U.S. Takes Equity Stakes in Miners: How is the Sector Reacting?

As rhetoric moves to action, the US government has recently taken equity stakes in several mining companies. What impact are these actions having on the mining sector?

There have been about three high-profile equity stakes that the government's taken over the last 2 to 3 months. These equity stakes range anywhere from about 5 to 15%. It's a very important step that we've seen because what this does is encourage additional investment in the space. It's all geared toward really making a robust domestic supply chain, and it does provide some level of not only additional capital for these miners, but I think more importantly, the clarity that it gives the mining industry overall.

Lithium Americas was one of the benefactors of an equity stake; about a 5% stake was taken by the US government. This is a Canadian-listed company. They have a large lithium deposit in Nevada, which if we were to talk about this 18 months ago, GM actually made a $650 million investment in the same company, in the same mine. Trilogy Metals, which has some copper reserves that they're looking to open up in the Ambler Mining District in Alaska, has also seen an equity stake that will be about 10%.

Probably the most high-profile would be MP Materials. They're a rare earth producer. This is one that's been increasingly important as we see the tensions that we've seen with China and really the stranglehold that they have on the rarest market. This is also even more significant than we've seen maybe from some of the other targets that the government's taken because it does two important things.

First, the Department of Defense has agreed to purchase 100% of the output of the new 10X facility. That's important because it provides some foresight into what could go on. Something that's different than we've seen in the past with other deals is that they're also putting a price floor in place. So this also gives MP Materials in this case some stability as it relates to financing.

That, combined with the Department of Defense being the only company that will step in if that price floor isn't met, I think are two very important signals as to how the government's viewing rare earth and other critical materials.