From the attention they received after President Donald Trump issued executive orders to secure the nation’s supply of critical minerals to the interest that rare-earth stocks like MP Materials (MP +2.49%) and USA Rare Earth (USAR 3.41%) received after the government announced equity investments in them, it’s clear that rare-earth stocks are having their day in the sun.
While I’ve been bullish on rare-earth stocks for some time, I haven’t been motivated to click the buy button on either MP Materials or USA Rare Earth stocks.
But when this rare-earth stock became available recently, I jumped at the chance to buy it.
Image source: Getty Images.
A high-risk, high-reward stock that I have high hopes for
New on the scene, REalloys (ALOY +19.33%) debuted on public markets in late February after a business merger with a special purpose acquisition company (SPAC). Headquartered in Ohio, REalloys is a rare-earth company working to develop a vertically integrated operation that includes recycling, mining, oxide production, metallization, alloying, and magnet manufacturing.
Today’s Change
(19.33%) $1.91
Current Price
$11.79
Key Data Points
Market Cap
$705M
Day’s Range
$9.75 – $12.48
52wk Range
$2.82 – $26.90
Volume
4.1M
Avg Vol
991K
Gross Margin
47.74%
Like MP Materials and USA Rare Earth, REalloys is committed to developing a vertically integrated rare-earth platform, though there are several differences. While MP Materials relies on its Mountain Pass mine and USA Rare Earth depends on its Round Top deposit for feedstocks, REalloys plans to use mined material from a variety of sources.
The company, for example, recently signed a memorandum of understanding with U.S. Critical Materials, which supports REalloys’ securing of up to 10% of mineral production from Sheep Creek, one of the highest-grade rare-earth deposits in the United States.
I find the fact that REalloys plans to use rare-earth materials from different suppliers appealing because it mitigates the risk of a disruption to operations at one asset, as well as the extent to which it could adversely affect that company’s business.
Another appealing feature of REalloys is that its business model includes both light and heavy rare-earth elements. Unlike MP Materials, which concentrates on light rare earths like neodymium and praseodymium, and USA Rare Earth, which focuses on heavy rare earths from its Round Top deposit, REalloys is developing a processing platform that the company believes will make it “a key North American source of light and heavy REEs [rare-earth elements].”
REalloys stock isn’t right for everyone
While I’m excited about the high-reward potential of REalloys stock, I fully recognize it’s a higher-risk investment. The company is in the pre-revenue phase of its development, and it’ll likely remain there until the first half of 2027, when its rare-earth separation and metallization facility is expected to begin production. Plus, there’s no guarantee the company will be profitable once it begins commercial operations.
But despite these risks, I’m comfortable with my modest position. My portfolio is grounded in high-quality investments that help me sleep soundly at night. Should my investment in REalloys prove unsuccessful, it won’t ruin me financially, thanks to the conservative investments I have that balance the REalloys position.
Likewise, those considering a position in this new rare-earth stock on the block must do their own due diligence to confirm it isn’t too risky. If it is, though, there’s no reason to despair, as MP Materials stock is still a worthy consideration, as well as other mining stocks that may provide rare-earth exposure.
