Rare earth elements (REE) don’t have the glamour of AI, cybersecurity, or robotics, but they do have something that’s even more important: The Street’s attention. And the investors who own shares in them are gladly settling for that. Although this is not a new industry, investors are taking a closer look at it now, and they like what they’re seeing.

According to AI Overview, REEs refer to a group of 15 metallic elements plus scandium and yttrium. Most people have no direct contact with those. However, indirectly they do, because they are used in the production of numerous popular products including EVs, smartphones, computers, and hard drives, to name just a few. They are also used in other consumer electronics as well as in wind turbines, medical equipment, and defense systems.

Despite their name, REEs are not “rare.” They are called that because rather than being discovered in huge deposits, they are dispersed and mixed with other minerals, and that makes them difficult to extract and purify.

Currently, one country has a near-monopoly on refining and processing them. You guessed it: China. As a result, numerous companies and countries that need those elements are concerned about potential supply disruptions. And heightened trade tensions and their possible use as a geopolitical weapon add to that. These and other factors could impact their supply or shipment and lead to a variety of problems.

 

Problems and Opportunities

John Adams, the second U.S. president, said that “Every problem is an opportunity in disguise.” Adams’ insight is evident today as many companies want to reduce their dependence on China as the primary source of REEs. Even though this is still a relatively new objective, some fortunate investors already have made huge profits from this. And considering how precarious the situation is, they will almost certainly have many more opportunities to do so.

According to Fox Business, China controls an estimated 90%-plus of the world’s rare earth materials business, and lately it’s been flexing its muscles. According to Zero Hedge, earlier this summer its export controls on key REEs, particularly magnets essential for EVs, smartphones, fighter jets, and missiles, “triggered a sharp drop in shipments to U.S. firms. Production lines at various companies were disrupted, including one at Ford.” More recent data shows a rebound in Chinese exports.

Now other countries are rushing to develop and/or expand their own REE industries. Those include the U.S., Brazil, India, Canada, and Australia. And so are other countries we don’t necessarily associate with mining like Kazakhstan, Uzbekistan, Vietnam, and Thailand.

It may be hard to believe, but Greenland has 25 of the 34 minerals that power modern electronic items including smartphones, EVs, and nuclear power. Some believe Alaska also has great potential for containing these elements.

In any case, a larger and more secure supply chain would ease concerns related to national security, the stable production and pricing of important products. Even environmental issues could crop up from having to rely on just one source for mining and processing these elements.

Will the U.S. come to the rescue? Possibly. Although the U.S. is not known as a powerhouse of REEs, that may be due more to the fact that there hasn’t been enough exploration for them rather than because deposits don’t exist here. In fact, as exploration for these is increasing, rare earth elements are starting to turn up in very unexpected places. And U.S. firms, aware of the urgency to offer an alternative to China, are trying to find even more.

For example, the independent news organization The Conversation recently reported that “Georgia has mineral sand deposits that are rich in titanium, zirconium, and rare earth elements.” Although the “Peach State” is not the first place that comes to mind when thinking about rare earths, they are there nevertheless.

Most of the exploration and mining in the U.S. is done out west, which has been blessed with a great abundance of precious and base metals, oil, and natural gas — and possibly REEs, too. U.S. miner American Rare Earths is working hard to “dig green-energy rare earths out of the ground.” Results so far from their efforts in Wyoming are encouraging. The company recently said that it found substantially more rare earth minerals on its property in Wheatland, Wyoming, than was estimated in March 2023.

American Rare Earths is not the only company in the industry to share good news with the investment community recently. On July 11, investment information firm Investopedia wrote that rare earths miner MP Materials announced a multi-billion-dollar partnership with the U.S. Dept. of Defense (DoD) to … “reduce foreign dependency” on rare earths.

As part of the deal, the DoD will invest $400 million in MP stock and warrants to purchase more. That would raise their total ownership of MP’s stock to approximately 15%, and make the DoD MP’s largest shareholder.

According to Investopedia, “Apple will invest the $500 million it has pledged domestically as part of Pres. Trump’s push to boost U.S. production of rare earths” in MP, and will also work with the company on a new rare earth recycling line. Currently, MP owns and operates the only significant rare earths mine and processing facility in the U.S. Companies in other countries are also getting into the act. In Australia, for example, Lynas Rare Earths is the largest rare earths producer outside of China.

 

Money From Junk

Sharp investors have found another way to profit from REEs, and that’s by recycling them, an idea that’s becoming more relevant and timely as the shortage of reliable sources of rare earths intensifies.

According to CNBC, “Next-generation recyclers are innovating ways to gather and process the ever-growing mountains of electronic waste that include discarded computers, smartphones, servers, TVs, appliances, medical devices, and other electronics and IT equipment.”

Even though those devices no longer work and cannot be repaired, they still have value because they contain some gold, silver, copper, nickel, steel, aluminum, lithium, cobalt, and/or other metals crucial in the manufacture of many high-tech products and applications.

And these days, “Increasingly, recyclers are extracting rare-earth elements, such as neodymium, praseodymium, terbium, and dysprosium, which are critical in making everything from fighter jets to power tools,” CNBC adds.

Worst Kept Secret

The huge potential of REEs and related opportunities is probably the worst kept secret on Wall Street. Still, investors fortunate enough to be in the right place at the right time have enjoyed lip-smacking returns, and going forward there likely will be many more opportunities. Who says digging in the dirt can’t be fun?

(Note to readers: Neither I nor any members of my family own shares in any of the companies mentioned in this article. As always, investors are urged to consult with investment advisors before making any investment decision.)

Sources: cnbc.com; foxbusiness.com; ibd.com; investingnews.com; investors.com; zerohedge.com.

Gerald Harris is a financial and feature writer. Gerald can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it.