MP Materials and USA Rare Earth Rallied on a Greenland Deal Neither Company Has Any Exposure To. Here's the Reality Check.
There's a strong investment case for buying both stocks but it's not dependent on events in Greenland.
Overview
If any investor had doubts that rare-earth stocks were subject to volatility due to political events, the recent "Greenland bounce" would go a long way toward dispelling that notion. USA Rare Earth (NASDAQ: USAR) and MP Materials (NYSE: MP) stocks soared and slumped in response to recent events, even though they're unlikely to affect the fundamental case for the stocks. Here's the how, why, and what of the real investment case for the stocks.
The announcement of a defense agreement between the U.S., Denmark, and Greenland raised hopes that U.S. rare-earth companies might benefit from rare-earth extraction in Greenland, not least to source rare-earth materials ultimately used in magnet production in the U.S.
Details
However, neither USA Rare Earth nor MP Materials has any assets in Greenland, and it seems unlikely they will benefit directly from the deal. In addition, the parts of the arrangement regarding resource extraction do not grant the U.S. any special rights beyond the agreement, which requires unanimous decisions by the U.S., Greenland, and Denmark on mining investments by non-NATO members/partners, or non-European Union members.
Source
Originally published at www.fool.com.