Where Did the $2.1 Billion Go?

Where did the money go?

On Tuesday, I wrote about a minerals financing package announced by The White House. I wanted to follow that up with another post discussing where it's going. So, where did it go?

US$1.66bn of Friday's US$2.1bn American mining package went to companies that do not own a mineral deposit.

Sila Nanotechnologies, Inc. builds silicon-carbon battery anodes in California. Niron Magnetics, Inc. makes rare-earth-free permanent magnets in Minnesota. Global Advanced Metals processes tantalum and niobium in Pennsylvania. Standard Bauxite is securing refractory grade bauxite supply.

Four companies. Four factories. 79% of the money.

The four recipients that own deposits split US$438m between them, and US$400m of that went to one name.

Here is the second number. Four of the eight recipients are publicly listed, and three of them are small. Strip out Sunrise Energy Metals, and the remaining three are worth about US$185m combined, against US$37.8m of announced support. The cheque is one-fifth of their aggregate market value.

Sunrise is the exception, and it is worth asking why. It closed at A$15.93 before the announcement. It sits at A$19.08 two sessions later. The market has added roughly US$450m of value to a company that received a conditional, non-binding, undrawn loan commitment of US$400m.

What that says about where Washington thinks the constraint sits is not subtle.

For twenty years, the industry has argued that the bottleneck is permitting and orebodies. The chequebook says otherwise. The bottleneck is separation, refining, alloying, and magnet-making; and the United States is buying midstream capacity because a deposit without a refinery is an export to China.

Which reframes the question for anyone screening this sector.

The interesting asset might no longer be the highest-grade deposit. It might just be the deposit sitting closest to a processing route that is being paid for by somebody else.

Less searching. More strategising.™