What happened

Shares of uranium miner Energy Fuels (NYSEMKT:UUUU) rose a quick 12% in early trading on March 2. The most likely cause for the stock price move was the company's news release after the close on March 1 announcing that it had signed a new deal outside of the uranium space.  

So what

Although Energy Fuels' core business is mining for uranium, it has been looking to expand its reach into the rare earth metals space. To that end, in November 2020 the company announced that it had produced a rare earth element carbonate concentrate from material provided by a third party. Rare earth metals are integral to modern technology like electric vehicles but most of the rare earth metals available come from China. Recently China has floated the idea that it might limit exports of rare earth metals. That's increased the demand for alternative sources of the materials, which means that Energy Fuels was clearly moving in the right direction with its rare earths effort.  

A compass with the arrow pointing to the word strategy.

Image source: Getty Images.

That effort, meanwhile, got a big boost yesterday when the company announced an agreement with Neo Performance Materials in which Energy Fuels will process monazite sands provided by Chemours into a mixed rare earth carbonate. (Uranium will also be extracted in the process.) The rare earth carbonate material will then be used by Neo at its separate rare earth production plant in Europe. Energy Fuels also announced that it is looking into "additional value-added U.S. rare earth production capabilities" in the future. With increasing concern that China could be an unreliable source of rare earth metals, investors viewed these developments in a very positive light.

Now what

Energy Fuels is clearly attaching itself to a hot sector, so investors need to step back and think about the company and what it is doing here. That's not to suggest that the move is a mistake in any way, but that the company has historically been focused on uranium. Before long-term investors jump in here because of the rare earth metals angle, a deeper dive is probably warranted. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.