U.S. Government invention in metal markets is starting to generate fat profits for investors on the right side of trades with Australian iron ore billionaire Gina Rinehart more than $300 million richer from her positions in rare earths.
Iron ore is Gina Rinehart’s engine room while rare earths are her fastest growing investment. … More
The first market roiling government action was the unveiling two days ago of a 50% tariff on copper imported into the U.S.
That move, designed to boost domestic U.S. copper production lifted the U.S. copper price by 10% to $5.51 a pound, 25% higher than the $4.40/lb for copper traded on the London Metal Exchange.
Next came direct investment by the U.S. Defense Department in the rare earths industry via an investment in MP Materials, the only domestic producer of the critical metals, plus the promise of a $110 per kilogram floor price for the most important material called NdPr, a mix of neodymium and praseodymium.
NdPr is mainly used in the permanent magnets of military equipment, including the F35 fighter, as well as a wide range of commercial applications such as electric vehicles and wind turbines.
While the copper tariff is aimed at encouraging local mining and smelting of the most widely used industrial metal, the rare earth intervention is aimed directly at countering Chinese dominance of a family of elements which are of growing importance.
Weaponised By China
Over the past 12-months, China has weaponised its dominance of rare earth supply, limiting exports as part of trade war being waged against the U.S.
Yesterday’s move by the U.S. Government will see it become a major shareholder in MP, through a $400 million purchase of preferred stock, as well as the creation of a guaranteed market for rare earths produced in the U.S.
MP, which operates the Mountain Pass rare earths mine in California, saw its share price electrified by the government intervention which also lit a fire under the share price of Lynas Rare Earths, an Australian miner which is the biggest producer of the material outside China.
MP rose by 40% to $45.23, taking its increase over the last 12 months to 203%. Lynas rose by 15% to A$9.67, taking its 12-months increase to 51%
Rinehart, best known for her iron ore interests and a $30.4 billion personal fortune, has been a buyer of shares in MP and Lynas for several years and is keen to see the companies merge, a move unlikely now that the U.S. Government has taken a major stake in MP.
For now, Rinehart will have to be satisfied with the sharp increase in her 8.5% stake in MP which has risen in value by approximately $200 million, and the 8.2% rise in her Lynas stake which has risen in value by about $100 million.