Offtake Agreements for Critical Minerals
Facts checked against sources on . How we check facts.
An offtake agreement is a contract in which a buyer commits to purchase a defined volume of a mineral product from a producer over a set period, usually before the project has started production. Lenders and investors use the contract as evidence that the project will have revenue. Since July 2025 governments have also become offtake parties: the US Department of Defense guaranteed a $110 per kilogram price floor for MP Materials' neodymium-praseodymium oxide for ten years, and in March 2026 Lynas agreed the same $110 floor in a Japanese 12-year agreement and a US government letter of intent. The largest deals since 2025 have combined offtake, equity and loans.
$110/kg
ten-year price floor on MP Materials neodymium-praseodymium products agreed with the Department of Defense
Source: MP Materials, 10 July 2025
100%
of the output of MP's planned 10X magnet plant that the Department of Defense agreed to ensure is bought for ten years after completion
Source: MP Materials, 10 July 2025
$400m
convertible preferred stock bought by the Department of Defense, which with a warrant equals 15% of MP common shares on an as-converted basis
Source: MP Materials, 10 July 2025
$500m
Apple commitment to buy recycled-content magnets made by MP Materials, with shipments expected from 2027
Source: MP Materials, 15 July 2025
What does an offtake agreement contain?
An offtake agreement contains the terms that decide who carries price, volume and quality risk. Each deal is negotiated separately, but most cover the same six points.
| Term | What it decides | What to check |
|---|---|---|
| Product and specification | The exact material, such as battery-grade lithium hydroxide or neodymium-praseodymium oxide at a stated purity | Rejection rights and penalties if the product misses specification |
| Volume and term | Tonnes per year, ramp-up schedule and contract length | Whether volume is fixed, a range or "up to", and whether it is take-or-pay |
| Price mechanism | Fixed price, a formula linked to a published benchmark, or a hybrid | Floors and ceilings, and which assessment is the reference |
| Delivery | Where risk and title pass, such as free on board at the port or delivered to the plant | Who pays freight and insurance, and who carries delay risk (see logistics and shipping) |
| Conditions precedent | Events that must happen first, such as project financing or permits | Long-stop dates after which either side can walk away |
| Termination and force majeure | What releases a party, including changes in law or export rules | Whether export controls or sanctions count as force majeure |
This is a general structure, not legal advice. Actual terms vary by deal and are rarely published in full.
Why do lenders ask for offtake agreements?
Lenders ask for offtake agreements because a mine or refinery has no revenue until it is built, and an agreement with a creditworthy buyer shows that the output has a market. The quality of the counterparty matters as much as the volume: a binding contract with a large manufacturer or a government body supports debt more than a letter of intent with an unproven trader. Prepayments and equity stakes from buyers are common add-ons, and in some deals the buyer is also the financier.
How have governments changed the offtake model since 2025?
Governments have changed the model by guaranteeing prices and volumes themselves and by taking equity. The MP Materials agreement of July 2025 is the template: the Department of Defense bought $400 million of convertible preferred stock plus a warrant, set a ten-year floor of $110 per kilogram for neodymium-praseodymium products, agreed to ensure that all magnets from the 10X plant are bought, and lent $150 million for heavy rare earth separation. A commitment letter from JPMorgan Chase and Goldman Sachs for $1 billion of commercial financing sat alongside it.
| Deal | Date | Structure | Source |
|---|---|---|---|
| MP Materials and the US Department of Defense | July 2025 | $400m preferred equity and warrant, ten-year $110/kg floor, offtake backstop for the 10X magnet plant, $150m loan | MP Materials |
| MP Materials and Apple | July 2025 | $500m multiyear commitment for recycled-content magnets; volumes and length not disclosed | MP Materials |
| Lynas and Japan Australia Rare Earths (JARE) | March 2026 | 12-year agreement with firm offtake of 5,000 t a year of NdPr at a US$110/kg floor, upside sharing above US$150/kg capped at US$10m a year, and firm offtake of 50% of Lynas's heavy rare earth oxides for Japanese industry | Lynas |
| Lynas and the US government | March 2026 | Binding letter of intent: about US$96m, reallocated from funds previously intended for a Texas heavy rare earth plant that will no longer proceed, to be spent over four years on Lynas light and heavy oxides, with an NdPr floor of US$110/kg | Lynas |
| Vulcan Elements and ReElement Technologies | November 2025 | $1.4bn deal in which the government receives equity and warrants in return for incentives and loans; no price floor or offtake terms were reported | E&E News |
| USA Rare Earth and the Department of Commerce | January 2026 | $1.6bn package: $277m of direct federal funding and a $1.3bn loan, with a government stake that Fortune says could exceed 15% and an SEC filing puts at 8% to 16% depending on warrants | Fortune |
| Ucore Rare Metals and Sumitomo | June 2026 | Offtake agreement for Ucore's rare earths facility in Kingston, Ontario | Government of Canada |
| Project Vault participants | February 2026 | Companies commit to buy materials at agreed prices and pay upfront fees for preferred access, can access their inventories in major disruptions, and repurchase material at its original price | Mining Technology |
Figures for Vulcan Elements, USA Rare Earth and Project Vault come from news coverage, not from primary filings, and the detailed structure of Project Vault was still being finalised when reported. The Council on Foreign Relations counted 42 US government investment deals worth $28.4 billion since January 2025 as of 30 July 2026.
