On November 16, 2025, an executive of MP Materials signed a disclosure form for the House Select Committee on the Chinese Communist Party, and in the answer to question six the company wrote a sentence about one of its own shareholders.
Via the witness disclosure filed with the committee:
"Shenghe could be considered an 'agent' of the People's Republic of China based on the reported ownership of 14.06% of Shenghe's outstanding shares of common stock by the Institute of Multipurpose Utilisation of Mineral Resources Chinese Academy of Geological Sciences."
Today, ten months later, Reuters reported that Beijing's state rare earth champion is in talks to buy that shareholder outright.
MP Materials runs Mountain Pass in California, the only rare earth mine producing in the United States, and the Department of Defense is its largest shareholder. Shenghe Resources, listed in Shanghai, still owns about 3% of the company.
So what happens when a Chinese state-owned enterprise and the Pentagon end up on the same share register, and what does it do to the stock you own?
What Reuters Reported
Let's start with the report, because every other question here hangs off it.
Writing on September 18, 2026 and citing two sources with knowledge of the matter, Reuters put it this way:
"State-owned China Rare Earth Group is in talks to acquire Shenghe Resources, said two sources with knowledge of the matter, a move that would consolidate Beijing's control over the sector and give the firm a stake in one of Washington's rare earth plays."
China Rare Earth Group wants a controlling stake, one of those sources said, and the talks have been running since earlier this year. Neither source knew when a deal might be announced or completed, and China Rare Earth Group, Shenghe and China's Ministry of Commerce did not respond to Reuters' requests for comment.
Why would Beijing bother buying a sector it already dominates? Because Shenghe is one of the last big Chinese miners and refiners of rare earths with private ownership still in it, and taking it closes out a consolidation the state has been running for decades. China Rare Earth Group itself was assembled in 2021 out of five state-run rare earth companies, and it is the country's largest supplier of heavy rare earth elements.
There is a second prize inside the deal, because Beijing grants its mining, smelting and separation quotas to state-owned groups, which then parcel them out to subsidiaries. One of Reuters' sources said a deal would give Shenghe better access to those quotas, and China has stopped publishing the quota numbers that the rest of the world used to read as a gauge of global supply.
The Cord MP Already Cut
You may read all of that as a Chinese corporate story, so it helps to know how deep into MP the Chinese side once reached.
Shenghe was never a passive holder. From 2017 it was MP's offtake partner, the buyer that took Mountain Pass material for distribution to end users in China, under agreements renewed on May 19, 2020, on March 4, 2022 and again on January 16, 2024.
MP gave Congress the revenue those agreements produced, year by year.
MP Materials revenue from the Shenghe offtake, US$ million
Source: MP Materials disclosure, House Select Committee on the CCP, November 2025
| Label | Value |
|---|---|
| 2021 | 326.6 |
| 2022 | 496.7 |
| 2023 | 242.5 |
| 2024 | 158.0 |
| 2025 | 51.3 |
Then the company walked away from all of it. In the same disclosure, MP told the committee:
"In July 2025, to align with the terms of the Transaction Agreement with the Department of War and in further support of its domestic supply chain objectives, MP Materials Corp. ceased all sales of its products to China and will not extend the term of the current 2024 Offtake Agreement when it expires in January 2026."
You can still see the decision in the accounts. In the second quarter of 2026, reported on August 6, revenue rose 89% from a year earlier to $108.5 million even after what MP calls the cessation of concentrate sales beginning in July 2025, because NdPr sales more than doubled to 1,006 metric tons and the domestic business replaced the Chinese one.
The trade is finished. The shareholding is not.
The Cord It Could Not Cut
When the Pentagon deal was announced in July 2025, Reuters described Shenghe as one of MP's biggest shareholders with a stake of about 8%, at a time when MP was still sending most of its ore to China for processing. Reuters now puts that stake at 3%.
How did 8% become 3%? We do not know from the public record how much of the decline came from selling and how much from MP issuing new stock, and either way the holding never went to zero.
MP has said repeatedly that neither Shenghe nor the Chinese government has any control over its operations, and nothing we have read contradicts that. A 3% holder does not run a company, which is why the size of the stake is less interesting than the identity of whoever ends up holding it, and a state group built by Beijing to control the sector would be sitting on the register of the company Washington built to escape it.
Reuters was careful on this point, and so are we:
"It is not clear how the prospect of a major Chinese state-owned rare earth firm sharing space on a shareholder registry with the US Department of Defense could impact the deal."
Nobody has filed anything yet, and what exists today is a negotiation, two anonymous sources and a share register that has been in plain view since MP went public.
The MP stake is also the smallest of the foreign holdings that would change hands. Last year Shenghe's Singapore unit agreed to buy Australia's Peak Rare Earths, offering A$0.443 a share in cash for the stock it did not already own and valuing the company at A$195 million, or about US$130 million, according to Reuters. Peak's board took that offer over an unsolicited A$240 million approach from a United States bidder, citing deal certainty, and Shenghe had already said it would not support the American proposal.
The asset behind that deal is Ngualla in Tanzania, one of the world's largest deposits of neodymium and praseodymium, the two elements that make a permanent magnet strong. So a Chinese state group buying Shenghe would inherit a Tanzanian NdPr deposit, a position in Australia's rare earth sector and a slice of America's only rare earth producer, in one transaction, without bidding for any of them separately.
What the Pentagon Actually Bought
Now set that 3% against what Washington put on the table.
