How Rare Earths Could Shape the Future of Investment

Rare earths play an indispensable role in multiple industries, from radar instruments (which use samarium) to high-powered magnets used to propel missiles and aircraft. Unfortunately, rare earth elements cannot easily be replaced.

The US is looking to regain its role as a top supplier of rare earths - essential materials used in electric vehicles, renewable energy technologies and technology manufacturing processes - however this process will likely take years.

The Future of Electric Vehicles

Electric vehicles (EVs) are rapidly increasing in popularity, which should translate to significant reductions in tailpipe emissions. But many of the details remain undetermined. Some researchers worry that heavy trucking involving EVs might increase ground-level ozone pollution--an essential ingredient of smog--while others speculate whether their extra weight causes tire wear that contributes to more pollution.

Rare earth mining raises significant environmental concerns. Extraction requires considerable energy, while current production methods create dangerous waste products including radioactive water, toxic fluorine and acidic residue. Furthermore, mining destroys vegetation and harms natural environments.

To mitigate these impacts, research is ongoing to increase both efficiency and environmental friendliness of REE processing. Researchers at University of California San Diego have recently developed a more efficient process for recovering REEs from used fluorescent bulbs and magnets; according to Jansone-Popova as the lead researcher this technology will soon be ready for commercialization.

While REEs are currently only produced in China, signs indicate they will soon be manufactured outside as companies compete to establish reliable sources. There is now an international race underway to create an efficient production and refining supply chain capable of helping accelerate global adoption of more carbon-neutral technologies.

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The Future of Renewable Energy

Renewable energy generation has experienced rapid expansion over the last several years due to declining costs for solar and wind systems and policies setting goals for renewable electricity to contribute a certain percentage of electricity by a certain date. Rare earths play an instrumental role in driving this increase.

Rare earth elements (REEs) are chemical elements with unique fluorescent, magnetic and conductive properties that make them suitable for high-tech components used in permanent magnets, catalytic converters, rechargeable batteries, LED lights and displays and more. Many rare earths mined worldwide are currently mined in China using labor intensive and potentially environmentally hazardous processes that generate an enormous amount of toxic waste including heavy metals and radioactive elements.

Due to environmental risks associated with REE production and refinement, some companies have been reluctant to invest in additional production capacities. But in the United States, researchers are actively working on expanding domestic REE production and refining supply chains backed by federal funding.

An increased awareness of ethical supply chains has increased companies and investors' willingness to work with producers from developing nations such as Africa. One promising project in Texas seeks to build a REE mining and production facility that would be safe for workers, customers and the environment while creating more diverse supply chains to reduce price volatility of REEs.

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The Future of Transportation

New generations of vehicles promise to radically revolutionise how we travel, yet their success relies on rare earths - 17 elements which form super-efficient permanent magnets which keep smartphones buzzing, wind turbines spinning and electric cars zipping along.

Mining for rare earth elements involves extracting them through excavation of soil and the construction of leaching ponds containing toxic chemicals to extract rare earth metals, an extraction method which damages ecosystems by destroying vegetation and polluting both surface water and groundwater sources. In China this has led to blocked rivers and landslides as a result.

Chinese authorities recognized the strategic value of rare earths and introduced export taxes and quotas to manage supply. While this decreased price volatility, it made various technology sectors even more dependent on REEs as substitutes are often not readily available (USGS 2020).

Geomega Resources' GOMRF is creating the world's first sustainable rare-earths recycling facility that will convert waste magnets from both production and end of life phases into products used by green technology and electric vehicle makers, significantly reducing mining needs and greenhouse gas emissions.

USA Rare Earth and other companies, such as Round Top project, are already mining and refining rare earths in the U.S. As soon as its completion in 2022 - when it could provide 195 full-time jobs - Round Top could significantly lessen the environmental impacts associated with rare earth mining industry.

The Future of Healthcare

Since healthcare providers increasingly place importance on value-based care and desire better results, healthcare companies must develop flexible models capable of responding quickly to ever-evolving trends. With this increased investment appetite for private equity investments in this space, healthcare-specific private equity is poised for significant growth.

Investors have an opportunity to capitalize on China's race to bolster its production and refining of rare earths outside China through increasing production and refining supply chains for rare earths outside. These 17 elements, such as cerium and neodymium, are widely used in consumer products like TVs and LED lights as well as permanent magnets used in electric vehicles, wind turbines, military technologies like precision guided munitions missiles sonar radar systems.

China has taken significant strides toward becoming a world leader in high-strength rare earth permanent magnets and other clean energy technologies in recent years. Now accounting for 60% of world mined production of rare earths and 85% of processing capacity worldwide; China also controls 90% of production of high-strength rare earth permanent magnetics.

As with oil and other energy resources, rare earths prices are highly susceptible to economic cycles and volatility, making investing in this sector during periods of lower volatility essential. Therefore, investors should recognize this metal's cyclicality when making investment decisions in this space.