Three Companies Fighting Back Against China's Rare Earth Dominance

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Nov 18, 2024, 08:00 ET

FN Media Group Presents Oilprice.com Market Commentary

LONDON, Nov. 18, 2024 /PRNewswire/ -- With Trump having secured a historic victory in the U.S. Presidential election, investors are now racing to position themselves for a new America. Dramatic shifts in geopolitical, financial, and trade policies are going to transform the market, with trillions of dollars at stake. And nowhere is the anxiety more acute than among strategic companies, with Trump's victory poised to give a boost to big banks and send defense sector stocks soaring. Companies mentioned in this release include: Lockheed Martin (NYSE:LMT), Nucor (NYSE:NUE), Raytheon Technologies (NYSE: RTX), General Dynamics (NYSE: GD), Mercury Systems (NASDAQ: MRCY).

Meanwhile, the tech industry is a mixed bag and the oil and gas industry is set to do well under Trump. While readers might expect Tesla (TSLA) to be among the biggest 'Trump Trades', the "Magnificent Seven" in general aren't on this list.

These three stocks are highly strategic and focused on the biggest elephant in the room: national security, defense, and heavy industry.

#1 Lockheed Martin (NYSE:LMT)

Trump's spending policies are expected to inject significant momentum into the defense industry, starting first with key manufacturers such as Lockheed Martin, General Dynamics, and Northrop Grumman. With a Trump victory, there will be a decidedly hawkish undertone to budget amounts for defense.

With the Middle East threatening to explode into a wider regional conflict, with enough external actors to turn this into a world war, and with the Russia-Ukraine war still going strong and expanding into venues as far away as Africa, national defense has become a mainstream issue that captures voter sentiment more than it did the last time around.

Lockheed Martin manufactures F-35 fighter aircraft, and it is already outperforming its peers and enjoying its share of the Pentagon's recent $12-billion budget bonanza. In these times of geopolitical escalation, Lockheed is likely a buy under any president, but Trump could push it over the edge.

#2 Military Metals Corp. (MILI.CN; MILIF.QB)

Antimony is the "most important metal you've never heard of", as Forbes has perfectly described it. It's the national defense kingmaker, and Military Metals Corp. is uniquely positioned to supply what could be the most significant metal of our time.

According to the Center for Strategic & International Studies (CSIS), antimony is a highly critical element for the defense industry. It's necessary for armor-piercing ammunition, infrared sensors, bullets, precision optics, nuclear weapons, semiconductors, cables, and batteries.

Antimony prices exploded this year, rising well over 200% after Beijing slapped export restrictions on antimony, with the explicit intention of restricting global shipments to shore up China's own natural security. This move has sent shockwaves through the tech and defense industries. Antimony is currently trading at over $35,000 a ton.

The few companies active in the space have seen their share prices jump. Larvotta Resources, an Australian miner saw its share price explode 800% as China moved to restrict antimony exports, while Perpetua Resources, a Pentagon-backed miner saw its share price jump by more than 200% since the beginning of this year.

Despite the major jump in antimony prices there are very few pure antimony plays in the market, but Military Metals Corp. (MILI.CN; MILIF.QB) stands out as a bold contender, aggressively building a portfolio of some of the most prolific, past-producing assets in Europe and North America. This ambitious explorer isn't just gathering properties; it's strategically seizing high-grade antimony and gold projects with historical impact such as the historical West Gore antimony mine, which was England's largest supplier during World War I.

Across the ocean in Europe, the company recently announced that it has entered into a definitive agreement to purchase one of Europe's largest antimony deposits in Slovakia.

But the best thing here is the quality of the assets. Where development stage competitor Perpetua will mine antimony as a by-product at 0.06% per ton, the future Slovakian properties of Military Metals Corp. easily reach up to 4% per ton of ore. According to Military Metals Corp. CEO Scott Eldridge, its assets are in the top three out of 15 companies globally in terms of quality of the assets.

Confirming its reputation as a fast-mover, Military Metals Corp. announced the acquisition of another 388 hectares at its Nova Scotia West Gore project and has now "gained complete coverage over the entire mineralized system including all the historical mine workings and known antimony-gold occurrences".

Already earlier this month it made another acquisition, this time in Europe, where governments are just about as anxious about its future antimony supply as the United States.

On October 7, 2024, Military Metals Corp. pushed onward with its rapid advance on antimony assets with an agreement to scoop up 100% ownership in a private company that owns two antimony projects in Slovakia, including a third tin asset. The Trojarova Antimony Project, Tienesgrund Antimony Project and the Medvedi Tin Project all have Soviet-era resources.

The Trojarova project is one of the European's Union's largest historical Antimony resources.

