Investors have mixed response to Trump's $12B rare earth gambit
Rare-earth stocks surged on Monday in pre-market trading on a report that the Trump administration is looking to build a stockpile of the critical minerals as part of a nearly $12 billion effort called Project Vault.
According to Bloomberg, which was the first to report on the initiative, it will combine $1.67 billion in private capital with a $10 billion loan from US Export-Import Bank (Ex-Im).
In a post on X later on Monday, Ex-Im president and chairman John Jovonavic said that the board had officially approved the 15-year loan, which he noted was the largest deal in the bank's 92-year history, accounting for more than double anything it had ever done before.
"I could not be more excited because this transaction strengthens American manufacturing, secures critical supply chains and delivers real wins for American workers and our national security," Jovonavic said.
Project Vault will be similar to the nation's existing stockpile of crude oil, Bloomberg noted, but instead of oil the US will be stockpiling rare earths and other critical minerals.
Trump was expected to address the American people about Project Vault on Monday evening.
Although rare earth stocks rose in the early morning hours, most of them gave up those gains by the close of trading.
The United States Antimony Corp. (UAMY) and NioCorp Developments Ltd. (NB) both got noticeable bumps, with the former rising nearly 7% and the latter closing the day up 4.4%. Meanwhile, MP Materials Corp. (MP) was up only 0.57%, while USA Rare Earth (USAR) fell 1.4% and Critical Metals Corp. (CRML) dropped 4.4%.
The Trump administration has made domestic manufacturing of rare earths one of its priorities, which it sees as being a matter of national security. China is currently responsible for about 90% of global production of the critical minerals.
This imbalance came to the forefront when Beijing cut off rare earth exports last year as retaliation for Trump’s “Liberation Day” tariffs. Rare earths are the key building block of modern tech, automobiles and the military, powering everything from electric vehicles and semiconductors to robotics and missile guidance systems.
The private funding for Project Vault will come from a number of US companies, Bloomberg reported. There are more than a dozen that have agreed to participate so far, including Alphabet Inc.'s (GOOG) Google, General Motors Co. (GM), The Boeing Co. (BA), GE Vernon Inc. (GEV) and Stellantis N.V. (NV).
Why a stockpile may not solve a rare earth shortage
The White House has been aggressive in its efforts to boost domestic manufacturing in the sector, taking stakes in both MP Materials and USA Rare Earth.
Back in July, the Defense Department entered into a 10-year public-private relationship with MP Materials (MP) as part of multibillion dollar package that will allow MP Materials to construct its second domestic magnet manufacturing facility – called the 10X Facility – at a soon-to-be-named location that will serve both defense and commercial customers.
The Defense Department also agreed to purchase $400 million of a newly-created series of the MP Material’s preferred stock, which is convertible into shares of the company’s common stock.
This investment made the military agency the largest shareholder of MP materials.
And last week, USAR entered into a non-binding letter of intent (LOI) with the US Commerce Department in conjunction with the Department of Energy (DOE) that will include approximately $300 million in federal funding and a $1.3 billion loan.
The Commerce Department will also take 16.1 million shares of common stock and 17.6 million stock warrants, giving the US government a 10% stake in the company.
In a blog post addressing Project Vault, strategic consulting firm Rare Earth Exchanges said that the government's initiative has both upsides and downsides to it.
It noted that China's dominance is a real concern, and when it curbed exports last year as part of its trade war with the US, it "exposed how thin Western buffers really are."
And while the nation has a US National Defense Stockpile, this is mainly reserved for military needs.
“Civilian manufacturers—from autos to semiconductors—have had no equivalent safety net,” the firm wrote. “Project Vault addresses a real structural gap.”
However, Rare Earth Exchanges also notes that stockpiles do not bolster supply, but rather "delay scarcity."
"Without parallel acceleration of mining, separation, and magnet manufacturing, the U.S. still draws down material ultimately sourced or processed abroad—often in China," the firm noted.
It added that in extreme cases, "a stockpile can mask shortages rather than solve them."