A $73m boost sends the Austal share price to the top of the ASX 200 today

The Austal Limited (ASX: ASB) share price surged after the US government agreed to pump US$50 million ($73 million) into its US shipyard.

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The Austal Limited (ASX: ASB) share price surged after the US government agreed to pump US$50 million ($73 million) into the company's US shipyard.

The Austal share price jumped 7.7% to $3.62 in morning trade and is the best performer on the S&P/ASX 200 Index (Index:^AXJO).

Gold miners are in distant second and third places. The Saracen Mineral Holdings Limited (ASX: SAR) share price jumped 4.9% to $4.95 and Northern Star Resources Ltd (ASX: NST) added 4.5% to $13.62.

ASX COVID-19 winners

While precious metals are in favour in this risk-off environment, Austal is the real standout as it is also a big COVID-19 beneficiary.

The US Department of Defence (DoD) signed a Defense Production Act Title III Agreement with Austal USA. The agreement is part of the US government's national response to COVID-19 to maintain, protect and expand critical domestic shipbuilding and maintenance capacity.

Austal will likely match the DoD's investment to take the total capex budget to around US$100 million.

Austal catches coronavirus stimulus

While details on how the cash will be spent is yet to be worked out with the DoD, management intends to "commence investment in the development of additional capacity for steel naval vessel construction".

The US government funding is also aimed at protecting and creating jobs in Mobile, Alabama, where the local economy is hit hard by the coronavirus pandemic.

Austal is promising to release more details in the coming months, but it's easy to see why investors are excited – and it's not only because of the cash amount.

More than money

The large financial commitment by the US government shows how important Austal is to the US Navy. This is an important signal after Austal missed out on the Guided-Missile Frigates FFG(X) contract, which was awarded to a competitor.

Austal is one of my top picks in the industrials space as its earnings are more resilient to the global COVID-19 recession.

Another ASX stock to for your watchlist

Interestingly, Austal isn't the only ASX stock that is likely to benefit from US government funding. I believe that rare earths miner Lynas Corporation Ltd (ASX: LYC) is in the box seat to get a cash injection from Uncle Sam.

There's speculation that Lynas might be overlooked due to intense lobbying by Lynas' US competitors for its government to back local companies.

But Lynas is the only non-Chinese miner that have rare-earths operations of any significance, and I think it will get a piece of the action.

The US is trying desperately to develop its own supply of rare earths to ease its dependence on China.

Rare earths are used in a range of critical equipment, including weapons and electronics.

Brendon Lau owns shares of Austal Limited and Lynas Limited. Connect with me on Twitter @brenlau.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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