Why Shares of USA Rare Earth Are Tanking Today

Starting the week on a bearish foot, both the Dow Jones Industrial Average and S&P 500 are down around 0.15% in afternoon trading. Shares of rare earth miner USA Rare Earth (NASDAQ: USAR) are also heading lower today -- unrelated to news from the company. While the bearish tone on Wall Street may be partially responsible for the stock's decline, a new partnership announced, involving the United States government, is also contributing to the slide in USA Rare Earth stock.

As of 2:50 p.m. ET, shares of USA Rare Earth are down 11.7%.

Image source: Getty Images.

Another government deal -- another deal that doesn't include USA Rare Earth

Investors learned today that the U.S. government is partnering with Korea Zinc Co., which is developing a zinc smelter in the United States. According to Bloomberg, the U.S. is one of several investors contributing about $1.94 billion to help Korea Zinc develop the project.

Zinc appears on the U.S. Geological Survey's 2025 List of Critical Minerals.

With the issuance of executive orders in May to spur domestic production of rare earths, investors recognized that shoring up the nation's supply of certain critical metals was a priority in President Trump's second term. Trump's interest became increasingly apparent when the U.S. government announced an investment in rare earths producer MP Materials in July.

After the U.S. inked partnerships with lithium producer Lithium Americas in October and rare-earth magnet producer Vulcan Elements, investors speculated that USA Rare Earth would also soon receive an investment from the U.S. government, like its rare-earth peers. Today, however, investors appear to be losing faith that a deal of this sort is in the cards for the company.

Should investors buy the dip on USA Rare Earth stock?

While many may be disheartened to find the U.S. partnering -- again -- with a company other than USA Rare Earth, today's news shouldn't disqualify potential investors. With USA Rare Earth nearing completion of a rare earth magnet production facility, investors with sufficient risk tolerances may find today a great time to start positions.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool recommends MP Materials. The Motley Fool has a disclosure policy.