The shares of some of the biggest Australian critical metals and rare earths firms shot up on Tuesday after a huge minerals agreement was announced between Washington and Canberra costing as much as $8.5 billion.
The agreement was signed Monday between U.S. President Donald Trump and Australian Prime Minister Anthony Albanese. It includes funds for projects that will boost the supply of key materials for the defense industry and energy security.
Lynas Rare Earths, the biggest rare earths producer in Australia in terms of market value, surged approximately 4.7 percent in early trading in Asia.
Mineral sand miner Iluka Resources gained over 9 percent and lithium producer Pilbara Minerals gained about 5 percent.
Other smaller rare earth miners were also profitable, with VHM surging about 30 percent and Northern Minerals surging about 16 percent.
However, Latrobe Magnesium, the largest magnesium producer in Australia, jumped almost 47 percent.
Alcoa, a NYSE-traded company, is developing a project in Western Australia to recover and refine the critical metal gallium. It was identified as one of the two priority projects under the new minerals deal. Washington will provide equity capital for the initiative.
The shares of Alcoa, which is also quoted on the Australian Securities Exchange in the form of a depository receipts, increased by close to 10 percent.
High-tech products, including electric vehicles, semiconductors and defense equipment, depend on rare earths and critical metals.
China, the world leader in the production of rare earths as well as most other valuable minerals, has restricted exports of the materials in a trade war with the U.S., which has increased the speed of international diversification of global supply chains.
Albanese announced that in the next six months, the two countries will share $1 billion in the form of projects which are “immediately available.”
Nevertheless, the White House fact sheet further said that Washington and Canberra will invest over $3 billion in critical mineral projects within the same period as the agreement was a “framework.”
The White House further indicated that the Export-Import Bank of the United States would issue seven letters of interest totalling over $2.2 billion in financing which could open up to $5 billion in overall investment.
