MP Materials accuses USA Rare Earth of tech theft

MP Materials (NYSE: MP) has issued a lawsuit against USA Rare Earth (Nasdaq: USAR) alleging that its rare earth mining rival stole its proprietary magnet technology through an ex-employee.

The suit filed with a Texas court last Friday accuses one of MP’s former employees of sharing “grain boundary diffusion” formulations with USAR, which later disclosed the information to a third-party technology company. The case was first reported by Bloomberg News.

“USA Rare Earth has exhibited a pattern of recruiting employees from other companies and then using those employees to misappropriate trade secrets to accelerate USA Rare Earth’s own development,” MP alleged in the suit.

In an emailed response to The Northern Miner sister publication MINING.COM, USAR said MP Materials’ complaint “has misrepresented our company, our culture, and our people.” USAR said it will defend against the accusations and respond “appropriately”.

Shares of USA Rare Earth fell over 3% during the early hours of trading, sending its market capitalization below $6 billion. MP Materials also fell 3%, trading at a market capitalization of $11.6 billion.

Rare earth rivals

Las Vegas-based MP also claimed USAR had failed on multiple operational milestones and questioned the validity of the mineral resources being touted at the latter’s flagship Round Top deposit in Texas.

MP — the only producer of rare earths in the United States — has developed its own technology to turn the extracted minerals from its Mountain Pass mine in California into permanent magnets used in electric vehicles, defence systems and advanced electronics.

USAR is also looking to follow the same path by developing its Texas deposit, which it calls “the largest heavy rare earth deposit” in the U.S. The company has already commissioned a magnet manufacturing facility in Stillwater, Okla.

It also has ambitions to expand abroad through building a plant in France and recently announced a $2.8-billion acquisition of Serra Verde Group, which owns Brazil’s only rare earth mine.

West vs China

Both companies are seen as key players in the Washingtont’s plans to establish a domestic rare earth supply chain to reduce its dependence on economic rival China, which controls more than half of the world’s mined supply and almost all of its processing.

To facilitate this strategy, the Trump administration has made large financial commitments to both, including a $400-million equity investment in MP last July, followed up by a $1.6-billion agreement with USAR this year.

MP’s lawsuit places USAR under further scrutiny, as the latter’s deal with the White House had already received pushback from lawmakers, while the Serra Verde deal remains under review.

USAR, however, has said it is not concerned by questions surrounding the government’s investment.

“At USA Rare Earth, we are focused on the real challenge: China’s dominance of the rare earth supply chain,” USAR said in its statement to MINING.COM. “The American people, our allies and investors are counting on us — all of us in this industry — to deliver a secure Western, rare earth value chain to protect our national and economic security,”