Australian Rare Earths Stocks Surge After U.S. Takes Stake in MP Materials

Australia’s rare earths producers saw their shares jump on Friday as the U.S. Department of Defense’s deal with U.S. rare earth producer MP Materials boosted sentiment across the Western industry amid Chinese export controls.

Shares in Australia’s Lynas Rare Earths, the world’s biggest producer outside China, surged by 17% on the Australian Securities Exchange on Friday. The stock surge sent Lynas Rare Earths shares to their highest level since August 2022.

Critical minerals producer Iluka Resources jumped by as much as 27%, recording its biggest intraday surge ever.

The stock gains on Friday followed the announcement by U.S. rare earths miner and magnet producer MP Materials Corp from Thursday that it had entered into a transformational public-private partnership with the United States Department of Defense (DoD) to dramatically accelerate the build-out of an end-to-end U.S. rare earth magnet supply chain and reduce foreign dependency.

With a multibillion-dollar package of investments and long-term commitments from DoD, MP Materials will construct its second domestic magnet manufacturing facility, the “10X Facility”, at a soon-to-be-chosen location to serve both defense and commercial customers.

For a period of 10 years following the construction of the 10X Facility, DoD has agreed to ensure that 100% of the magnets produced at the 10X Facility will be purchased by defense and commercial customers with shared upside.

DoD will also become MP Materials’ biggest shareholder with a 15% stake.

The deal “signals a strong U.S. push for rare earth magnet independence, lifting upside risk across the rare earth pricing complex,” analysts at Jefferies said in a note carried by Reuters.

Shares in MP Materials soared by 50% on Thursday, and Australian rare earths stocks also surged as the Australian market opened on Friday.

China’s firm grip on rare earths and critical minerals has emboldened it to weaponize the export of these elements with export controls and curbs.

By Tsvetana Paraskova for Oilprice.com

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