Why Standard Lithium Stock Is Soaring Today

Key Points

• The Department of Defense acquired a major stake in MP Materials, a mining company operating in the U.S.

• Stocks across the industry moved higher in the hopes that more deals would be coming.

• 10 stocks we like better than Standard Lithium ›

Shares of Standard Lithium (NYSEMKT: SLI) jumped on Thursday, finishing the day up 11.7%. The rise came as the S&P 500 (SNPINDEX: ^GSPC) gained 0.3% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was flat.

Standard Lithium moved higher alongside much of the industry after MP Materials announced it had inked a major deal with the Department of Defense (DoD).

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This mining company has a new shareholder

MP, which owns the sole operating rare earth mine in the US, announced this morning that the Pentagon is purchasing $400 million worth of shares in the company. The DoD is now the largest shareholder, controlling more than 15% and nearly twice that of CEO James Litinsky and BlackRock Advisors.

The Trump administration has been considering direct investment in domestic mining in order to shore up critical security and defense supply chains. Investors across the industry were hopeful that more deals such as this would follow, leading to today's rise in Standard Lithium stock.

Image source: Getty Images.

Standard Lithium is still speculative

There are no guarantees that the Pentagon will follow up with more deals such as this, and even if it does, there's certainly no guarantee that Standard Lithium would be one of the company's choices. Given that it is Canadian-owned, I would venture to guess it won't. The company is still pre-revenue, and only investors without particularly high risk tolerance should consider investing.

Still, the company's Arkansas project was designated as a "Priority Transparency Critical Mineral Project" in the Trump administration's executive order. It would seem that even if it doesn't get a direct investment, it is seen favorably by the administration.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.