The U.S. Department of Defense is backing a small strategic metals producer to scale up domestic tungsten production, a critical metal essential for military hardware.

Shares of Elmet Group, the only American-owned tungsten producer, surged 33% to $21.56 on Monday, while the S&P 500 fell 0.2%. The gains came after the company said it received a $450 million investment from the Defense Department to boost tungsten production for military hardware, with the goal of reducing U.S. reliance on Chinese-dominated supply chains.

In 2025, about 85,000 metric tons of tungsten were mined globally, and roughly 80% came from China. The figures illustrate the extent to which China dominates the market for the critical metal. A similar dynamic has played out in rare earths: China mined approximately 70% of the world's rare earth oxides in 2025, compared with 13% for the U.S. Thirty years ago, the two countries each accounted for close to 40% of global production.

The U.S. hasn't mined significant quantities of tungsten in the past three decades, while China's share of the market for the dense metal, which is used in munitions and machine tools, has increased over time.

Elmet shares were on track for their largest percentage increase since the company went public in late April, according to Dow Jones Market Data.

As part of the deal, the Defense Department can buy up to 19.9% of Elmet's common stock on a post-transaction basis through warrants. Elmet will also receive $200 million immediately upon closing the deal, while the remaining $250 million will be released in later installments as Elmet hits specific project milestones, according to a press release.

Elmet will use over $165 million to upgrade plants in Maine, Michigan, and Ohio to supply metal parts for military jets, missiles, and submarines. Another $150 million will fund a joint venture with mining companies Blue Moon Metals and EQ Resources to build North America's only independent tungsten refining facility and restart Nevada's Springer Mine-a major historic tungsten deposit-by the end of fiscal 2027.

The remaining $150 million will fund investments in foreign mines in allied countries such as Australia and Spain to access raw materials.

Capital and ownership for expansion are similar to the Defense Department deal struck with MP Materials in 2025. That agreement had a lasting effect on MP stock: Shares traded at roughly $30 before the investment and are above $50 today.

The Pentagon used the MP Materials deal to secure supplies of rare earth magnets for defense applications. Now it is making a similar push into tungsten. In a separate announcement on Monday, Elmet said it would sell up to $2 billion of tungsten to the Defense Department over five to seven years to support national emergency reserves. To prevent domestic commercial shortages, the company said deliveries will not begin until new production capacity comes online.

MP Materials is considerably larger, with a market value of about $9 billion. Of the 20 analysts covering the stock, 19 rate it Buy. Elmet has a market value of less than $1 billion and is covered by four analysts, all of whom rate the shares Buy. Their average price target is about $21, roughly where the stock traded Monday. Those targets, however, don't yet reflect analysts' assessments of the new Pentagon deal.

The Defense Department investment aligns with Washington's recent push to break reliance on China and Russia for critical minerals. Tungsten has faced tightening global supply due to Chinese export restrictions and the lack of active domestic mines.