I’ve been holding MP Materials for quite some time and this is probably one of the positions I’ve found hardest to make a decision on.
The Q2 results were actually much better than I was expecting. Revenue increased 89% YoY to $108.5M, adjusted EBITDA turned positive at $28.5M, NdPr production increased 41% and NdPr sales more than doubled. The magnetics business in Texas also generated $16.5M in revenue and $7.5M in adjusted profit.
On top of that, MP continues to benefit from US price support and signed another agreement with a US aerospace and defense customer.
So, looking at the business itself, I have to admit that the latest results were encouraging.
And this is exactly what makes the decision to sell difficult.
I originally planned to liquidate my position and use the capital elsewhere, mainly because I felt there were better opportunities in my portfolio and because MP still carries a lot of execution risk. I’m also sitting on a significant loss, which obviously makes the decision psychologically harder.
But after these results, I’m starting to question whether selling now would simply mean giving up on the thesis just as some of the pieces are beginning to fall into place.
The Texas magnetics operation is starting to contribute, processing revenues are growing rapidly, EBITDA has turned positive and the company is becoming more vertically integrated.
At the same time, there are still plenty of uncertainties. The business remains exposed to rare earth prices, government support, execution risk and the huge capital requirements involved in building the full supply chain.
So I’m genuinely undecided.