This Contrarian Investor Saved America’s Biggest Rare Earths Mine, With Some Help From The Chinese

Forbes

Money manager James Litinsky turned a bad junk bond bet into a $400 million fortune. His MP Materials operates a strategic mine and will begin manufacturing supermagnets for electric vehicles next year.  Read the full story on Forbes: https://www.forbes.com/sites/christopherhelman/2024/07/30/chinese-investors--helped-save-a-strategic-us-mine-and-made-this-american-rich/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Today on Forbes, Chinese investors helped save a strategic U.S. mine and made this American rich.

00:09James Latinsky first visited the Mountain Pass Rare Earths Mine in 2015 because he was worried about the $40 million

00:17his hedge fund had sunk into distressed bonds issued by mine owner Molecorp.

00:22He came away stunned by the enormousness of the site in the mountains above California's Mojave Desert

00:28and its status as the only U.S. source for certain strategic metals, including the neodymium used in so-called supermagnets

00:36needed for electric vehicles, MRI machines, computer hard drives, and fighter jets.

00:42He says, quote, I was hooked.

00:45A few months later, Molecorp filed for bankruptcy, and Latinsky went on to make a risky play to salvage both the mine and his investors' money.

00:55So what if he knew nothing about mining or complex rare-earths chemistry?

00:59So what if rare-earths got their name because they are so difficult to extract and refine?

01:04So what if the mine, by the time he got it in 2017, had been mothballed and reduced to a 600-foot-deep pit filled with 30 million gallons of water?

01:14With his Yale degree in economics and a JD and MBA from Northwestern, he was cocky and confident the numbers were compelling.

01:23China mines and refines 80% of the world's rare-earths.

01:27Those numbers give Washington policymakers cold sweats, given the industrial and military importance of the metals.

01:34From the start, Latinsky shrewdly calculated he could count on federal support if he went into the rare-earths business,

01:41which indeed he has received, to the tune of $105 million from both the Trump and Biden administrations.

01:48Perhaps more surprising is the degree of assistance he has received from the Chinese,

01:52who have helped him finance and rebuild the Mountain Pass site, and have proven to be some of its most loyal customers.

01:59Latinsky convinced rare-earths giant Shenghe Resources, based in Chengdu, to help finance his bid for the rest of the Mountain Pass operations,

02:07which Latinsky and a Chicago-based JHL Capital Group hedge fund won in a June 2017 bankruptcy auction for just $20.5 million.

02:18He pre-sold output to Shenghe for $50 million, enough to restart operations.

02:23In some quarters, the ploy raised eyebrows.

02:26Shenghe is partially owned by the Chinese government, and wasn't part of the point here to bolster America's position in rare-earths minerals?

02:33Latinsky shrugs off such criticism.

02:36He says, quote,

02:47It hasn't all been smooth going, but the gamble has paid off, making the 46-year-old Latinsky worth at least $400 million, Forbes estimates.

02:57He has wound down JHL Capital Group, which at its peak had $2 billion in assets under management,

03:03and spends his days as CEO of MP Materials, which operates the now-thriving Mountain Pass mine

03:09and is finishing a Fort Worth, Texas facility that will refine rare-earths into high-performance metals.

03:16After going public in 2020 at $10 a share in a SPAC deal that raised $545 million,

03:22MP's stock shot to $56 as the price of its most valuable output, neodymium praseodymium powder, spiked at $150,000 per metric ton.

03:33China has since flooded the market, and prices are just a third of that now, driving MP's shares down to $15.

03:41But MP still has a market cap of $2.4 billion, making Latinsky's 11% stake worth $265 million,

03:50adding to the profits he reaped from his hedge fund.

03:53When Latinsky finished distributions from JHL in 2023, much of it in MP's stock,

03:59he crowed in a farewell letter that the fund's gross annual compound return since 2006 came to 23.4%,

04:07compared to 9.5% for the S&P 500.

04:11According to SEC filings, JHL had attracted a roster of billionaire-linked investors,

04:16including Seth Klarman's Baupost Group, Leon Cooperman's Omega Associates, and Barry Sternlich's Jaws Capital.

04:24For full coverage, check out Christopher Hellman's piece on Forbes.com.

04:30This is Kieran Meadows from Forbes. Thanks for tuning in.

04:37.

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