U.S. Defense Department Invests in Mining Companies to Secure Gallium Supply
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 5 days ago
0mins
Should l Buy AA?
Source: Benzinga
- Strategic Importance of Gallium: Gallium is critical for military radar, satellites, and 5G infrastructure, with 98% of global supply controlled by China, and prices have tripled in two years to $1,572 per kilogram, highlighting its essential role in defense and technology sectors.
- Pentagon's Investment Strategy: The U.S. Defense Department has adopted an equity investment approach for the first time, investing $1.9 billion in Korea Zinc for a Tennessee smelter and $150 million in Atlantic Alumina to extract gallium from red mud, marking a new strategy in securing supply.
- Alcoa's Gallium Production Plans: Alcoa plans to produce 100 tons of gallium annually starting late 2026, potentially generating $170 million in revenue, which, while only 1.2% of total sales, could yield profit margins of 70-80% due to low raw material costs.
- Market Supply-Demand Risks: By 2028, global gallium supply is expected to increase by 27%, while demand is projected to grow only 24%, raising concerns of market collapse, with experts warning that oversupply could rapidly depress prices and impact investment returns.
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Analyst Views on AA
Wall Street analysts forecast AA stock price to fall
10 Analyst Rating
6 Buy
2 Hold
2 Sell
Moderate Buy
Current: 60.510
Low
33.00
Averages
46.00
High
58.00
Current: 60.510
Low
33.00
Averages
46.00
High
58.00
About AA
Alcoa Corporation is a vertically integrated aluminum company comprised of bauxite mining, alumina refining, aluminum production (smelting and casting), and energy generation. The Company’s operations are comprised of two business segments: Alumina and Aluminum. The Alumina segment primarily consists of its bauxite mines and alumina refineries, which generally include the mining of bauxite and other aluminous ores, as well as the refining, production, and sale of smelter grade and non-metallurgical alumina. The alumina produced by this segment is sold to internal and external aluminum smelter customers; a portion of the alumina is sold to external customers who process it into industrial chemical products. The Aluminum segment consists of the Company’s aluminum smelting and casting operations along with the Company’s energy production assets in Brazil, Canada, and the United States. It has direct and indirect ownership of 26 operating locations across nine countries on six continents.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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