Another Rare-Earth Stock Jumps on Government Deal

Neodymium-praseodymium metal ingots. (SeongJoon Cho/Bloomberg)

Key Points

• Ramaco Resources shares rose 6.8% after announcing a research collaboration with the Department of Energy. It is working with Goldman Sachs on its plan for a Strategic Critical Minerals Terminal.
• The proposed terminal aims to reduce U.S. reliance on Chinese rare-earth products, as China controls an estimated 85% of global processing capacity.
• Despite a month-to-date decline of 11%, Ramaco stock is up 189% year to date, while MP Materials is up 316% and USA Rare Earth is up 71%.

A wild month for rare-earth stocks closed with a bang.

Shares of coal miner and aspiring rare-earth company Ramaco Resources rose to $30.36, up 2.4% on Friday. The S&P 500 and Dow Jones Industrial Average gained 0.3% and 0.1%, respectively.

Two pieces of news were behind the move.

For starters, the company, which is developing the rare-earth Brook Mine in Sheridan, Wyo., said it signed an agreement to collaborate on rare-earth research and development with the U.S. Department of Energy’s National Energy Technology Laboratory. That builds on an existing partnership with the lab, but Ramaco said it would also work with other Energy Department laboratories on rare earths.

The amount of money that might be spent wasn’t covered in the news release. Ramaco didn’t respond to a request for comment.

Next, Ramaco said that Goldman Sachs will “act as the exclusive structuring agent in connection with its previously announced initiative to establish a Strategic Critical Minerals Terminal at Ramaco’s Brook Mine facility in Wyoming.”

The terminal is a Ramaco idea to reduce America’s dependence on supplies of Chinese rare-earth products. It could serve as a strategic stockpile where Ramaco and other producers could store the metals. Eventually, it could become a center for trading.

China dominates the global rare-earth market with an estimated 85% of global processing capacity. Rare-earth materials end up in everything from electronics to electric vehicles to wind turbines to fighter jets. Their use has almost quadrupled over the past 10 years.

The move caps a wild month for Ramaco and other rare-earth shares. Shares traded as high as $57.80 and as low as $27.24. Catalyzing the volatility was a threat from China to restrict rare-earth exports. Chances of the country making good on that threat diminished as trade talks with the U.S. advanced.

In the talks, the U.S. secured commitments from China to suspend the implementation of export controls on rare earth materials that it announced on Oct. 9.

All the volatility left Ramaco stock down 8.5% in October, and off 27% since China’s threat in earlier in the month. October’s decline still left Ramaco stock up 196% year to date.

The trading pattern has been similar for shares of MP Materials and USA Rare Earth.

MP stock dropped 2.9% on Friday. USA Rare Earth shares fell 1.2%. Through Friday trading, MP stock was up 304% year to date. USA Rare Earth shares were up 69%.

Investors might believe the Ramaco news represents competition for the other two, but the stock moves also might just be trading-related volatility. There is plenty of rare-earth business to go around.

MP, the largest of the three, makes only a fraction of the rare earths used by American businesses annually. USA Rare Earth and Ramaco don’t have rare-earth revenue yet. USA Rare Earth is developing a mine in Texas.

MP signed a blockbuster deal with the Defense Department in July that included an equity stake, a price floor for rare-earth materials, and a guaranteed customer for rare-earth magnets from production infrastructure the company is building.

The deal reshaped the U.S. rare-earth industry, creating the frenzy investors have been dealing with for months.

Write to Al Root at allen.root@dowjones.com