It is well known that the USA wants to achieve its own secure supply of so-called rare earths, which are used in numerous high-tech applications, as quickly as possible, and we have reported on this regularly. Now, the United States is taking another significant step! The US Department of Defense is entering into a multi-billion US dollar Public-Private Partnership with US-based MP Materials (WKN A2QHVL), causing the stock to jump by more than 50%…
Part of the deal is that the US Department of Defense will become the largest shareholder in MP Materials and also guarantees a minimum price of 110 USD per kilogram for two of the most sought-after rare earths. This is double the current market price in China!
Beijing recently imposed restrictions on the export of rare earths, which, according to sources, led to a 75% decline in exports of rare earth magnets (permanent magnets) from the Middle Kingdom last month.
Rare Earth Producer Lynas with Strong Gains
The news of the US investment in MP Materials also ignited a turbo under the shares of Australian Lynas (WKN 871899) and Iluka Resources (WKN 859133). Lynas, the largest rare earth producer outside China, gained 20% temporarily, while Iluka shot up by 27%, recording the largest intraday gain in the company’s history.
Experts view the US government’s investment in MP Materials as a strong step towards independence in rare earth magnets, which further increases the upside potential of the entire sector. They see Lynas as the next logical candidate for similar government support and, due to the “reconfiguration” of the sector’s price landscape, potentially expect a significant short-term increase in Lynas’s profit.
Also on the rise in recent days was Ucore Rare Metals (WKN A2QJQ4 / TSXV UCU). The Canadian company has developed a technology that allows rare earths to be processed (separated) faster – and more quickly and cost-effectively than the method currently predominantly used in China.
Ucore has also already received support from the US Department of Defense, most recently another 18.4 million USD. At the end of May, the company celebrated the groundbreaking ceremony for the construction of its first plant in the US state of Louisiana. Even if the United States and China reach an agreement, and the issue of rare earths may no longer be quite as acute, we believe Ucore will continue to benefit from the US’s efforts to become independent from Beijing in this regard. We’ll stay on top of it!
