MP Materials Corp DE

NOTE 13—COMMITMENTS AND CONTINGENCIES

Litigation: The Company may become party to lawsuits, administrative proceedings, and government investigations, including environmental, regulatory, construction, and other matters, in the ordinary course of business. Large, and sometimes unspecified, damages or penalties may be sought in some matters, and certain matters may require years to resolve. Other than the matter described below, the Company is not aware of any pending or threatened litigation that it believes would have a material adverse effect on its Consolidated Financial Statements.

The Company is currently in a dispute with a general contractor for a construction project, which is scheduled to go to binding arbitration. The Company disputes that it owes any monies (and believes it has a valid claim against the contractor) in connection with this construction project. The Company is unable to estimate a range of loss, if any, at this time. If an unfavorable outcome were to occur in the binding arbitration, it is possible that the impact could be material to the Company’s Consolidated Financial Statements in the period in which any such outcome becomes probable and reasonably estimable.

401(k) Plan: The Company maintains a qualified defined contribution retirement plan under the provisions of Section 401(k) of the Internal Revenue Code, which covers all eligible employees (the “MP 401(k) Plan”). Under the MP 401(k) Plan, eligible employees may contribute up to 90% of their annual compensation, subject to the Internal Revenue Service annual contribution limits. The Company makes a discretionary matching contribution, where applicable, of 100% of employees’ elective salary deferrals, up to a maximum of 4% of eligible employee compensation. For the years ended December 31, 2024, 2023, and 2022, the Company recognized contribution expense of $3.1 million, $2.0 million, and $0.9 million, respectively.

NOTE 14—REVENUE RECOGNITION

The following table disaggregates the Company’s revenue from contracts with customers by segment and by type of good sold, which are transferred to customers at a point in time:

Rare earth concentrate revenue is primarily generated from sales to Shenghe under the amended and restated offtake agreement for sales between January 2022 and February 2022, the 2022 Offtake Agreement for sales between March 2022 to December 2023, or the 2024 Offtake Agreement starting in January 2024 (as such terms are defined in Note 19, “Related-Party Transactions”). The sales price of rare earth concentrate sold to Shenghe under the applicable agreements is based on a preliminary market price per MT and estimated exchange rate between the Chinese yuan and the U.S. dollar, with an adjustment for the ultimate market price of the product realized by Shenghe upon sales to their customers, including the impact of changes in the exchange rate between the Chinese yuan and the U.S. dollar.

NdPr oxide and metal revenue was generated from sales made primarily under the Company’s distribution agreement with Sumitomo Corporation of Americas.

Other revenue was generated primarily from sales of other refined products, including lanthanum and cerium. Additionally, other revenue for the year ended December 31, 2022, included sales to Shenghe of certain stockpiles of rare earth fluoride.

Contract Balances: Pursuant to the long-term agreement with GM, GM prepaid to the Company $50.0 million in April 2024 and an additional $50.0 million in December 2024 for magnetic precursor products. As of December 31, 2024, the Company had not yet satisfied any performance obligations, which pertain to the production of NdPr metal, related to the prepayments received from GM.

As of December 31, 2024, the Company classified $56.9 million of the $100.0 million prepayment as current deferred revenue and the remaining $43.1 million as non-current deferred revenue in its Consolidated Balance Sheets based on the Company’s expectation of when the performance obligations will be satisfied. The Company currently estimates that the performance obligations associated with the current deferred revenue will be satisfied within 12 months after December 31, 2024, and between approximately 13 months and 21 months after the same date for the non-current deferred revenue. The Company’s estimate of when the performance obligations will be satisfied and revenue will be recognized is dependent upon the timing of the production ramp of NdPr metal at the Independence Facility. There were no other deferred revenue balances as of both December 31, 2024 and 2023.

NOTE 15—GOVERNMENT GRANTS

Asset-Based Grants: In November 2020, the Company was awarded a Defense Production Act Title III technology investment agreement (“TIA”) from the Department of Defense (“DOD”) to establish domestic processing for separated light rare earth elements (this “Project”) in the amount of $9.6 million. Pursuant to the terms of the TIA, the Company was required to utilize the funds to acquire property and equipment that contribute to the mission of this Project. Furthermore, in exchange for these funds, the Company is required to provide the DOD with periodic reporting specific to this Project for up to approximately five years.

