Before we dive in, I want to let you know that we’ve opened enrollment to our Macro Ops Collective.
The Collective is our premier service, offering discussions on high-level theory and performance, differentiated research, real-time trade alerts, portfolio tracking, and a global community of serious traders and investors dedicated to mastery.
We’re having a decent year (up ~7% YTD), holding a few big themes, finding a few stocks nobody has heard of, and not doing anything stupid.
Volatile markets like these are a perfect reminder of the value of our Collective. A lot of investors have no idea how to trade this market. They’re scared, quick-triggered, and cortisol-maxxing.
Macro Ops takes the guesswork out of all of that. And we’re having a hell of a time doing it.
Alright, enough of that. In this week’s column: Rare Earths are hot, jurisdictions matter, and more defense industry news.
“Digging for Value, One Story At A Time.”
Rare Earths: So Hot Right Now
We’ve written a lot about rare earth elements (or REEs) on Digging Value. As a quick refresher: REEs aren’t rare (relatively abundant); China owns 90%+ of supply, refining, and processing capacity, and they’re a very important COG in all our weapons systems and gadgets.
China, for reasons that are partly geological and partly “we don’t mind the environmental mess,” refines about 90% of the world’s rare earths.
The U.S. has one active rare earth mine and processing facility: MP Materials’ (MP) Mountain Pass, California. If you want to buy American neodymium, you basically have to call MP Materials and hope they pick up.
President Trump escalated the trade war with China this past week by slapping tariffs on almost everything except smartphones and laptops because even trade warriors need TikTok and Excel. China responded by restricting exports of rare earths, which is a bigger deal because the US can’t get its REEs anywhere else. And we need them for fighter jets and other Weapons of Mass Peace.
So what do you do? How about, “What if we just dug up a bunch of stuff from the ocean floor and see what we find?” Here’s Mugglehead Magazine:
“President Donald Trump is preparing an executive order to permit the stockpiling of critical metals from the Pacific Ocean, according to a Financial Times report published over the weekend.
The initiative aims to counter China’s dominance in rare earth supply chains and battery minerals, as the United States works to secure self-sufficiency in critical mineral resources.”
I don’t know. It’s hard enough to find, permit, develop, and produce an above-ground mine – let alone a deep-sea excursion. But deep-sea mining sounds a lot cooler than “open pit” mining.
Deep-sea mining is exactly what it sounds like: sending giant robots to the bottom of the ocean to scoop up metal-rich nodules, presumably while annoying a lot of fish and permanently damaging coral reefs. This is controversial because the ocean is big and mysterious, full of things that don’t like being scooped, and not the most environmentally friendly activity.
But, geopolitics! If the choice is between annoying some fish and running out of magnets for your F-35s, the fish are going to lose.
There’s a trade (or multiple trades) here. The most obvious is to buy MP Materials (MP), which we did at Macro Ops. The logic is simple:
Traders hear Trump talking about rare earth elements → traders ask ChatGPT for the best way to play the bullish REE theme → ChatGPT tells them MP → traders buy MP.
That makes sense. Then there are the ancillary trades like USAR, REEMF, and any other company with “rare earth element” in its CUSIP description. Remember, most of these companies are worth nothing. They have no projects, only pipe dreams. But that won’t stop them from 5x’ing on “vibes.”
Jurisdiction Matters
Mining is a tough business.
You don’t set the sale price of the thing you produce, you can’t move an orebody from a high-risk location to a safer one, you drill a bunch of holes in the ground hoping to find more of the thing you sell, and once you find it, you hope the price is high enough to make a profit.
And the best part? At any point, the government could say, “We don’t want you mining here anymore. Please leave.”
“The Ghanaian government has refused to extend Gold Fields’ mining lease for the Damang gold mine and is insisting the group cease operations by April 18 when the lease expires.
The refusal to extend was first reported in the group’s recently published annual report for the year to end-December 2024 but that report indicated Gold Fields was still negotiating with the Ghanaian government over the mine.
The development will have little impact on Gold Fields’ production levels because mining operations ceased at the mine last year which has since only been treating surface stockpiles. Damang produced 135,000oz of gold in 2024.”
