Insights 
VT 
The Trump Administration recently made a $35.6 million investment in Trilogy Metals to support mining in Alaska’s Ambler Mining District. This investment involves the U.S. Department of War acquiring 10% of Trilogy Metals through 8,215,570 units at $2.17 each, alongside a matching purchase from South32.
Through this venture, the U.S. government becomes a 10% shareholder in Trilogy Metals, with additional warrants for a further 7.5% stake. The agreement allows the department to nominate a director to the Trilogy Metals board for three years.
Exploration Funding
The funds are earmarked for exploration of the Upper Kobuk Mineral Projects, home to valuable metals like copper, gold, and rare earth materials. Access to the mining district will improve with a planned 211-mile highway.
Following the announcement, Trilogy Metals’ stock surged 240%, with shares rising to $7.13 from $2.09. The stock received target upgrades, including a buy rating and $10 target from Cantor Fitzgerald.
Prior to this, the U.S. government invested $8.9 billion in Intel, aligning with the Chips and Science Act. Trilogy Metals reported a 1 cent per share net loss last quarter and has not achieved profitability in recent years.
We saw how the 240% surge in Trilogy Metals (TMQ) last month caused implied volatility on its options to skyrocket. That volatility remains elevated today, reflecting the market’s indecision on whether the stock will consolidate or push towards the new $10 analyst targets. This presents an opportunity for traders to consider premium-selling strategies, like covered calls, if they believe the initial excitement has peaked.
Government Investment Patterns
This government investment is not a one-off event, as we saw a similar, though much larger, stake taken in Intel during the summer of 2024. This signals a clear pattern of targeting sectors crucial for national supply chains, including critical minerals and semiconductors. Derivative traders should now be looking for the next potential target by scanning other junior miners or domestic tech firms and considering cheap, long-dated call options on the most likely candidates.
The focus on the Ambler Mining District has lifted the entire domestic mining sector, not just TMQ. We’ve seen funds flowing into related stocks since the announcement, with the VanEck Rare Earth/Strategic Metals ETF (REMX) gaining over 4% in the last month alone. Buying call options on such ETFs allows for a broader play on this onshoring theme without the immense risk of a single, unprofitable exploration company.
This reminds us of the government-fueled clean energy boom we witnessed back in 2020 and 2021, where the Invesco Solar ETF (TAN) saw a dramatic run-up before a significant correction. That historical pattern suggests that while the upside can be explosive, the eventual reversal can be just as sharp. Using defined-risk option strategies, like bull call spreads, could capture upside while protecting traders from the inevitable volatility spike.
These trades are entirely dependent on the current administration’s industrial policy, making them highly sensitive to political headlines. Recent reports show that inflation, which the Bureau of Labor Statistics pegged at an annualized rate of 3.8% last month, continues to be a major political issue that could influence future government spending priorities. Therefore, we believe positions should be kept on a shorter leash, focusing on option expirations in the next few months to avoid exposure to sudden policy shifts.
