Everyone knows about the potential upside when investing in precious metals, especially over the last year, as gold, silver and platinum prices all surged higher. But if you dig into the dirt a little deeper you’ll also find the so-called “rare earth minerals,” and for the small-cap investor, these too could be a virtual gold mine. To get a better understanding of the universe of rare earth mineral stocks, let’s first take a closer look at what these compounds are and what they’re used for.
Rare earth minerals, or simply “rare earths,” are a group of chemical elements that can be located right on the Mendeleyev periodic table (yes, that’s the same chart of the elements you studied in high school chemistry class). These elements and their associated chemical compounds are characterized by their high fusing point, great density and high thermal and electricity conductivity. They’re also able to generate a wide variety of electron energy levels.
These minerals are widely used in various industrial fields due to their many special physical and chemical attributes. The attributes include high degrees of magnetism, luminosity, superconductivity and environmental non-toxicity. Because of their versatility, rare earths are widely used in a plethora of industries, including cell phones, computers, electronic devices, fiber optics, hybrid cars, medical devices and wind turbines. It’s safe to say that almost everyone owns multiple devices containing rare earths.
Because of the ubiquitous use of rare earths in so many different products over the last several years, the supply of rare earths has become constrained. Econ 101 tells us that when supply is constrained and demand is high, you get rising prices. Those rising rare earth prices have caused a boom in several mining companies, and as such the price of those stocks have risen astronomically over the past 12 months. More importantly, however, demand for rare earths is anticipated to continue growing over the next decade. This demand wave, along with the paucity of rare earth supplies, translates into continued gains for rare earth mining companies.
Although there are thought to be various deposits of rare earths around the globe, including a sizeable untapped supply here in the U.S., the overwhelming bulk of the world’s rare earths can be found in China. And while there is no pure-play Chinese rare earth mining stock currently trading on U.S. exchanges, investors willing to make a move to the Hong Kong exchange can invest in China Rare Earth Holdings Limited (769:HK). The company is one of the leading rare earth manufacturers in China, and has been listed on Hong Kong Stock Exchange since 1999. Over the past 12 months, the total return in this stock was 163.89%, and that’s a return definitely worth digging for in Hong Kong.
If you want to stay closer to home (at least in terms of U.S. exchanges) there are two other great rare earth stocks out there. The first is Lynas Corporation (LYSCF.PK), which is the main company behind a huge rare earths deposit in Australia. The total return on this stock over the past 52 weeks is 717%, proving just how powerful a wealth creating trend rare earths have been.
Finally, there is the biggest winner on our list, Rare Element Resources (RRLMF.PK). Roll around the dirt in this statistic: the total return on this stock is 1001% over the past 52 weeks! Where do you find such gains? Well, the company has a 100% interest in the Bear Lodge mining property in Wyoming, which contains one of the largest rare earth deposits in North America.
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