Why Did Trilogy Metals Stock Skyrocket 211% Today?
Key Points
The U.S. government is taking yet another equity stake in a public company.
The White House announced it is making a significant investment in Trilogy Metals as part of its push to secure a domestic supply of critical metals.
The company operates in Ambler, a copper-rich miining district in Alaska.
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Shares of Trilogy Metals (NYSEMKT: TMQ) soared Tuesday, finishing the day up 211%. The jump came as the S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC) fell by 0.4% and 0.7%, respectively.
The Trump administration announced it was taking a 10% equity stake in Trilogy Metals, a Canadian mining company, as part of its push to secure critical metal supply for the U.S.
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US looks to secure its metals supply
Late Monday, the White House announced that it would take a $36.5 million stake in Trilogy Metals, making it a 10% owner in the company. The deal also includes warrants for additional shares that would increase its stake to 17.5% of the company.
Trilogy Metals operates in the Ambler mining district, an area rich with copper, as well as cobalt, gallium, and germanium. These metals are critical to the U.S. economy and national defense, and the U.S. lags China in securing access to adequate sources of new metals. The Trump administration has made it a top priority to change this.
Image source: Getty Images.
Along with the announced equity stake, the White House said that it was reversing a decision by the previous administration to block the Ambler Road Project to "unlock Alaska's mineral potential." The project, a proposed industrial road, will increase mining access, but could harm local wildlife.
Be cautious
While its connection to the White House could greatly benefit Trilogy, it is a double-edged sword. Its stock price is now highly dependent on that single relationship -- a relationship that could change dramatically, even during Trump's tenure -- and for that reason alone, I would avoid the stock.
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Johnny Rice 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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