James Litinsky, a money manager, has turned a bad investment in junk bonds into a $400 million fortune through his company MP Materials. The company operates the Mountain Pass rare earths mine, the only U.S. source of strategic metals used in supermagnets for electric vehicles, MRI machines, and other high-tech applications. Despite lacking experience in mining, Litinsky took a risk to salvage the mine and his investors’ money after Molycorp, the previous owner, filed for bankruptcy in 2015.
Litinsky’s calculated gamble paid off, with federal support of $105 million and assistance from the Chinese, who are major customers of MP’s rare earths. MP went public in 2020 through a SPAC deal and saw its stock price soar due to high demand for neodymium-praseodymium powder. However, price fluctuations in the market have caused MP’s stock to decline, but the company still maintains a market cap of $2.4 billion. Litinsky’s stake is now worth $265 million, adding to his profits from his hedge fund.
To reduce vulnerability to commodity price swings, Litinsky is vertically integrating MP by building a new supermagnet plant in Texas. The plant will produce high-performance magnets for electric vehicles and other applications. Litinsky’s previous success includes launching his hedge fund JHL Capital Group in 2006, which saw impressive returns during the financial crisis by making strategic bets on distressed assets. His early success laid the foundation for his current fortune and strategic approach to investments.
Litinsky’s acquisition of Mountain Pass was a complex process that involved legal maneuvers, financing from Chinese partners, and technical expertise to restart the mine’s operations. Despite initial challenges, MP has tripled its output since restarting the mine in 2018 and plans to increase production by 50% over the next four years. The site has the potential for 30 years of production, with the possibility of additional rare earths deposits nearby. Litinsky also holds an option on a large pile of excavated rock that could be processed in the future, depending on demand and technological advancements.
The success of MP Materials highlights Litinsky’s ability to identify undervalued assets and execute strategic plans to unlock their potential. With a background in finance and a keen eye for investment opportunities, Litinsky has navigated complex challenges in the rare earths industry to build a profitable business. As demand for rare earths continues to grow, MP Materials is poised to capitalize on this trend and solidify its position as a key player in the market.
