Key Points
- Australian rare earth stocks, such as Lynas and Iluka, saw significant gains on Friday.
- The surge was caused by a major deal between the U.S. government and MP Materials to boost magnet production.
- The deal is a direct response to China’s restrictions on its exports of the critical metals.
- The U.S. government is guaranteeing a high minimum price for rare earths, making non-Chinese producers more profitable.
Australian rare earth mining stocks surged on Friday, with investors cheering a major deal in the United States aimed at breaking China’s grip on the critical metals. Shares in Lynas Rare Earths, the biggest producer outside of China, surged by as much as 20%. In comparison, Iluka Resources experienced its biggest single-day gain ever, skyrocketing 27%.
The reason for all the excitement? A significant agreement was reached between the U.S. Department of Defense and the American company MP Materials. The U.S. government is investing heavily in the company to accelerate production of rare earth magnets, a crucial step in establishing a supply chain that is independent of China.
This move comes just as China has tightened its grip on the global supply. Last month, Beijing’s restrictions led to a 75% drop in its magnet exports, forcing some car companies to halt production. These special metals are crucial for producing the powerful magnets used in a wide range of applications, including electric cars, wind turbines, advanced weapons, and electronics.
The U.S. deal is a game-changer because the government is guaranteeing a minimum price for the metals, nearly double the current price in China. This makes non-Chinese suppliers incredibly valuable.
Analysts immediately saw the massive upside for Australian companies, with one firm noting that Lynas is the “next logical beneficiary” of this kind of government support. The firm upgraded Lynas stock to a “buy” and significantly raised its price target.
