Bags containing a mixture of rare earth elements at the facility of Australian mining firm Lynas in eastern Malaysia's Gebeng on April 8.ARIF KARTONO/AFP/Getty Images
Every government wants access to rare-earth elements (REEs). Most investors don’t know exactly what they are or how to invest in them.
To cite Reuters, REEs possess “unique magnetic, luminescent, and defence applications.” Neodymium is a rare-earth element essential for producing the strongest permanent magnets, which are widespread in defence technologies, hard drives, medical imaging devices, electric-vehicle motors, wind turbines and more.
Without REEs, we wouldn’t have smartphones or TV sets. They are critical for green technologies, including wind turbines and EV rechargeable batteries. In defence, they are used in guidance systems, radar, sonar and lasers in military equipment such as destroyers and submarines.
In short, they’re critical to modern technology. And one country controls the global supply: China.
According to a report released earlier this year by Natural Resources Canada, China is the world’s largest producer with an estimated 270,000 tonnes of mined REEs and 215,000 tonnes of refined REEs in 2024. That accounts for 69 per cent of global mined production and 90 per cent of global refined production. The U.S. is second in production, at 45,000 tonnes.
What makes this near-monopoly worse is that China has strictly limited rare-earth exports through comprehensive export controls. These were introduced in April and October, 2025, as Beijing cited national-security and dual-use concerns. These controls require government-approved licences, targeting heavy rare earths, magnets and technology, which has forced many foreign companies, particularly in the defence and tech sectors, to seek alternative supplies.
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The restrictions particularly target foreign defence manufacturers and firms working on advanced AI and semi-conductor equipment.
The result is major global shortages, affecting automotive and technology companies in the U.S. and Europe.
The recent Canadian government report says this country holds some of the largest known resources of rare earths globally, estimated at more than 15.2 million tonnes of rare-earth oxide in 2024. We are not yet a commercial producer of REEs, but we have projects under way in six provinces plus the Northwest Territories.
It appears that REEs will be a critical resource in the world of the future. But how do you invest in in them? Most of the companies involved in this business are private, state-controlled or very small.
There are a few ETFs to consider. The most followed one is the VanEck Rare Earth and Strategic Metals ETF (REMX-N). Almost 30 per cent of its assets are invested in China-based companies, with just over 24 per cent in Australia. It’s been hot recently, with a one-year gain of 126.39 per cent (market price) to March 31. However, it has a bumpy track record. Since its launch in 2010, it has posted an average annual return of -3.47 per cent.
The Global X Rare Earth & Critical Materials ETF (EART-Q) has only been around since 2022. About a quarter of its assets are in China, 20 per cent in the U.S. and 14.7 per cent in South Africa. The one-year gain is 108.65 per cent.
Those are the only two ETFs with a three-year-plus record that I could find that focus primarily on REEs. But they also include other minerals in their portfolios, such as copper and uranium.
An interesting newcomer is the Sprott Rare Earths Ex-China ETF (REXC-Q). The company says it is the only ETF focused exclusively on REEs. “By excluding exposure to China, REXC taps into companies that may benefit from the burgeoning investment and a structural shift in rare earth supply chains,” Sprott says on its website.
The company notes that China’s dominance and past export controls have made REEs a national-security priority.
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“We believe rare-earth companies outside China offer a compelling investment opportunity,” says Sprott’s Jacob White, director, ETF product management. “China’s dominant share of the rare-earth market, combined with its recent willingness to weaponize that position through export controls, has sharpened the strategic importance of securing supply for defence, advanced technologies and energy. In response, governments around the world are accelerating the buildout of ex-China rare-earth supply chains.
“Critical mineral agreements and federal governments are unlocking billions in grants, loans and even equity investments for rare-earth companies, helping de-risk projects and attract additional private capital. At the same time, permitting is being expedited, and regulatory hurdles are being reduced. As a result, we believe ex-China rare-earth companies are increasingly well-positioned to deliver strong growth and potentially outperform.”
REXC started trading on April 14 at US$20.30. It closed last Friday at US$21.02. The fund has a portfolio of 34 companies. It makes big bets on some of its positions, the largest being a 22.85-per-cent weighting in Lynas Rare Earths Ltd.
Lynas is headquartered in Perth, Australia. It owns the Mount Weld mine in Western Australia, one of the world’s largest rare-earths deposits. Concentrate sourced from Mount Weld is processed at the company’s Rare Earths Processing Facility in Kalgoorlie, Western Australia, and the Lynas Malaysia advanced materials plant in Kuantan, Malaysia. The company’s stock has recently been trading near its all-time high after a decade of flat performance.
The heavy weighting of Lynas stock makes Australia the dominant geographical position in the portfolio, with 52.44 per cent of the assets. The U.S. is next with 36.38 per cent, with Canada at 7.66 per cent. No other country has more than 2.5 per cent.
It’s too soon to make any projection as to how this ETF will perform over time; however, the recent results of funds like REMX shows there is investor interest in the rare-earth story.
Aggressive investors may wish to take a small position at this time, with a view to adding more if the current buying trend continues.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.