Digging Value is a twice-a-week column where I deep dive into markets, mining, and whatever financial absurdity caught my attention.
If you like your investing insights (not advice!) grounded in cash flows, hard assets, and common sense—but also recognize that markets frequently ignore all three—you’ll probably enjoy this.
Let’s explore the wild world of value investing in natural resources together.
Today’s column: The US needs a czar, China finds the MJ of REE deposits, and Uzbekistan wants to play ball with the US.
“Digging for Value, One Story At A Time.”
Help Wanted: Metals Czar
I talk a lot about how Everything Is Bullish Metals. Like when China bans critical minerals exports or the EU says, “We need to rearm all our countries.” That’s bullish metals.
But what about appointing a “Critical Minerals” Czar? That has to be bullish metals.
“U.S. President Donald Trump is seeking to build metal refining facilities on Pentagon military bases, and also plans to name a critical minerals czar to help curb dependence on Chinese imports, Reuters reported on Thursday.
Trump could announce the move in an executive order by as soon as Wednesday, as the U.S. President recently said he will move to secure domestic production of critical minerals and rare earths.”
Everyone loves a good title – Dr., PhD, CEO, Prime Minister – but czar? Come on.
Trump is directionally correct in his plans to reduce the US’s dependence on China for critical minerals – China controls ~95% of global critical mineral processing/refining capacity.
And the solution – build refineries on Pentagon bases – is vintage Trump. If you’re going to refine minerals critical to national security, why not do it somewhere secure? Like on military bases, which already have fences and guards and presumably some spare acreage.
It kind of makes sense: if you’re worried about supply chains and geopolitical risk, just put the whole supply chain under military guard. Problem solved!
But I say “directionally correct” because China still controls 60% of global critical mineral production. Which creates tons of potential problems. Like where would we get all the critical minerals to feed our fancy new refineries?
Do you think we’d ask China, “Hey, I know we’re not on the best terms, and we kind of built these refineries because we don’t trust you and we don’t want your Communist rocks, but can we have just a few to get our factories moving? Thx.”
The other problem is you can’t just stick a new mine within an existing military base (how convenient!). You mine the stuff where you find the stuff.
So I see two options:
- The US just so happens to build new military bases near large critical minerals deposits.
- Our new Minerals Czar offers sweetheart deals to all US domestic critical minerals producers, developers, and explorers. Something like, “We’ll buy 75% off your offtake at a 20% market premium, but you can’t sell it to China.”
Regardless, I can’t help but see this as incredibly bullish for US-based critical mineral deposits and processing infrastructure, and the companies that own those deposits and infrastructure.
Remember, the refineries solve maybe 25% of the problem. The US needs to overhaul every part of the supply chain: regulations, permitting, capacity, surveying, infrastructure.
It doesn’t matter how many refineries we build if it takes 20 years to bring a new mine into production.
We need more US material – something along the lines of what China just discovered.
The Michael Jordan of Rare Earth Deposits
Let me paint a picture of China’s latest rare earth deposit discovery through the game Monopoly.
I hate Monopoly because my wife always wins. Here’s how she does it. Somehow she always rolls the perfect number to buy the most expensive hotels. Then, equally miraculously, I always roll the perfect number to land on those most expensive hotels.
I pass go, Collect $200, and then pay my wife $2,000 because I can’t roll anything other than snakeyes or some combination of 4.
China is like my wife. They keep rolling that lucky die.
“China solidified its global dominance in rare earth elements mining with a new discovery that its experts say is likely to be the largest middle and heavy rare earth deposit in the country.
The discovery was first reported in the Chinese paper Workers’ Daily late January, then confirmed and published by the China Geological Survey (CGS) under the Ministry of Natural Resources.
According to the CGS, the deposit could host as much as 1.15 million tonnes of resources containing key rare earth elements such as praseodymium, neodymium, dysprosium and terbium, which are being sought after globally. Once tapped, it would yield about 470,000 tonnes of these strategic minerals, it estimated.”
The timing here is also amusingly convenient. Just as the world ramps its EV ambitions and clean energy dreams — both heavily reliant on these obscure metals — China casually announces it’s found even more of them. Oh, and the whole US stance of “We’re reducing our dependence on China for critical minerals.”
That’s gotta feel pretty good if you’re China. But of course it gets better for them.
