Why This Intriguing Rare Earth Stock Slumped Over 10% This Week

Shares of Critical Metals (NASDAQ: CRML) fell 10.8% at their lowest point this week, according to data provided by S&P Global Market Intelligence. The rare earth miner announced a joint venture this week, but something else caught investors' attention, triggering selling in the stock.

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A major rare earth deal

Critical Metals owns a 42% stake in Tanbreez in Greenland, one of the world's largest rare-earth deposits, with plans to increase its stake to 92.5%. The company recently secured environmental approvals, paving the way for the mine's development.

This week, Critical Metals filed a term sheet to create a 50/50 joint venture with a state-owned entity in Romania to construct a rare-earth plant that will process rare-earth concentrates into magnets for aerospace and military applications. Rare-earth magnets are broadly used in electronics, phones, electric vehicles, and defense systems.

Importantly, Critical Metals will supply half of the rare-earth concentrate from Tanbreez to the joint venture for the mine's full resource lifespan.

That makes it a significant deal as it commits 50% of Tanbreez's concentrate under a long-term offtake agreement. With this deal, Critical Metals has now secured agreements for 75% of the mine's produce even before it has started mining.

This also highlights the high demand for rare earths and the incentive for domestic miners, such as Critical Metals, to expedite operations, particularly under President Donald Trump's leadership. Securing the domestic supply of critical metals and minerals, including rare earth elements, is among the top national security priorities for the Trump administration, aimed at reducing reliance on China.

So why did Critical Metals stock fall this week?

Rare earth stocks surged some months ago after China imposed export restrictions on several critical rare earth elements. The U.S. and China, however, reached a trade truce, and industry numbers this week revealed a big jump in China's rare earth exports for November.

With shares of Critical Metals surging over 340% in the year at one point, investors are taking profits off the table. However, given the rare-earth potential and Critical Metals' Tanbreez ownership, it's a stock worth keeping an eye on.

Neha Chamaria 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.