In its announcement on July 10, 2025, MP laid out a package that runs for more than a decade:
"DoD has entered into a 10-year agreement establishing a price floor commitment of $110 per kilogram for MP Materials' NdPr products stockpiled or sold, reducing vulnerability to non-market forces and ensuring stable and predictable cash flow with shared upside."
The Department of Defense also agreed to buy $400 million of convertible preferred stock plus a warrant, both struck at $30.03 a share, which together represented 15% of MP's shares outstanding as of July 9, 2025 on an as converted and as exercised basis, and left the Pentagon positioned as the largest shareholder. It committed to a decade of offtake covering 100% of the magnets from the planned 10X facility, lent MP $150 million for heavy rare earth separation at Mountain Pass, and stood behind a $1 billion financing commitment from JPMorgan and Goldman Sachs.
Is that floor real money, or a line in a press release? MP books the difference as price protection agreement income, and it came to $42.3 million in the first quarter of 2026 and $17.6 million in the second, so the United States government has paid roughly $60 million in half a year purely to hold the American NdPr price above the level at which Beijing could make the mine uneconomic.
Washington has built the parallel market we described in How to Play the Critical Minerals Boom, and it is working. What no price floor can buy is the right to choose who else appears on the register.
Six Days Before the Summit
Does the timing tell you anything? It might.
Reuters also reported today that Treasury Secretary Scott Bessent plans to discuss AI, trade and rare earths with Chinese Vice Premier He Lifeng in New York this weekend, ahead of the meeting between President Trump and President Xi in Washington on September 24.
A story that lands six days before that summit, sourced to two people who will not be named, and describing a transaction neither company will confirm, reads as a negotiating position as much as a corporate event.
We have watched Washington hesitate on exactly this kind of call before, in Washington Blinked on Copper, where the prospect of a tariff moved the copper price far more than any tariff itself ever has.
What It Means for What You Own
Let's put the whole picture in one place:
- China Rare Earth Group, the state group formed in 2021, is in talks to take control of Shenghe Resources.
- Shenghe owns about 3% of MP Materials, down from about 8% in July 2025.
- MP ceased all sales to China in July 2025 and let the Shenghe offtake expire in January 2026, after revenue from it fell from $496.7 million in 2022 to $51.3 million in 2025.
- MP told Congress that Shenghe could be considered an agent of the People's Republic of China, on the basis of a 14.06% holding by a Chinese state research institute.
- The Pentagon holds convertible preferred stock and a warrant worth 15% of MP as of July 2025, pays a $110 per kilogram NdPr floor, and has already paid about $60 million under it this year.
- Shenghe also controls the Peak Rare Earths takeover and the Ngualla NdPr deposit in Tanzania.
So what do you do with this?
MP Materials (NYSE: MP) closed at $49.38 on September 17, 2026, per Nasdaq, inside a 52 week range of $37.81 to $100.25. The stock sits at less than half its high while revenue in the June quarter rose 89% and NdPr sales more than doubled, and that gap is what you are being asked to price.
The upside is that every move Beijing makes to tighten its grip raises the value of the one integrated alternative, and MP now has a floor under its main product, a guaranteed buyer for a decade of magnets from the 10X plant, a new gadolinium contract with an American defence customer, and a government shareholder with every reason to keep writing cheques.
The risk is that a Chinese state owner of a 3% stake gives Washington a reason to act on the register, and any forced divestment, review or restriction would be noisy and slow while it ran. A friendlier risk sits on the other side, because at $49 the stock carries a great deal of policy goodwill, and a summit that eases export controls would take some of that premium back out.
If you own MP, a 3% holder changing hands is not a reason to sell a domestic supply chain the United States government is underwriting. If you have wanted a position and found the price impossible, a headline about a Chinese state company on the share register is the sort of thing that hands you a better one.
Three dates are worth writing down:
- This weekend in New York: Bessent meets He Lifeng with rare earths on the agenda. Watch whether either side talks about ownership rather than only exports.
- September 24 in Washington: Trump meets Xi. A deal that trades export licences for something Beijing wants is the largest single swing factor for every rare earth share price outside China.
- Shenghe's next filing in Shanghai: a change of control has to be disclosed to the exchange. Until that filing exists everything above is a negotiation, and the first confirmation will come from Shanghai rather than from Washington or Las Vegas.
Washington bought 15% of the company, a floor under the metal and a decade of magnets.
Beijing is negotiating for the shareholder nobody was watching.
Seek the truth and be prepared,
Equedia
Sources
- Reuters, China Rare Earth Group in talks to buy MP Materials shareholder Shenghe Resources, sources say
- US House Select Committee on the Chinese Communist Party, Witness disclosure, MP Materials Corp., November 2025
- MP Materials, MP Materials Announces Transformational Public-Private Partnership with the Department of Defense
- Reuters, MP Materials seals mega rare-earths deal with US to break China's grip
- Reuters, Australia's Peak Rare Earths picks $130 mln Shenghe takeover, rejects higher US bid
- MP Materials, MP Materials Reports Second Quarter 2026 Results
- MP Materials, MP Materials Reports First Quarter 2026 Results
- Reuters, US Treasury's Bessent plans to discuss AI and rare earths with China's He, source says
- Nasdaq, MP Materials Corp. historical data
- The Equedia Letter, How to Play the Critical Minerals Boom
- The Equedia Letter, Washington Blinked on Copper
Disclaimer: This letter is for informational and educational purposes only and does not constitute investment advice. Past predictions and performance are not indicative of future results. Please see our full terms of use and disclaimer at equedia.com.
