MP Materials CEO weighs in on the company's market debut, SPAC merger

MP Materials started trading publicly on Wednesday. MP Materials CEO James Litinsky joins Yahoo Finance Live to discuss restoring the U.S. rare earths supply chain and break down the company's outlook heading into 2021.

Video Transcript

AKIKO FUJITA: Welcome back to Yahoo Finance. We've been talking a lot about the SPAC boom this year. And we've got yet another company coming to market today through a SPAC. Rare earths miner MP Materials going public through a $1 and 1/2 billion SPAC merger. The company today started trading. And we've got James Litinsky, the MP Materials CEO, joining us from the Stock Exchange.

And James, it's good to talk to you today, and congratulations on your IPO. Let me first just ask you a question we've been asking a lot of CEOs that have been coming to a market-- coming to market. Why a SPAC?

JAMES LITINSKY: Sure, why a SPAC. So, you know, a SPAC-- and obviously, it's topical today. And I think when you look back at sort of the year 2020, there's probably going to be some great success stories in SPACs. And then there'll be some, you know, some failures. And obviously, there's very diverse outcomes here.

But when you look at a SPAC, it's really just a structure. It's a mechanism to raise capital and get to the public markets. And in our situation, we hired Morgan Stanley. We were in the traditional IPO process early this year. And we were able to put together a transaction that allowed us to get to markets more quickly, have more certainty around valuation, bring in some investors. Like, you know, our pipe was led by Slate Path, Lee Cooperman, Chamath Palihapitiya.

And so we were able to kind of gather some strategic partners and thoughtful investors and get to market quicker. And, you know, we really-- we set up a deal that was great for all stakeholders. And obviously, the market reflects that today. And so, you know, we think it was a great outcome for us and for our shareholders. And, you know, I think every SPAC is different. And I think you're going to see-- like I said, you'll see a variety of outcomes in them.

But then the last thing I would say on it is, at the end of the day, you know, once it's done, we're an NYSE-listed company, and whether we straight IPOed today or, you know, de-SPACed today, we've got to execute. And we've got to deliver the cash flow for shareholders, just like, you know, no matter what we do. So from here on, it doesn't matter.

ZACK GUZMAN: Yeah, James, let's talk a little bit more about what the company is trying to do there then because you guys operate Mountain Pass. Obviously, it's a big rare earth mining processing site. It makes up about 15% of the global rare earth content coming out of that mine. Through this, though, as Akiko was mentioning, you guys are raising more than half a billion dollars here to put to work. So what is your plan there in taking on China, which, obviously, controls a large chunk of this market? What are you looking to do with all that cash?

JAMES LITINSKY: Absolutely, and so, yeah, we-- you know, today, we now have north of $500 million of cash on our balance sheet. We're a profitable business. And we're 15% of the global rare earth content today. You mentioned in rare earth magnetics, you know, ultimately, it's probably important to point out rare earths go into the magnets that go into motors for electric vehicles, wind turbines, you know, drones, robots, defense technologies.

So when you think, when you're a viewer at home, when they buy their Tesla or their iPhone, inside that device or car is a magnet that was made in China. And we simply want to move downstream. That supply chain today is all in China. And we want to make sure that the Teslas and Apples of the world have an option to buy from an American company so that they can have some diversity of supply chain.

And that's the mission that we're on. Our mission is to restore the full rare supply chain to the United States of America. And, you know, obviously, we have an equitized balance sheet and a profitable business. And we'll continue to move downstream. Our next step is separated rare earth products, and then after that, magnetics.

AKIKO FUJITA: Yeah, I mean, to that point, even if you do mine them in Mountain Pass, you still have to send them to China for final processing, which does beg the question of how independent you can really be from China. We had the administration, or President Trump specifically, sign an executive order last month calling for a national emergency, essentially trying to boost production in this particular area. How much do you think you can move the needle on that?

JAMES LITINSKY: Well, we're 15% of the global market of content today. We're the second largest producer in the world. And so we think that the key thing is that we don't need to take over the industry. We just need to be a stable, strong source of supply so that it really does remain competitive.

You know, the Chinese have very thoughtfully taken over this industry over the last 20 years. And you can see it today. You know, look at the public markets. You see a lot of Chinese electric vehicle makers. The auto supply chain is the single largest private employer in our country. It's 10 to 14 million jobs, hundreds of billions of dollars of GDP. And, you know, 25 years ago, the Chinese didn't have a rare earth industry or a magnetics industry or an EV industry. Now they've got it all.

And so if we want to make sure that we have supply chain end to end, we're going to need some Western champions in this space. And that's the mission that we're on. You know, we have to be that. And again, we don't have to be all of it. We just have to be a big player. And obviously, having an NYSE-listed company that is transparent and, you know, we have a remarkable board, and, you know, so we think that that's a great thing for American industry.

ZACK GUZMAN: James, the national security questions that are raised here kind of reminds me of the positioning in oil, too, when you think about how dependent the US was on the Middle East for that. Obviously, there was a big push into changing it. Now fracking here has changed that story completely.

But there is a question about pricing, what pricing pressures was placed on crude here, too. So on that front, I mean, if you guys are successful and really driving production here in the US, what do the pricing pressures look like if it changes the dynamic between the US having these options here and what China has been offered?

JAMES LITINSKY: So that's a great analogy. There's a famous quote from Deng Xiaoping, the former ruler of China, the Mideast has oil, China has rare earths. And if you think about it-- and there was-- you know, there was an "Economist" cover story on this maybe a couple of months ago. When you think about petrol states like Saudi Arabia, the new electrostate is China. They have very thoughtfully taken over this supply chain.

And so now, as we think about the fact-- and with this new administration, we're talking about climate change. And if you look at Elon Musk talking about going from 2 million to 30 million EVs manufactured globally over the next six or seven years, the entire-- you know, a significant portion of the industrial landscape is getting electrified. And so, you know, strategically, this is happening. And so, you know, we are-- China is the electrostate. They control the supply chain. And so, that's what makes a company like ours so strategic.

And when it comes to pricing, you know, we need to compete. I mean, I'd love for American companies to want to pay us big premiums because we're American. But that's just not the realities of the market. We need to compete. We need to be a low cost producer to the world. We're one of them. We're profitable, even just making an intermediate product, you know, at today's prices.

And by the way, we have the added attribute of, you know, we're right in the state of California. So, you know, we're environmentally friendly. So for those who do care about sustainability in the supply chain, you know, we've got the best attributes from an environmental standpoint of any rare earth operation in the world, you know, by a landslide. So we think that that positions us for success. But to be clear, we need to be a low cost producer. We need to make sure that industry can come to us and that they feel like it's, you know, a thoughtful business decision to come to us. We're not a charity.

AKIKO FUJITA: James Litinsky, the CEO of MP Materials, it's good to talk to you today.

JAMES LITINSKY: Thank you. It's great to be here, and we appreciate it. It's a great day for MP. And we'll get back to work tomorrow.