Here's Why MP Materials Stock Rocketed Higher This Week
Key Points
Heavy rare-earth minerals from Venezuela could potentially help meet the demand for magnet production in the U.S.
The stock carries embedded risk, and there is no guarantee that any of the speculation will come to fruition.
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Shares in MP Materials (NYSE: MP) rose by 11.1% in the week to Friday morning. The move comes as the market prices in the possibility of an improved trading relationship with Venezuela, a country rich in resources.
MP Materials and Venezuela
The country is better known for its oil deposits, but it's also believed to have 300000 tonnes of rare-earth minerals in the Orinoco Mining Arc. In addition, Venezuela's deposits contain monazite minerals, which in turn contain highly prized heavy rare-earth elements, including Dysprosium (used in electric vehicles and wind turbines) and Terbium (used in defense munitions and advanced sensors).
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These minerals could potentially be highly valuable to MP Materials, as its Mountain Pass deposit in California is scarce in them and is known as a light rare-earth deposit, producing. light rare-earth such as neodymium and praseodymium.
What it means to investors
While it's interesting to speculate about MP Materials, a company with substantial U.S. government investment, utilizing heavy rare-earth elements from Venezuela to feed its magnet-producing facilities, it's a long way from happening or even being a possibility. It's a long way from happening anytime soon.
Image source: Getty Images.
That said, the reality is that securing non-China-sourced materials and magnets is clearly a priority for the current administration, and MP Materials offers a pathway to help ensure a domestic source of such materials, even if the company faces execution, funding, and political risks ahead.
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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.
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