July 15 (Reuters) - The U.S. Department of Defense plans

to continue working with rare earths companies to ensure diverse

American supply of the critical minerals used across the

economy, a defense official told Reuters on Tuesday.

The Pentagon last week signed a multibillion-dollar deal to

become the largest shareholder in rare earths producer MP

Materials ( MP ) and also agreed to several financial backstop

measures for the company.

The move - which the defense official said reflected a desire to

"share the risk" inherent in a critical minerals project -

sparked questions across the U.S. mining sector about whether

other companies could see similar investments from the U.S.

military.

The Pentagon "is looking forward to continue working with

companies across the (rare earths) supply chain to ensure that

DoD and the nation have the secure and resilient supply chains

necessary to secure national and economic security for

generations to come," the official said.

The MP deal structure reflects a "unique approach" by the

government to "account for the difficulties in establishing and

sustaining production of critical rare earth magnets in a market

environment in which China controls much of the supply chain,"

the official added.

The Pentagon investment in MP was undertaken via a Cold War-era

law known as the Defense Production Act, as well as its Office

of Strategic Capital, the official said.