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What Investors Should Know About Trump's Rare Earth Mining Executive Order

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What Investors Should Know About Trump's Rare Earth Mining Executive Order

President Donald Trump signed a new executive order to emphasize the U.S. efforts on rare earth mining.

What Happened: On Wednesday, Trump signed an executive order to expand the production of rare earth minerals. Rare earth minerals are vital to many manufacturing sectors, including electric vehicles, missile guided systems and wind turbines.

The executive order declares a national emergency in the mining industry. The White House is ordering the Department of Defense to boost the production of rare-earth magnets.

Why It’s Important: The U.S. is currently dependent on China for 80% of its imported rare-earth compounds and metals. There is a fear that China could restrict exports of this segment due to ongoing tariff conflicts.

Demand for rare earth minerals is expected to rise substantially. Mining Weekly shows the sector going from $2.98 billion to $5.65 billion by the year 2030.

Metal Stocks Move: Northern Dynasty Minerals (NYSE: NAK), which is working on getting a mine approved in Alaska, saw shares climb 7% to $1.04.

Piedmont Lithium (NASDAQ: PLL), who saw shares boost from a Tesla Inc (NASDAQ: TSLA) lithium deal, were up 8% to $25.32.

Lithium Americas Corp (NYSE: LAC) shares were up 10% to $12.50.

Westwater Resources (NASDAQ: WWR) shares climbed 18% to $2.96.

Lynas Corporation (Pink: LYSCF), who is planning a rare-earth mineral processing site in the U.S., saw shares trade 5%% higher to $1.77.

The VanEck Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX) traded higher 1% to $38.15. The ETF contains many Chinese miners in its top ten holdings.

The SPAC Miner Opportunity: Fortress Value Acquisition Corp (NYSE: FVAC) is a SPAC set to merge with rare earth miner MP Materials.

MP Materials is the only rare earths producer in North America and has an existing deal in place with the Department of Defense.

In April, the company signed a contract to accelerate the U.S. production of rare earth minerals. Phase 1 was to help reduce the U.S. supply chain for rare earth minerals. Upon completion of Phase 1, the DoD may award further contracts.

The merger values MP Materials at an enterprise value of $1.5 billion. The company estimates 2020 revenue to be $100 million.

MP Materials is expecting a positive adjusted EBITDA of $30 million for the 2020 fiscal year. The company expects adjusted EBITDA to hit $250 million in 2023 as production is ramped up.

SPAC King Chamath Palihapitiya is part of the $200 million PIPE to finance the MP Materials and Fortress Value deal.

 

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