Why Trilogy Metals Stock Crashed Today

Trilogy Metals (NYSEMKT: TMQ) is a stock I'll bet most people had never heard of before, up until earlier this month, when the Trump administration announced it would take a 10% stake in the Canadian miner of rare-earth metals as a hedge against Chinese threats to restrict exports.

That news caused Trilogy Metals' stock price to triple in a day.

Admittedly, the initial elation didn't last, and investors later sold off Trilogy stock, still leaving it up nearly double. News out of Washington, D.C., today, however, is causing Trilogy more pain, and the stock is down 18.9% through 10:45 a.m. ET.

Image source: Getty Images.

Good news for the U.S. is bad news for Trilogy

Trade negotiators from the U.S. and China have struck what Treasury Secretary Scott Bessent calls "a very successful framework for the leaders to discuss on Thursday." Details are still firming up, but the broad outlines include China buying more U.S. soybeans, Trump retracting his latest tariffs threat, and China allowing more exports of rare-earth metals to the U.S.

That's good news for many, but bad news for companies like Trilogy, which is counting on a U.S. market, starved for rare-earth supplies, buying its product.

Is Trilogy stock a buy?

Fear of a rare-earth supply crunch propelled Trilogy stock up nearly 800% over the last 12 months. But what if Chinese supplies don't crunch? In that case, these gains could disappear. President Donald Trump has also struck a deal to have Malaysia, home to some 16 million tons of rare-earth metals, accelerate development so as to sell more supplies to the U.S., too.

The more rare-earth metals Malaysia can sell the U.S., the less we'll need from Trilogy -- and the dimmer the prospects for unprofitable Trilogy ever earning money in the future.

Rich Smith 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.