Stocks exploring or producing REEs in Australia have had a pretty solid run in recent history, ultimately driven by the U.S. Government’s decision to buy into MP Materials.
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The U.S. government now holds stock in that company, in a more orderly fashion than the ‘golden share’ Trump holds in U.S. Steel.
As an aside, that deal effectively gives Donny complete veto powers over any decision U.S. Steel makes, and installs him as some kind of ethereal Non-Executive Chairman, but appears to have been a concession as part of Nippon Steel’s purchase of the company.
Anyway, back to MP Materials. That company the U.S. Government bought a stake in is a publicly listed smallcap REE explorer in the U.S.. In the U.S., none other than the Pentagon ticked off on a 10Y deal that said Neodymium (NdPr, to be exact) will fetch a price of at least US$110/kg for the company.
Why neodymium support matters
Neodymium prices ultimately have an outsized sway on overall REE sentiment when it comes to prices (for which many REEs are opaque), so the market reaction is likely in part because Neodymium price support, a fairly liquid benchmarked mineral, offers a straightforward calculus.
The other factor is that, right now, Nd prices are having a lithium moment. Or at least, it was. But with prices up +17% in the last month, you’ve also got upside coming from metals markets, too.
But as for why MP Materials’ U.S. gov’t buyout has proved to be such a catalyst for the ASX, it is, in my view, due to a cultural circumstance.
Has MP Materials got an Aussie accent?
In my view, the real psychological aspect of MP Materials’ recent dealings leading to butterfly-effect gains down under is because MP Materials is not at all unlike the kind of stock you’d see dozens of here in Australia.
To reiterate: It’s a smallcap explorer, and now Trump wants a share.
Which is why the prospect of like-for-like government commodity price guarantee support, here at home, is easy for the local market to understand.
Thus leading to select stock price momentum on the ASX around the potential of Canberra to do the same as the U.S. did for MP Materials.
So will it? That remains anybody’s guess, but I anticipate we’ll see something similar in the next twelve months. In my view, Federal Labor won’t want to be seen to be copying Trump.
Expect them to call it something else
So it seems to me we’ll probably get some kind of “scheme,” or “subsidy,” or “incentive,” possibly a “special zone,” or something else named in such a way to make it sound completely different to what Washington just did with MP Materials.
In fact, Resources Minister Madeleine King has said just that earlier this week, coinciding with the Diggers & Dealers conference this week, the Logies of mining.
But let’s be real.
On Thursday, the same day we’ve learned Aussie exports to the U.K. have surged, it’s clear America mightn’t quite be the buddy we once thought it was.
The whole Western world is having that realisation, and political mythologies are being formed along the lines of whether a leader does or does not concede to Trump. (That, and the ongoing crisis in the Middle East.)
But I think it’s likely we’ll see Canberra-led price supports in the future.
After all, if countries are serious about establishing domestic critical mineral supply chains, they can’t just keep hyping up the private sector to get encouraged.
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At some point, the taxpayer is going to need to provide funds – which is the kind of thing we pay taxes for, after all.
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