Rare Fortune

Hedge fund manager JAMES LITINSKY just wanted to salvage a bunch of bad bonds. He ended up making a mint from rare earths and bolstering U.S. strategic interests-with a little help from the Chinese.

- Chris Helman

James Litinsky first visited the Mountain Pass rare earths mine in 2015 because he was worried about the $40 million his hedge fund had sunk into distressed bonds issued by mine owner Molycorp. He came away stunned by the enormousness of the site in the mountains above California's Mojave Desert and its status as the only U.S. source for certain strategic metals, including the neodymium used in "supermagnets" needed for electric vehicles, MRI machines, computer hard drives and fighter jets. "I was hooked," he says.

A few months later, Molycorp filed for bankruptcy and Litinsky went on to make a risky play to salvage both the mine and his investors' money. So what if he knew nothing about mining or complex rare earths chemistry? So what if "rare" earths got their name because they are so difficult to extract and refine? So 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? With his Yale degree in economics and a J.D. and MBA from Northwestern, he was cocky-and confident the numbers were compelling.

China mines and refines 80% of the world's rare earths. Those numbers give Washington policymakers cold sweats given the industrial and military importance of the metals. From the start, Litinsky shrewdly calculated he could count on federal support if he went into the rare earths business-which indeed he has received, to the tune of $105 million from both the Trump and Biden administrations. Perhaps more surprising is the degree of assistance he has received from the Chinese, who have helped him finance and rebuild the Mountain Pass site-and have proven to be some of its most loyal customers.