I guess it could be worse for GFI. The mine represents ~6% of annual production, and the company stopped mining the area last year, opting to harvest the stockpiles instead.
But that doesn’t mean it can’t get worse for GFI. The whole idea is that GFI did everything right by the Ghanian government – got all the approvals, permits, signatures, environmental studies, and social licenses – and still lost the mine.
The official reason for the non-renewal is not very official. The government hasn’t given a detailed public explanation, but the timing is interesting. Ghana just had national elections, and there’s a new administration in place.
Gold Fields is being cautious not to escalate things—no international arbitration (yet), no angry press releases, just a lot of “ongoing engagement” and “seeking the best outcome for all stakeholders.”
This is probably because Gold Fields has bigger fish to fry in Ghana. The company is negotiating a merger of its Tarkwa mine (the big one) with AngloGold Ashanti’s Iduapriem mine, and it doesn’t want to annoy the government while that deal is up in the air. Back to the article:
“The decision not to go for arbitration may well have to do with avoiding undue confrontation with the Ghanaian government while a decision on the Tarkwa/Iduapriem merger is pending.
Regarding the merger, the 2024 annual report stated, “Following the recent national elections, Gold Fields and AngloGold Ashanti are working to engage the new government on progressing the potential JV.”
I don’t know. Something doesn’t feel right here. I get that GFI stopped mining the area, so who cares if the Ghanian government revoked their license? But this is part of a broader Resource Nationalization trend that we’ve been writing about for months.
The government is centralizing control over artisanal and small-scale gold trading, kicking out foreign companies from direct gold purchases, and creating a new state entity, the Ghana Gold Board, to handle all the buying, selling, and exporting of artisanal gold.
This is why jurisdiction matters.
One day, you could wake up to find your mine closed by a government that wants to do it themselves, but that also is really appreciated for all the hard work you did building it for them.
More Defense Stockpiling News
I can’t go a week without writing about the defense industry, and I love it. The defense industry is the perfect blueprint for what the mining/metals industry will become over the next 3-5 years.
Defense was dirty, violent, and the antithesis of a proper ESG portfolio. Then, the stocks started going up, and suddenly, defense companies became “Nationally strategic,” “ethical,” and “a staple in every good European investment fund.”
It’s amazing what prices can do to narratives.
Anyway, two weeks ago, the FT released an article explaining the UK’s attempt to create a fund to stockpile weapons.
“The informal paper, written by UK officials and seen by the Financial Times, presents the case for a multilateral fund for a “coalition of the willing” that would borrow on markets at favourable rates and support defence spending.
Backed with equity and sovereign guarantees, the fund would both lend money for defence projects and actually acquire military assets, creating common “stockpiles” of equipment for participating nations.”
I know what you’re thinking – this sounds like a Ponzi Scheme. I pool some money from a bunch of European countries, give it to defense companies at attractive (read: very low) rates, and then buy products from those defense companies because of “stockpiling.”
Ponzi Schemes are great if you’re on the right side of the trade (not advice!).
Here’s more info on the fund:
“While the proposed fund could help drive common procurement and provide finance for smaller defence companies, its main advantage would be to bankroll the stockpiling of weapons and ammunition that governments would only pay for when they draw them down.
Potential purchases noted in the paper include spares for military equipment such as tanks and aircraft, artillery shells, air defence munitions, explosives and logistics aircraft such as helicopters and carriers.”
All of this is, of course, Bullish for Metals. You need copper, REEs, titanium, tungsten, antimony, and iron ore to make all those weapons.
It’s also bullish because the defense industry is the playbook for mining and metals. That means we’ll get a Metals-Focused Multilateral Fund to stockpile “critical minerals.”
The Metals Fund will lend money to mining companies at very low rates, allowing miners to increase production and sell to an insatiable buyer: governments that want to stockpile critical resources.
None of this is priced into mining stocks, either. Yes, gold is up a lot. However, institutions and retail investors have almost zero exposure to the sector. They don’t own miners. They don’t own physical. But they will.
Look around: governments are telling you that critical minerals are “priceless.” Governments, like they’re doing for defense spending, are going into deficits to secure “national defense supplies.”
It’s all right there. And it hasn’t even started yet.
