Home » News » Investment Trends » How to Invest in Rare Earths?

How to Invest in Rare Earths?

How to Invest in Rare Earths?
Rare Earths, although little mentioned, are elements of the periodic table that today are essential in our lifestyle, so their demand has increased considerably.

Up to the bottom of the periodic table, in two rows that would seem to be outside the main table, are those elements that are rarely reached to study in chemistry courses. The penultimate row, which is called “lanthanides” are commonly called “Rare Earths”. Probably the most frequent thing that is said about “Rare Earths” is that they are neither earths nor are they so rare.

These elements are important components in high-tech devices: cell phones, electric vehicles, lasers, radars, guided missiles, flat screens, magnets, ceramic catalysts, microphones, hearing aids, optical fibers, among others. Additionally, they have been used in agriculture, to accelerate plant growth, and their resistance to stress without apparent damage to human and animal health.

All the matter that exists in the universe is formed by the elements contained in the periodic table, and it is fascinating how the differences in behavior and properties of everything we know is due to the number of electrons, protons and neutrons that each element contains; and the way these are arranged within the atom. To give an example, copper and zinc are neighbors in the periodic table, each with different properties and characteristics, yet the only difference between these base metals is a proton and an electron.

The group of elements known as rare earths is composed of the elements of the lanthanide group: lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd), promethium (Pm), samarium (Sm), europium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er), tullium (Tm), ytterbium (Yb), lutetium (Lu), plus scandium (Sc) and yttrium (Y). The main characteristic of lanthanides is that they contain electrons in the orbitals f, of layer 4, protected by the electrons in the outer layers s and p. It is precisely those electrons “4f” that mark the remarkable properties of rare earths.

What properties do you have and what are the rare lands used for?

One of the important features of these elements is their electrical, magnetic, fluorescent or luminescent properties. The lanthanides from cerium (Ce) to tulium (Tm) present a strong magnetism because they have unpaired electrons in the 4f orbitals. Some of these elements when combined with other metals, such as iron (Fe) produce intermetallic compounds, such as Nd2Fe14B, which is ferromagnetic, and after following a heat treatment it becomes the material with the highest magnetism so far known. Its main use is in electric motors, hard disks, horns, wind turbines, actuators and magnetic resonance imaging (MRI) equipment.

Another example of intermetallic compounds is formed from the combination of lanthanum and nickel, LaNi5, which is the main component of rechargeable nickel-metal hydride batteries used in hybrid and electric vehicles. Another lanthanum compound, LaB6, is critical for the production of electron sources used in high-resolution electron microscopy.

On the other hand, rare earths form compounds with organic molecules, called coordination complexes, which have applications as luminescent materials, in lasers and in nuclear magnetic resonance (NMR) and magnetic resonance imaging (MRI) equipment in medicine. For example, a very important material for increasing the resolution of MRI images is a gadolinium complex, which is administered to patients before undergoing this type of study.

The nuclear properties of Rare Earths have also been exploited for a wide variety of applications. Europium and dysprosium are used in control cylinders for nuclear reactors, while one of the isotopes of yttrium (Y-90) is used in therapies for cancer treatment. Additionally, yttrium-169 and gadolinium-153 are used in X-ray equipment.

The toxicity of Rare Earths is low, so they do not need special protocols for their management. When administered orally, only a small percentage is absorbed by the body. On the other hand, ions and complexes have a higher toxicity than solids or inorganic compounds. However, it is important to consider that the production and purification of these elements produce toxic waste, sometimes radioactive, that has to be stored, because they present a high risk to environmental and human health.

Its value in the international trade war

Despite being called rare earths, most of these elements have a relatively high abundance in the earth’s crust (except for promethium, which is radioactive); however, their extraction is complicated and expensive because they are mixed with other minerals that are very similar to each other, so their isolation involves complex chemical processes. This makes the price of these elements very high.

