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LYSCF The U.S. Department of Defense has signed a $120M deal with Australia's Lynas (OTCPK:LYSCF) to build the first "heavy" rare earths separation facility in Texas. The contract, which will be entirely bankrolled by the Pentagon, builds on a similar award granted to MP Materials (NYSE:MP) in February for a heavy facility in Mountain Pass, California. Last year, the DoD awarded the two companies contracts to construct "light" rare earths facilities as Washington looks to counter China's dominance of critical mineral supply chains. Premarket action: MP +3% to $35/share.

What are rare earths? The term refers to a group of 17 elements that are used in everything from high-tech consumer electronics to military equipment. Despite the name, there are deposits of them all over the world (some of them are even hundreds or thousands of more times abundant than gold), but the elements are still called "rare" as it is unusual to find them in pure form or in concentrated quantities. As a result, they are difficult to mine and refine profitably, and in the past, there have been strict U.S. environmental regulations related to extracting and processing (think toxic wastewater and radioactive residues).

"Putting aside any geopolitical issues, what we've seen from the pandemic is that any singular supply chain has risk associated with it. So this is a terrific opportunity to address that risk," Lynas (OTCPK:LYSCF) CEO Amanda Lacaze declared.

Go deeper: The U.S. is highly dependent on rare earths for its military capabilities like lasers and guidance systems (a Congressional Research Service report in 2020 even found that each F-35 required 920 pounds of the materials). Chinese dominance of the market has meanwhile allowed the country to control prices, leading to additional barriers to entry and putting pressure on upcoming challengers. In fact, Beijing's "Made in China 2025" strategy aims to create a vertically integrated supply chain that dominates mining, magnets and high-tech manufacturing that could also impact everything from defense components to electric vehicles. (1 comment)