Raw materials alert for defense and technology! Almonty, MP Materials, and Rheinmetall!

Defense Minister Pistorius on the hunt for raw materials in Canada?

With his visit to NATO's Atlantic partners, German Defense Minister Pistorius wants to send a clear signal about Germany's growing role in the European security architecture. His first stop was Iceland – a country of central strategic importance for the alliance's northern flank. Together with the Icelandic foreign minister, Pistorius signed a memorandum of understanding on deeper military cooperation. Plans include the expansion of logistical infrastructure for naval units, joint exercises for air and maritime surveillance, and cooperation in the areas of cyber defense and protection of critical underwater infrastructure. The aim is to better secure the North Atlantic as a key military and technological region – also against the backdrop of increasing Russian activities in the Arctic. The stock market newcomer TKMS is also likely to benefit from this.

With Pistorius continuing his trip to Canada and the UK in the coming days, Germany is underlining its claim to be an active player in the alliance. Talks on maritime logistics, reconnaissance, and arms cooperation are on the agenda, as are preparations for joint NATO maneuvers. Another critical topic that will hopefully not be overlooked is Europe's dependence on raw materials. Canada in particular is considered a key partner in the supply of strategic metals such as nickel, lithium, and tungsten – materials that are indispensable for modern weapon systems, electronics, and energy technologies. Europe currently lags in domestic production and remains highly dependent on imports from China. Pistorius is expected to address this challenge: without secure sources of raw materials, any military and technological sovereignty remains a pipe dream. The US is showing what needs to be done, namely investing directly in raw materials companies and projects. This year alone, the US government has invested in MP Materials and the Canadian lithium producer Lithium Americas.

Almonty: Tungsten also critical for AI

The Frankfurter Allgemeine Zeitung devoted almost an entire page to the topic of critical raw materials on Friday. Specifically, for an interview with Almonty CEO Lewis Black. Tungsten may be overshadowed by rare earths in terms of attention, but it has long been at the center of geopolitical tensions. Almonty is right in the middle of it, and investors can benefit. Lewis Black emphasized in the interview that progress in artificial intelligence would hardly be possible without tungsten. The metal is indispensable in high-performance AI chips due to its extreme heat resistance. The raw material is also of central importance for defense, aviation, mechanical engineering, and energy production. China's export restrictions have highlighted its strategic importance. Almonty is benefiting from this development and is about to begin production at its Sangdong project in South Korea. The Company already operates a mine in Portugal, where it has gained important experience in mining this hard raw material.

Black describes the new Sangdong mine as the largest tungsten production site in decades and also one of the world's largest processing plants. Operations are scheduled to being in 2025, initially processing 640,000 tons of ore per year, with plans to double capacity in the future. Given the heavy dependence of Western countries on China, Black views the project as critical for securing a stable supply of tungsten.

In the geopolitical context, Black emphasizes that while the US is exerting significant pressure on Western suppliers, it is also seeking to invest directly in commodity companies as a shareholder. It is hard to believe that the US is 100% dependent on tungsten imports. Black highlighted that Almonty is fundamentally capable of filling the gap of 1,200 to 1,500 tons for US defense applications and may even support the US in establishing domestic production. A few weeks ago, in an interview with Bloomberg, he hinted at a possible takeover in the US, which could further increase production capacity.

In any case, Almonty does not appear to have to worry about sales of its production.

https://youtu.be/24TSlyX22aM?si=I3kmxuD42q-jABwm

Rheinmetall: Off to the US

Germany's largest defense contractor has also discovered the US as a location. However, it is not known whether this is due to future access to raw materials.

In any case, Rheinmetall is expanding its presence in the US, positioning itself as a key partner to the American defense industry. Through its subsidiary American Rheinmetall, the group is currently investing around USD 31.7 million in the expansion and modernization of its sites in Michigan. Plans include new production capacities, research centers, and up to 450 additional jobs. At the end of 2024, Rheinmetall acquired the US company Loc Performance Products to strengthen its expertise in armored vehicle components and drive systems. The purchase price was USD 950 million. The investments are part of a long-term strategy to tap into the US market, the world's largest defense sector, more strongly – also in order to benefit from rising budgets for armaments and ammunition programs while making the supply chains of Western partners less dependent on China and Russia. The US business still contributes to a manageable extent to the Group's revenue of EUR 9.8 billion (2024). The share of the US subsidiary is likely to be well below 10%. The goal is for American Rheinmetall Vehicles to achieve revenue of more than USD 1 billion by 2027.

Almonty is much more than a critical supplier to the defense industry. Tungsten is unjustly overshadowed by rare earths – at least in the public perception. Almonty shares continue to appear to have sustainable potential. Rheinmetall remains a core investment in the defense sector.