Why Rare-Earths Miner Energy Fuels Rallied in the Double Digits on Thursday

Shares of critical mineral miner Energy Fuels (NYSEMKT: UUUU) rallied 11.7% in Thursday's trading, well ahead of the overall market.

Energy Fuels is a U.S.-based miner and processor of uranium and other rare-earth elements, among other critical metals. In recent days, China announced that it would be suspending certain shipments of rare-earth minerals to the U.S., in response to President Donald Trump's large tariff increases on Chinese goods. But today, Energy Fuels issued a press release saying it has a solution ready that could alleviate potential shortages... albeit with a catch.

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Energy Fuels says it has the ability to ramp rare-earth production

On April 4, China retaliated against President Trump's "Liberation Day" tariffs by ordering restrictions on shipping six heavy rare-earth metals to the U.S. These metals are crucial for a number of end markets, including electric vehicles, aerospace and defense equipment, and capacitors that go into semiconductor systems. China's government said that exporters would now have to apply for a license to ship these crucial materials to the U.S.

Of note, the U.S. imports 80% of its rare-earth elements, with China accounting for 70% of those imports between 2020 and 2023. So, the new restrictions show China has cards it can play to counter Trump's tariffs.

In response to China, Trump signed an executive order on Tuesday directing the U.S. commerce secretary to investigate whether the U.S. should apply tariffs to these critical materials.

Energy Fuels believes it has a critical role to play, and issued a press release today explaining that it has achieved technology know-how to ramp U.S. rare-earth production. In the release, Energy Fuels said it had developed technology giving it the ability to produce six of the seven rare-earth metals now subject to those Chinese export restrictions at its White Mesa Mill in Utah.

But there's a catch

Although Energy Fuels says it now has this critical capability, its processing operations are still likely much more expensive than those in China. Throughout the press release, Energy Fuels notes that its production could occur, "with appropriate U.S. government support and/or market conditions." Chalmers was quoted in the press release as saying:

We encourage the U.S. government to showcase its commitment to American rare earth manufacturing with focused support to proven companies like Energy Fuels that have made significant investments in the critical mineral space and demonstrated their ability to commercially produce the critical minerals our country needs.

So, as with many crucial materials and products mostly produced in China or abroad, it seems that producing rare-earth metals in the U.S., while possible, would be prohibitively expensive without government support.

Given the Trump administration's aversion to subsidies, it will be interesting to see if Energy Fuels gets what it needs to boost production. The money-losing miner remains a speculative play on geopolitics and government policy as of today.

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Billy Duberstein and/or his clients have 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.