ASM (ASX:ASM) share price in flux after deal with South Korean Government

The Australian Strategic Materials (ASX: ASM) share price is trending downwards today.

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The Australian Strategic Materials Ltd (ASX: ASM) share price is trending downwards today.

Despite an early rise of 1.3% in morning trade, the share price has slipped and is now 0.5% down on yesterday's close. At the time of writing, shares in the metal company are selling at $5.30. In comparison, the S&P/ASX All Ordinaries Index is up 0.3%.

Let's take a closer look at the company's most recent announcement and how it could be affecting the ASM share price.

What did ASM announce today?

In a statement released to the ASX, ASM announced it had signed a memorandum of understanding (MoU) with the South Korean, Chungbuk provincial government and Cheongju city government. The MoU is for the establishment of a metals plant within the Ochang Foreign Investment Zone.

The scope of the MoU includes "supply of utilities, administrative licenses and permit procedures…"

The plant is located 115km south of Korea's largest city, Seoul. It will initially produce neodymium-iron-boron powder and titanium powder.

The company will also receive an as-yet undisclosed government grant as part of the deal.

Management commentary

Speaking on today's announcement, ASM Managing Director David Woodall said:

This MoU, along with the strong support from the Korean Ministry of Trade, Industry and Energy (MOTIE) and the Chungbuk Provincial Government, provides ASM with confidence to build the metals plant in the Ochang Foreign Investment Zone. With key Korean manufacturing companies like LG Chemical, Samsung SDI, SK Hynix, and Hyundai Mobis within close proximity, we are confident that building our first metal plant in this well-established industrial area will provide significant benefits.

The Governor of Chungbuk, Si-Jong Lee, also gave his thoughts on the future plant:

To sustain the growth of the Chungcheongbuk-do economy, we strongly support this investment. ASM is establishing its Korean headquarters, 2 R&D centre and metals plant in the Ochang Foreign Investment Zone. This will provide key rare earth metals to the Korean economy and local employment to revitalise our local economy.

ASM share price snapshot

Despite today's negative movement, the ASM share price is on the upward swing. Listed on the ASX at a price of $1.40 on 30 July 2020, the share's value has increased by 277.1%. ASM shares reached their highest price ($6.84) in December last year.

Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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