Why USA Rare Earth Stock Leaped by Almost 14% Today

USA Rare Earth (NASDAQ: USAR) won big on Monday, as it operates in a country whose government just signed an encouraging deal for such materials. On top of that, its stock is now under coverage by an analyst who feels it is a buy at current prices. USA Rare Earth's stock rose by nearly 14% that day as a result, positively trouncing the S&P 500 index's 1.1% gain.

Trump makes a deal

On Monday, President Trump and his Australian counterpart Prime Minister Anthony Albanese inked a rare earths and critical minerals deal between the two countries. The intention behind the pact is to ensure a reliable flow of the materials in the face of China's recent tightening of export controls over them.

Image source: Getty Images.

A major provision of the agreement is that both countries would devote $1 billion over the coming six months to domestic rare earth mining and processing efforts. Although USA Rare Earth is currently pre-revenue, investors clearly believe the company will feel the positive effects of this initiative.

Also on Monday, William Blair analyst Neil Dingmann initiated coverage of the stock. He rated it an outperform, his company's equivalent of a buy, without setting a price target.

According to reports, the pundit is particularly encouraged by USA Rare Earth's status as one of only a handful of truly integrated companies of its type. He also waxed bullish that it will soon launch operations of its magnet-making facility.

A rare opportunity?

While these developments are very encouraging, we have to keep in mind that since USA Rare Earths is still at an early stage as a business, it has to be considered a speculative investment. That said, as a rare and stacked rare earths company in this country, it feels like a decent play for investors with a higher-than-average tolerance for risk.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.