For example, in 2018 the price of neodymium (Nd) was US$107,000 per cubic ton, while that of europium (Eu) was US$712,000 per cubic ton. Due to the accelerated production of electronic devices, the demand for these elements has increased considerably in recent years; and for the time being, there are no real alternatives to replace them.

Since 2008, China has become the leading producer of Rare Earths. Other producers include the USA, Australia, Russia, India, and Brazil. Notably, in recent months, the issue of Rare Earths has been constantly touched upon in the media because of the potential role they could play in the U.S.-China trade war. A poorly planned strategy could seriously alter the place both countries have in global economic leadership.

Some of the most used minerals are:

Dysprosium

In 1886, the discoverer of Gallium, Lecoq de Boisbaudran, achieved a new stroke of genius, that of isolating Dysprosium oxide from a sample of Holmium oxide, previously considered a homogeneous substance. The name comes from the Greek and means “difficult to access”, which describes it perfectly.

This silver-grey heavy metal is both flexible and extensible. It is very impure and therefore very reactive. In fact, it oxidizes in contact with the open air or with water, it dissolves in a fine acidity. In its oxidized form, it is a yellow-beige powder.

Dysprosium is one of the most important heavy Rare Earths for technology because of its heat resistance. Dysprosium is also part of the permanent magnet components, which are used in generators for electricity production and electric cars. The current amount of dysprosium exploited is less than 100 tons per year.

Neodymium

1885 Vienna, Austria. The entire monarchy dances the waltz to the rhythm of its industrialization. Baron Carl Auer von Welsbach, an Austrian chemist, and businessman, does not dance but prepares for his first experiences in rare lands. In one experiment, he dipped strips of cotton in a saline solution and then burned them when they were dry. He realized that the remaining oxide structures developed a strong property of radiation.

This discovery greatly increased the power of the gas lamps of the time. But this is not enough for this proud baron. During the same year, he isolated Neodymium (or Néodymiium) from didymium for the first time. This raw element would later become the most famous of the lanthanides and the most powerful magnets in the world. Two Neodymium magnets can be attracted to each other from a distance of half a meter!

This rare earth is more resistant to corrosion, unlike most other rare earth metals. Its particularity lies in its ease of ignition and its reactivity. But its main quality is its magnetism. Its use as permanent magnets was immediately adopted by the jewelry industry, where its attraction force is used in earrings to hold them in the earlobes without the need to pierce them.

On the other hand, Neodymium is used in very powerful lasers and in glass, where it serves to absorb ultraviolet light and is also used to discolor ferrous glass. This metal is mainly used for the production of very powerful magnets. They have the capacity to support up to 1,300 X their weight continuously. It is also used in areas where very strong magnetic fields are needed in small quantities, especially in turbines for high performance electric motors, in microphones and smartphone speakers, that is, in the most advanced technologies.

The magnetic force of Neodymium helps to reduce the volume of components for the same performance in generators and electric motors. Therefore, this rare earth plays a crucial role in the operation of wind turbines. Since weight plays an important role at the top of the wind turbines to keep the center of gravity as low as possible

Whoever wants Neodymium must get it from China, which holds 97% of the world’s Neodymium production. One of the other producers is Australia.

It is used for super-magnets, super-lasers, for the steel industry. It is also used in high-quality headphones and speakers. Other uses of neodymium are in lighter stones, chip ignition pitting, steel industry, smart glass (for ferrous glasses), as well as in magnetic resonance imaging, glass industry (ferrous).

How to invest in Rare Earths?

An easy way is through the exchange-traded strategic metals fund, VanEck vectors Rare Earth / Strategic Metals ETF ( REMX ). This is a basket of companies involved in strategic metals and Rare Earths with good exposure to Chinese companies.

Another way is through an Australian company that has approximately 14% of the world market share in Rare Earths; it is called Lynas Corporation Limited ( LYSCF ). Lynas has a processing plant in Malaysia and recently signed a preliminary agreement to do the same in Texas.

For more aggressive investors, there are also some smaller speculative companies that I own that have a higher risk/reward profile