During the years ended December 31, 2024 and 2022, the Company received $0.1 million, which was the final reimbursement expected under the TIA, and $5.1 million, respectively, in reimbursements from the DOD. The funds received reduced the carrying amount of certain fixed assets associated with the Company’s Stage II optimization project, which were included in machinery and equipment as of December 31, 2024. There wereno reimbursements received for the year ended December 31, 2023.

In February 2022, the Company was awarded a $35.0 million contract by the DOD’s Office of Industrial Base Analysis and Sustainment program to design and build a facility to process heavy rare earth elements (“HREE”) at Mountain Pass (the

“HREE Facility”) (the “HREE Production Project Agreement”). The Company must utilize the funds to acquire property and equipment that will contribute to commercial-scale production of separated HREE at Mountain Pass. The Company will be paid fixed amounts upon the completion of certain project milestones. In exchange for these funds, the DOD will have certain rights to technical data following the completion of the project. The funds received pursuant to the HREE Production Project Agreement reduce the carrying amount of the fixed assets associated with the HREE Facility. During the year ended December 31, 2023, the Company received $2.8 million from the DOD under the HREE Production Project Agreement, which reduced the carrying amount of assets under construction. No such funds were received from the DOD during the year ended December 31, 2024.

Income-Based Grants: As mentioned in Note 12, “Income Taxes,” in August 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which, among other things, promotes clean energy adoption by providing several tax incentives for the domestic production and sale of eligible components for tax years beginning after December 31, 2022. Specifically, the 45X Credit provides a credit equal to 10% of eligible “production costs incurred” with respect to the production and sale of critical minerals, including NdPr oxide. In October 2024, the Internal Revenue Service released final regulations on the 45X Credit which, among other things, added direct and indirect materials costs, including costs related to the extraction or acquisition of raw materials, to the definition of “production costs incurred,” which were previously excluded from the definition under the proposed regulations released in December 2023. The impact of the new guidance, including a cumulative adjustment to reflect the inclusion of direct and indirect costs on previous sales, was accounted for in the fourth quarter of 2024.

For corporate taxpayers, the 45X Credit is eligible for the direct pay election, which allows a refund of the credit in excess of tax liability. The Company made this election on its 2023 tax return, and such election is binding, unless revoked, for five years (i.e., through 2027). Accordingly, the Company determined that the 45X Credit is not within the scope of ASC 740, and instead, should be accounted for as an income-based grant. As such, during the period that the 45X Credit is refundable, the Company will recognize such credit as a reduction to various operating expenses, as presented in the table below, depending on the location of the corresponding expense, in the period the critical mineral is sold to a customer.

As of December 31, 2024, the government grant receivable balance related primarily to cost of sales for tax purposes of critical minerals, specifically NdPr oxide and metal (of which, NdPr oxide is a constituent element), in 2024, which the Company estimates it will claim on its 2024 federal tax return. The government grant receivable balance as of December 31, 2023, and the deferred government grant balance as of December 31, 2024 and 2023, related primarily to the inclusion of tax depreciation on assets that support production of critical minerals, including the Company’s Stage II circuits that were placed into service during 2023 and qualify for bonus tax depreciation treatment. The deferred government grant associated with tax depreciation in 2023 will be recognized as a reduction of depreciation expense on a straight-line basis over the remaining estimated useful life of the underlying long-lived assets, which is approximately 11 years. During the third quarter of 2024, the Company received $19.4 million related to the 45X Credit claimed on its 2023 federal tax return. The current portion of deferred government grant, which is included in “Other current liabilities,” was $2.0 million and $1.7 million as of December 31, 2024 and 2023, respectively.

The benefits (reduction of expenses) recognized in the Company’s Consolidated Statements of Operations pertaining to the 45X Credit were recorded as follows: