Why USA Rare Earth Stock Stock Crashed This Week

Key Points

• USA Rare Earth stock returned the gains it secured last week.

• News out of China is just one of the recent news developments that has investors scared.

• Since nothing has materially changed for USA Rare Earth, current shareholders should try to ride out the current volatility.

• 10 stocks we like better than USA Rare Earth ›

Giving back all of its 5.7% gain from last week, shares of USA Rare Earth (NASDAQ: USAR) have been in free fall this week. Several news events out of the rare-earth-mining industry have investors feeling less than bullish on the stock's prospects.

According to data provided by S&P Global Market Intelligence, shares of the metals stock have plunged 18% from the end of last Friday's trading session through 12:25 p.m. ET on Thursday.

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News from around the world has investors feeling woeful

The week began on an inauspicious note when investors learned that rare-earth exports out of China have ramped up this summer. According to Bloomberg, the export volume of Chinese rare-earth products rose 69% from June to July. With rare earth products at the core of trade tensions between the U.S. and China, investors are hyperfocused on news that the world's leading rare-earth producer has escalated its exports of the prized critical minerals.

Tuesday didn't provide much relief. Reuters reported that Vulcan Elements, a producer of rare-earth magnets, recently signed a supply deal with ReElement for rare-earth oxides. USA Rare Earth recognizes the commencement of operations next year at its rare-earth-magnet production facility as a major catalyst. Investors are likely fretful about the company's prospects if peers are inking rare-earth-magnet deals while USA Rare Earth isn't enjoying the same interest.

Yet another factor behind the stock's tumble this week is news from rare-earth peer Critical Metals (NASDAQ: CRML), which reported favorable drilling results from a project in Greenland. Besides magnet production, USA Rare Earth is also focused on mining at its resource in Texas. With the promising results that Critical Metals reported for its Greenland asset, investors may be finding USA Rare Earth less appealing.

What's an investor to do now?

Because USA Rare Earth is a highly speculative investment, the volatility this week is unsurprising. Current shareholders should simply sit tight at this point, since nothing materially has changed for the company.

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Scott Levine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.