“Chinese media claim that the new discovery represents another breakthrough in its mineral exploration, as it is the first super-large ion-adsorption type deposit found in the country in over half a century.
Rare earth minerals on this type of deposit are naturally concentrated and absorbed onto clay surfaces, making them relatively easy to extract through environmentally sensitive methods like ion exchange. The last such discovery dates back to 1969 in the eastern Chinese province of Jiangxi.”
It’s like I’m watching my wife win Monopoly all over again. I mean think about this timeline:
- The entire world agrees that we should eventually switch to “cleaner” fuel sources like solar, wind, and nuclear, and also “cleaner” cars like EVs and hybrids. All requiring vast amounts of critical minerals.
- Trump enforces tariffs and globally commits to reducing its reliance on China for critical mineral processing and production.
- Trump appoints a Critical Minerals Czar charged with finding US-based supply and processing capabilities.
- China finds the Michael Jordan of Rare Earth deposits in its backyard.
- Oh and the deposit just so happens to be the easiest, least environmentally damaging type to extract.
I don’t know. It feels too depressing to write, “there’s no chance that we (the US) ever catches China in the race for critical mineral independence.” But it kind of feels like that at this point?
China is to the critical minerals industry what the US Men’s National team is to Olympic Basketball. You just can’t beat them.
Diversifying away from China on rare earths is like trying to quit Amazon Prime. Sure, you could do it, but then where would you get your stuff? And how long would it take? And what if I can’t walk into Whole Foods and return my stuff as easily?
New Trades & Barter Systems
I’ve written before about how there have been two ways you can make money investing or trading commodities:
- Do deep research on individual companies, explore their projects and economics at various commodities prices, interview management to see if they’ve been successful in the past and aren’t complete liars, agnoize over why the stock isn’t higher despite its underlying commodity going up, then exit the trade for a 50% loss.
Or
- See what China is buying and then just buy those commodities/related companies.
But now there’s a third way to make money in commodities: wait for a country to launch a Nationally Strategic Metals Fund and find companies with deposits in that country.
It could work (not advice!)? I don’t know. It kind of worked with Greenland. So what about Uzbekistan?
“Uzbekistan has launched a $2.6 billion initiative to unlock its rich endowment of resources, with a three-year plan focusing on the extraction of critical minerals being sought out by the United States.
The ambitious initiative was unveiled on March 7 during a presentation by President Shavkat Mirziyoyev, who laid out plans to develop 76 projects covering 28 different elements.
“The main task is to extract valuable raw materials directly from ore using modern technologies, increase the purity of minerals and create products with high added value,” Mirziyoyev said in his statement.”
The trade seems simple enough. There are probably a few publicly traded companies with assets in Uzbekistan. Those assets probably have hundreds of millions in sunk capital exploring deposits and determining project size/scale. And now, thanks to the Nationally Strategic Metals Fund, might finally see the light of day.
Uzbekistan also simplifies things by telling you exactly what metals they want to invest in:
“To date, the Central Asian nation has identified significant deposits of critical minerals such as tungsten, lithium, titanium and vanadium, most of which have yet to be developed due to a lack of investment. These elements, according to Mirziyoyev, will be the focus of the billion-dollar initiative amid rising global interest for the roles they play in advanced technologies.”
The point here is to not overcomplicate natural resource investing. It’s already complicated enough with geology, metallurgy, geopolitics, and environmental issues. Determine where the money will go, into what specific rocks, and then find decent projects developing said rocks.
But this isn’t just about finding the next junior play. This move also conveniently aligns with U.S. interests.
Both Biden and Trump administrations have been eyeing Uzbekistan’s minerals for a while now. Secretary of State Marco Rubio recently mentioned the U.S.’s eagerness for “mutually beneficial opportunities” in critical minerals investment — which is diplomatic-speak for “please let us buy your lithium instead of China’s.” And last September, the U.S. and Uzbekistan signed a memorandum of understanding to collaborate on exactly this sort of thing.
We’re entering a world where countries rich in minerals pawn those minerals for national defense aid. That seems like a win-win-win for the United States.
First the DRC, now Uzbekistan. The days of loaning the US military in “goodwill” are over. It’s a new era of barter: “You give me a security blanket, I give you all the tungsten and antimony your heart desires, and we both reduce our dependence on China.”
The Art of The (Minerals) Deal?
