Rare Earth Elements: A New Dimension in Investing

As society moves toward sustainability and responsible growth, investors are searching for companies that align with this narrative. Rare earth elements play an integral role in low carbon technologies and digital electronics - an area in which investors have an increasing focus.

Carl Auer von Welsbach made history when in 1880 he separated didymium into its component elements: neodymium and praseodymium. His discovery enabled the creation of the incandescent gas lamp.

Demand for Rare Earth Metals

Rare Earth elements come in 17 varieties, each one offering specific properties that make it useful in certain ways. You'll find these metals used everywhere from everyday technology such as televisions and cell phones to renewable energy (wind turbines and solar panels) and national defense applications (jet engines, missile guidance and defense systems, satellites).

Due to their utility, rare earth minerals have long been in high demand. Unfortunately, mining and refining these metals is both costly and time consuming, leaving mining companies carrying significant debt burdens that increase the chances of them going bankrupt.

Investors are also concerned about China's dominance in the rare earth market, as it holds 60% of global mine production and 85% of processing capacity - giving China considerable leverage in global supply chains and creating friction with governments that want to reduce their reliance on Chinese imports.

U.S. efforts to regain its role in the global rare earth market had previously fizzled out, but under President Biden, efforts have rekindled under his administration's $2 trillion infrastructure proposal which includes efforts to secure domestic supplies of rare earth elements.

One of the main drawbacks to investing in rare earth miners is their potential environmental impact. If they aren't careful, their operations could pollute water sources or damage habitats - all which increases costs while decreasing potential returns.

Investors can purchase rare earth miner stocks directly, although few remain. Instead, there are exchange-traded funds (ETFs) which hold baskets of rare earth mineral producers like Market Vectors Rare Earth/Strategic Metals ETF, which includes American and Chinese mining firms among its holdings. Furthermore, some robo-advisors also provide exposure to rare earth minerals in ESG portfolios.

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Environmental Concerns

As demand for rare earth metals grows, so too do concerns over the environmental costs of mining and processing them. One significant impact of rare earth mining and processing involves waste. Mining produces toxic chemicals as well as needing to haul off large volumes of dirt and rock that often ends up in landfills or leaches into waterways; additionally, REE mining releases air pollution which has only become worse since China began experiencing chronic air quality problems over recent years.

Rare earths have become an international issue due to their vital role in high-tech applications such as 5G mobile communications standard, hybrid and electric cars and renewable energy technologies. Many analysts believe that without rare earths many of these advances would not have been possible.

Due to China's current dominance over 60% of world supply and 85% of processing capacity, many governments are searching for ways to increase REE production domestically and reduce their dependence on China.

One way is through recycling; the goal should be to extract as much lanthanum, dysprosium and neodymium as possible from existing spent batteries and materials as possible for recycling purposes. Unfortunately, though, recycling won't solve everything on its own as there simply aren't enough spent batteries available at present to collect all the metals required.

One way of producing rare earths more sustainably is finding ways to do it more sustainably, which requires much hard work and money. This includes investing in more efficient mining methods as well as finding ways to produce and process REEs more effectively.

Some rare earth companies are working towards meeting the demand for these materials in a more environmentally-friendly manner than is currently standard. Vancouver-based Leading Edge Materials, for example, is creating a separation and recovery plant to recover vital elements from scrap. According to Leading Edge's CEO, this could become operational as early as 2023 and may set an industry standard for sustainable production of rare earths.

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Investing in the Mining Industry

Are You Searching for Investment Opportunity in Mining? Consider Exploring It Now

Mining industry fluctuations can be unpredictable. Demand for raw materials typically increases during economic booms but declines when demand wanes; to avoid sudden downturns it is essential that your portfolio is well diversified to protect yourself from sudden recessionary impacts.

One of the primary concerns in investing in mining is environmental impact caused by production and processing of rare earth minerals. Some rare earth elements require extensive processing before becoming usable material; this process often creates significant environmental degradation. But ethical producers do exist; you can check their Environmental Performance Index rating to assess sustainability.

Even with these challenges, the mining industry is projected to experience long-term growth due to population increase, urbanization and scientific progress. Furthermore, increasing electrification rates are creating demand for mining industry elements in developing nations.

Investment in companies engaged in recycling or alternative means to mining rare earth minerals is also vital, helping reduce resource requirements while lessening environmental damage to our planet.

Mining companies can be divided into three distinct groups depending on size and risk: juniors, mid-tier and majors. Junior companies tend to possess the most potential; mid-tier ones often possess established mines with steady output that have global reach; whereas majors possess an impressive market presence.

One of the most attractive investments in mining is lithium. Used extensively for batteries and magnets, lithium also contributes significantly to renewable energy. Lithium can be found primarily in two rare earth minerals known as spodumene and samarskite.

Companies That Produce Rare Earth Metals

Rare earth elements (REEs) are 17 metallic elements located near the middle of the periodic table that possess unique fluorescent, conductive, and magnetic properties that make them essential components in many green tech applications ranging from wind turbines to electric vehicles - until recently there were simply not enough REEs to go around!

As the demand for renewable energy and electric vehicles surges, so too should rare earths' use increase - providing companies that mine for these metals an opportunity to profit from an ever-increasing need.

Investors looking for rare earths stocks on the stock market can choose from mining companies that produce rare earth metals and companies that manufacture finished products using these elements. Popular choices for investors are major mining corporations with extensive rare earth production experience and proven profits, as well as companies with stable output levels and an established presence in the rare earth market.

China dominates global mining of rare earth metals. But other major producers exist, with Lynas Corporation Ltd (ASX: LYC), from Australia being one of the top three rare earths mining companies outside China in terms of market capitalisation as of February 2023.

However, these other companies face stiff competition from Beijing. Partly due to state-owned enterprises consolidating their positions in this sector and being larger companies able to raise more money quickly while more efficiently negotiating pricing and quota agreements with foreign governments; further compounded by Beijing consolidating power under President Xi, its monopoly over rare earths becomes even stronger.

The US has made several attempts to regain its former dominance in this industry, yet may fall short of doing so. Although possessing vast natural deposits of rare earths, processing facilities in America lack sufficient capacity to take full advantage of them; competing against China in this sector will prove challenging despite national security and economic considerations.

United States may be able to reduce its dependence on Chinese rare earth suppliers by creating domestic processing plants; this will take time and money - just as in many other countries. Investors should be patient as this market matures before making their decisions on rare earths investments.