"This acquisition strategically positions Military Metals as a leading explorer and developer of antimony," said CEO Scott Eldridge. "The Trojarova and Tienesgrund projects offer significant potential for rapid advancement, particularly given Slovakia's strong mining infrastructure and history. We see this as a perfect alignment with the European Union's Critical Raw Materials Act, opening the door to potential EU funding sources as we advance these projects toward production."

The company is rushing the antimony playing field here, moving at breakneck speed to acquire critical assets at the same time that China is tightening the reins on the rarest components of its national defense machine.

With wildly escalating geopolitical tensions, coupled with Western sanctions on Russian metals, what makes it a 'Trump Trade' is the added impact a renewed tariff war would have on American antimony supplies if China decides to fight back. Speculative demand is at an all-time high, even as China grapples with a downturn in demand since it implemented export restrictions.

With every hostile move from Beijing, we could expect antimony prices to rise further, creating significantly higher value for junior explorers and producers who have swooped in to take advantage of this national defense opportunity.

#3 Nucor (NYSE:NUE)

Back in August 2021, under Trump's tenure, steel (HRC) was fetching around $2000 per ounce. Those days are gone. Today, it's trading in the low $700s, and American steel producers need a lifeline for slowing sales and faltering growth. Trump could be that lifeline, and Nucor looks nicely positioned to reap the benefits.

The American producer suffered this year, with revenue for the six months ended June 29 shedding 11% compared to the same period in 2023. Earnings per share have also taken a beating, down 40% from Q2 2024 compared to Q2 2023. And Q3 earnings are expected to be worse, making this a good time to get in on the steel sector before it truly becomes a 'Trump Trade'. There is a clear growth pathway here for Nucor, which is planning to invest $6.5 billion in eight major projects through 2027, but Trump policies would help bring the stock back up with the growth potential. A Trump promise of 10% tariffs on all important producers could reduce price competition pressure for Nucor, particularly emanating from producers based in China and Brazil.

"While market conditions have softened compared to recent record-setting years, Nucor remains focused on its long-term growth strategy and has returned more than $1.7 billion to investors through June," Nucor CEO Leon Topalian said in a second-quarter earnings release.

Three bonus companies to watch:

Raytheon Technologies (NYSE: RTX) is an aerospace and defense company that provides advanced systems and services for commercial, military, and government customers worldwide. Formed in 2020 through the merger of Raytheon Company and United Technologies Corporation, Raytheon Technologies has approximately 180,000 employees and is headquartered in Waltham, Massachusetts. The company operates through four segments: Collins Aerospace Systems, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense.

Raytheon Technologies is a leader in the development and production of a wide range of aerospace and defense products, including aircraft engines, avionics, cyber security solutions, missile defense systems, and space systems. The company's products and services are used by customers in over 150 countries. Raytheon Technologies is committed to innovation and invests heavily in research and development to maintain its technological edge.

Raytheon Technologies plays a vital role in the global aerospace and defense industry. The company's products and services help to ensure the safety and security of people around the world. Raytheon Technologies is also a major contributor to the U.S. economy, supporting thousands of jobs across the country. The company's continued success is important to the future of the aerospace and defense industry.

General Dynamics (NYSE: GD) is a global aerospace and defense company that offers a broad portfolio of products and services in business aviation; combat systems and munitions; IT solutions; and shipbuilding and marine systems. With approximately 100,000 employees, General Dynamics is headquartered in Reston, Virginia, and has a significant presence in more than 45 countries.

General Dynamics is a major supplier to the U.S. military and its allies. The company's products and services are used in a wide range of applications, including air defense, ground combat, maritime operations, and cyber warfare. General Dynamics is also a leader in the business aviation market, with its Gulfstream aircraft being some of the most popular private jets in the world.

General Dynamics is committed to innovation and invests heavily in research and development to maintain its technological edge. The company is also focused on expanding its international business, and it is currently pursuing opportunities in markets such as Europe, the Middle East, and Asia. General Dynamics is a well-established and respected company in the aerospace and defense industry.

Mercury Systems (NASDAQ: MRCY) is a key enabler of critical defense programs. The company's technology is used in a wide range of applications, including radar systems, electronic warfare systems, and C4ISR systems. Mercury's focus on security and reliability makes it a trusted partner to the U.S. government and its allies.

Mercury operates in a highly competitive market. The company faces competition from larger, more established defense contractors. Mercury must continue to innovate and develop new technologies to maintain its competitive edge.

Despite these challenges, Mercury is well-positioned for future growth. The company's strong technology portfolio, focus on security, and commitment to customer service make it a valuable partner to the defense industry.
By. Tom Kool

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