Do you know that your mobile phone, laptop, and television may contain rare earth elements? These elements are essential for certain manufacturing processes, and as demand for these products rises, so does the value of the companies that mine and process them. Many analysts believe that investing in these companies is a great way to generate long-term returns. There are several options if you are looking for the best rare earths stock to invest in. Let us look at why rare earth elements are so valuable and how you can get started investing in them.

What are rare earth elements?

Rare earth elements are a group of 17 different minerals that are essential for technology and industry. Despite their name, rare earth elements are actually more abundant than gold. The difficulty associated with extracting them is what keeps production at such low levels. Rare earth metal deposits are notoriously expensive to mine due to the low concentrations of valuable elements present in each deposit.

There are two main types of rare earth elements: light and heavy.

Based on their atomic weight, the rare earth elements neodymium, praseodymium, europium, and lanthanum are the lightest. Neodymium is used in the production of smartphones, electric vehicles, and medical equipment, and is the rare earth element with the highest demand on the market. Praseodymium is used in the production of aircraft engines, wind turbines, and NdFeB magnets (high-performance permanent magnets).

Heavy rare earth elements such as dysprosium, terbium, yttrium, and erbium are much rarer than their lighter counterparts. Many of them are used in the production of clean energy technologies like hybrid vehicles. In addition, erbium is used in fiber-optic cables, terbium is used in LCD televisions and solid-state hard drives, and dysprosium is used in batteries and electronic motors.

Why invest in rare earth stocks?

Given the importance of rare earth elements in today’s technology-driven world, the demand for these metals is likely to grow significantly in the coming years. However, supplies of these minerals are expected to be limited due to the difficulties in mining these elements. As a result, the price of rare earth elements is expected to increase substantially in the near future. An investment in rare earth elements may provide an opportunity to make a significant amount of money.

How to invest in rare earth stocks?

There are many different options for investing in rare earth elements. The easiest way is to buy stock in a company that is involved in the mining or processing of these minerals. While China is currently the world’s leading producer of rare earth elements, other countries are also ramping up production to meet the growing demand for these metals. As a result, these mining companies are likely to be able to provide stable long-term returns for investors.

Popular choices are typically ‘majors’—established and high-performing companies with a track record of profits over several years. These include companies such as MP Materials Corp. (NYSE: MP) and Rare Element Resources (REEMF) in the US and Lynas Rare Earths (ASX: LYC) in Australia. Look for major mining corporations that have proven exploration and mining techniques, reasonable rare earth market share, consistent output, and steady cash flow.

For those who prefer smaller companies, there are some that are emerging as future leaders in the field. One of these notable new players is Aclara Resources Inc. (TSX: ARA), which is set to revolutionize the way rare earth is mined with its proprietary environmentally friendly and resource efficient extraction processes. As the world turns towards sustainability and responsible growth, such companies are well-positioned to provide significant value to investors over the coming decades.

Investors can also invest in mutual funds or exchange-traded funds that hold a basket of different stocks related to the production of rare earth elements. The most accessible of these is the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX), which boasts holdings in leading Chinese, American, and Australian rare earth producers and processors. Another option is the Dolefin Rare Earth Elements Fund in Switzerland, a mutual fund that invests in rare earth and platinum group producers.

Finally, investors can consider moving to the end of the supply chain and purchasing stocks in companies that recycle rare earth elements. Some such companies include Metal Tech Recycling Corp (NASDAQ: MTRX) and American Resources Corp. (NASDAQ: AREC) in the US and Geomega Resources (GOMRF) in Canada. Investing in these types of companies can provide exposure to the rare earth market while also providing a hedge against any future supply disruptions.

Conclusion

The global demand for rare earth metals is expected to grow significantly over the next decade due to the increased use of hybrid and electric vehicles, renewable energy technologies, and other green technologies. Higher demand is expected to be accompanied by rising prices due to the limited availability of these minerals. This presents a unique opportunity for investors to profit from the strong demand for these materials by investing in companies that are involved in the production and/or processing of rare earth elements.

Although the rare earth market is poised for profit and growth, no investment is without risk. Be sure that you fully understand the risks and returns associated with investing in the mining industry and consider companies that are a good fit for the sustainability narratives of the future.