SA Asks: Will the U.S. government continue taking stakes in miners?

[USA Rare earth concept]
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The Trump administration has been actively looking to invest in mining companies with domestic operations as part of a push to counter Chinese dominance in the mining of rare earths and other critical minerals, which are used to produce a wide array of technological devices.

Over the last few months, the U.S. government has taken equity stakes in MP Materials (NYSE:MP [https://seekingalpha.com/symbol/MP]), Trilogy Metals (TMQ [https://seekingalpha.com/symbol/TMQ]), and Lithium Americas (NYSE:LAC [https://seekingalpha.com/symbol/LAC]). It's also reportedly been in talks with Energy Fuels (UUU [https://seekingalpha.com/symbol/UUU]), Critical Metals (NASDAQ:CRML [https://seekingalpha.com/symbol/CRML]), and USA Rare Earth (USAR [https://seekingalpha.com/symbol/USAR]).

We asked Seeking Alpha analysts Grassroots Trading [https://seekingalpha.com/author/grassroots-trading] and Austin Craig [https://seekingalpha.com/author/austin-craig] whether they thought the government would continue to seek out equity stakes in miners.

_WILL THE U.S. GOVERNMENT CONTINUE TAKING STAKES IN MINERS?_

Grassroots Trading [https://seekingalpha.com/author/grassroots-trading]: Yes, absolutely, there’s a clear trend emerging, and it seems likely that the U.S. government will continue investing in mining companies, particularly those involved in critical minerals and strategic supply chains.

Let’s walk it back to what’s been happening lately. Earlier this week, the Department of Defense bought a 10% stake in Trilogy Metals (TMQ [https://seekingalpha.com/symbol/TMQ]) to support its mining projects in Alaska’s Ambler district. Since then, the company’s stock has gone up about 200%. Earlier this month, the Department of Energy took a 5% equity stake in Lithium Americas (NYSE: LAC [https://seekingalpha.com/symbol/LAC]) as part of a funding restructuring. And back in July, MP Materials (NYSE: MP [https://seekingalpha.com/symbol/MP]), a major rare earth producer, finalized a $400 million preferred share and warrant deal, which gave the Pentagon roughly a 15% ownership position, making it the company’s largest shareholder.

I just covered Critical Metals (NASDAQ:CRML [https://seekingalpha.com/symbol/CRML]), and judging by Wednesday’s price action, it looks like the market maybe thinks the government could be getting closer to finalizing or expanding a deal there, contrary to what Bloomberg reported earlier this week. Separately, there’s growing speculation that Washington is also in talks with USA Rare Earth (USAR [https://seekingalpha.com/symbol/USAR]) about taking a stake to help strengthen U.S. supplies of rare earth materials and batteries.

That said, I don’t think this will turn into broad asset-class investing. The government’s going to limit this to two core areas: national security and supply chain vulnerability. Investors may want to pay attention to those aforementioned names and their peers. Or, if you want a broader selection, I’d go with ETFs like iShares MSCI Global Metals & Mining Producers ETF (BATS:PICK [https://seekingalpha.com/symbol/PICK]) or Global X Lithium & Battery Tech ETF (NYSEARCA:LIT [https://seekingalpha.com/symbol/LIT]) for exposure to where public policy right now is literally writing checks.

Austin Craig [https://seekingalpha.com/author/austin-craig]: I think investors need to consider a few things first when looking at companies in the sector.

One, does this empower the Department of War? Two, is it something we need more of in order to project power? And, three, is this a mineral, element, or process dominated by China?

Areas that I like are lithium, which is needed for drone warfare, EVs, and fixed energy for data centers. Lithium Americas (LAC [https://seekingalpha.com/symbol/LAC]) has had a run, but I am intrigued by Standard Lithium (SLI [https://seekingalpha.com/symbol/SLI]) with its approved DoE $225 million grant.

If LAC had to agree to equity for an interest-bearing loan, it seems logical President Trump would want something in return for a $225 million grant. After all, grants are free money in a sense.

Other sectors that interest me are helium and lithium iron phosphate, or LFP, refining for EVs. You need helium for semiconductor manufacturing, and LFP is dominated by China.

* Top Diversified Metals and Mining Stocks [https://seekingalpha.com/screeners/9409af15bf-Top-Diversified-Metals-and-Mining-Stocks]

MORE ON MP MATERIALS, LITHIUM AMERICAS CORP., ETC.

* Critical Metals: Don't Let The Trilogy Deal Scare You [https://seekingalpha.com/article/4828528-critical-metals-dont-let-the-trilogy-deal-scare-you]
* Critical Metals' Story Is Improving, But It's Not Time To Chase It [https://seekingalpha.com/article/4828324-critical-metals-story-is-improving-but-its-not-time-to-chase-it]
* Lithium Americas: Strategic For The U.S., Risky For Investors [https://seekingalpha.com/article/4827731-lithium-americas-strategic-for-the-us-risky-for-investors]
* Trump administration not weighing stake in Critical Metals Corp. - Bloomberg [https://seekingalpha.com/news/4502089-trump-administration-not-weighing-stake-in-critical-metals-corp-bloomberg]
* Communities push back on battery storage amid concerns about fires [https://seekingalpha.com/news/4501840-communities-push-back-on-battery-storage-amid-concerns-about-fires]