Why Shares of USA Rare Earth Are Soaring Today
Key Points
The U.S. government plans to invest $17.8 million in Trilogy Metals.
Investors are speculating that the U.S. government will also make an equity investment in USA Rare Earth.
Investors should remain focused on USA Rare Earth's development of its rare earth magnet production facility.
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Markets are hovering in positive territory today, and while they may end up down by the end of Tuesday's trading session, there's a strong likelihood that USA Rare Earth (NASDAQ: USAR) stock will end the day higher than where the rare earths stock began. And it doesn't even relate to any company news. Instead, the stock's spike stems from a development regarding a metals peer.
As of 12:14 a.m. ET, shares of USA Rare Earth are up 10%.
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Speculation of a notable partnership isn't just running rampant -- it's full-on sprinting
Trilogy Metals (NYSEMKT: TMQ) is the latest beneficiary of the U.S. government's growing enthusiasm for investing in companies focused on critical mineral production. The company, focused on copper and cobalt production, announced today that the U.S. government intends to make a $17.8 million investment in the company, which would result in an approximate 10% equity stake.
While investor interest in rare earths has soared since President Trump issued executive orders in May to shore up the nation's supply of these critical minerals, the administration's interest in acquiring equity stakes in these mining companies to expedite their growth has also represented a powerful catalyst -- one that has led investors to gobble up USA Rare Earth stock on the belief that it too will receive an equity investment from the U.S. government.
With shares rising, what are investors to do now?
Although it certainly seems with the realm of reason that the U.S. government would pursue an equity investment in USA Rare Earth, it's speculative at this point to predicate an investment in the company solely on this notion. Instead, potential investors should monitor the company's progress in developing its rare earth magnet production facility -- something a lot more material to a sound investment.
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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.
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