Investing in rare earths require a strategic mindset and patience

are earth elements (REEs) are one of the few investments that mix global politics, cutting-edge technology, and long-term growth potential.

A recent deal between Australia and the United States to supply rare earths, worth an estimated US$8.5 billion, has brought the sector into the spotlight for Australian investors.

What are rare earths?

Rare earth elements are a group of 17 metallic elements that, despite the name, are not particularly rare but are difficult and costly to refine. Their unique properties are essential in the powerful magnets that drive electronic devices such as headphones, speakers and computers, as well as wind turbine generators, electric vehicles and medical technologies like magnetic resonance imaging (MRI).

Almost half of the world’s known reserves of rare earths are located in China. It’s estimated that 44 million metric tonnes overshadows our 5.7 million and the 1.9 million in the United States. Brazil has about 21 million metric tonnes.

Production and processing

Reserves are one thing, but production and processing are what make the difference for investors.

China is leading the field by a wide margin. It extracted and processed some 270,000 tonnes in 2024. The US was next with 45,000 tonnes, followed by Myanmar (31,000 tonnes) and Australia, Nigeria and Thailand, each with 13,000 tonnes.

Australia’s strategic position

The deal recently signed in Washington (the US-Australia Framework for Securing Supply of Critical Minerals and Rare Earths) commits both countries to investing at least US$1 billion each over the next six months to accelerate mining, processing and supply chain development for critical minerals.

Two of the projects were announced by Prime Minister Albanese after his recent meeting with US President Trump.

One project, the Alcoa-Sojitz Gallium Recovery project in Western Australia, is expected to provide up to 10% of the total global gallium supply, which is essential for defence and semiconductor manufacturing.

The second, the Arafura Nolans project in the Northern Territory, aims to supply 5% of global rare earth demand by 2029.

A recently announced third project, Astron Corporation’s Donald Rare Earth and Mineral Sands project in western Victoria, is expected to become the world’s fourth-largest rare earth mine outside China.

The landmark Australia-US deal is a response to China’s dominance in the rare earths market and Beijing’s recent export restrictions on rare earths, which have left many nervous about vulnerabilities in the supply chains for defence and high-tech sectors.

Investment opportunities and risks

For some investors, rare earths may be seen as a long-term opportunity given a prediction by the International Energy Agency that demand could double by 2040.

There are several ways to invest including:

• Directly in ASX-listed companies such as Lynas Rare Earths (LYC), Arafura Rare Earths (ARU) or Iluka Resources (ILO)
• Through exchange traded funds (ETFs) or managed funds that offer exposure to rare earths miners and processors
• In private equity and venture capital. For high-net-worth investors, early stage mining and processing ventures may offer high risk, high reward potential

While there are risks worth considering, such as geopolitical shifts, environmental changes, market influence from China, being aware of these factors allows investors to approach rare earths with greater insight and preparedness.

In any case, patience will be required. Mines can take as long as seven years to become operational.

Next steps

Rare earths remain a developing sector with strong long term potential, driven by their importance across key industries. While share prices can be sensitive to global events and policy shifts, informed investors can navigate these market fluctuations with confidence.

There is a lot to consider when weighing up investment opportunities. Speak with your local Nexia Adviser today to review your investment strategy and navigate with confidence.