What is the difference between an offtake, a letter of intent and an MOU?
A binding offtake agreement obliges both sides to buy and sell, while a letter of intent or a memorandum of understanding records an intention to negotiate. The Canadian government's account of the 2026 G7 summit shows the distinction in practice: Ucore's deal with Sumitomo is described as an offtake agreement, whereas Torngat Metals' arrangement with Schneider Electric and several others are described as memoranda of understanding or letters of intent. Investors should read a headline about an "agreement" for that wording before counting the volume as contracted.
What are the main risks?
- Price risk. A producer that fixes a price can lose out if the market rises, and a buyer that fixes a price can be left paying above market. Floors and ceilings share the risk, and a government-backed floor shifts downside risk to the taxpayer, as the MP Materials structure does.
- Delivery risk. A project that ramps up late cannot deliver contracted volumes, which can trigger penalties or termination rights.
- Policy risk. Export licenses, quotas and bans can make delivery impossible. The Democratic Republic of the Congo replaced a cobalt export ban with quotas in October 2025, which now cap total exports at up to 96,600 t a year in 2026 and 2027 according to the US Geological Survey.
- Counterparty risk. A buyer or seller in financial difficulty may not perform, which is why lenders look at credit quality and security.
Frequently asked questions
What is an offtake agreement in mining?
An offtake agreement in mining is a contract in which a buyer agrees to purchase a stated volume of a mineral product from a producer over a set term, often before the mine or plant is built. Producers use it to raise finance, and buyers use it to secure supply.
What is a price floor in a critical minerals offtake?
A price floor in a critical minerals offtake is a minimum price the producer receives for its product even if the market falls below it. In July 2025 the US Department of Defense agreed a ten-year floor of $110 per kilogram for MP Materials' neodymium-praseodymium products, whether they are stockpiled or sold.
Why do governments sign offtake agreements for critical minerals?
Governments sign offtake agreements for critical minerals to make projects financeable that markets alone would not support, and to reduce dependence on a single supplier. The Department of Defense, the US Department of Commerce and Canada's G7 alliance have all used offtake, loans or equity for this purpose since 2025.
Is a memorandum of understanding the same as an offtake agreement?
A memorandum of understanding is not the same as an offtake agreement. An MOU records an intention to negotiate and usually does not bind the parties to buy or sell, whereas an offtake agreement sets binding volumes and prices, usually with conditions that must be met first.
Sources
Read on October 12, 2026. Figures on this page come from these documents; where a number is an estimate, the source says so.
- MP Materials: Public-private partnership with the Department of Defense (10 July 2025)
- Lynas Rare Earths: 2026 Annual Report and Appendix 4E (26 August 2026). Source for the Japanese agreement and the US government letter of intent; read on 14 October 2026
- MP Materials and Apple: $500 million partnership (15 July 2025)
- E&E News: Vulcan Elements deal. News report, not a primary filing
- Fortune: USA Rare Earth and Commerce (26 January 2026)
- Council on Foreign Relations: tracking US government investments (30 July 2026)
- Prime Minister of Canada: G7 Leaders' Summit backgrounder (17 June 2026)
- Mining Technology: Project Vault (February 2026)
- USGS Mineral Commodity Summaries 2026: Cobalt
Related topics
How Critical Minerals Are Priced
Spot, contract and assessed prices, and how floors fit in.
Spot vs Contract Pricing
The pricing structures that offtake agreements use.
Stockpiles and Strategic Reserves
Government buying programs that complement offtake.
Benchmarks and Price Reporting Agencies
The assessments that contract formulas reference.
