China controls more than 80 per cent of the world's rare earth supply and heightened tensions with the US could see exports restrictions come into play. Global supply risks combined with the demand-side application of rare earths for industries such as defence, renewables and technology could make rare earth miners the next ASX shares to boom.
ASX shares in the rare earths sector
Lynas Corporation Ltd (ASX: LYC)
Lynas is the largest rare earths producer outside of China with its flagship Mt Weld rare earths deposit in Western Australia and separation plant in Malaysia. The company's FY20 results outlined the heightened spotlight for rare earths and global appetite for a reliable, diversified rare earths supply chain. Lynas has positioned itself as a proven and reliable supplier to key markets, and continues to engage with end users and governments.
The company is expanding its production and selected Kalgoorlie WA as the location for a new rare earths processing facility. This project was awarded Lead Agency status by the Government of Western Australia and Major Project status by the Australian Government.
Furthermore, Lynas was selected by the US Department of Defence for a Phase 1 contract for a US heavy rare earths separation facility. Phase 1 will involve a detailed market study, planning and design work for a facility in the US. In terms of the breadth and depth of ASX shares within the rare earths space, I believe Lynas is the 'blue-chip' opportunity given its size, track record and revenues. .
RareX Ltd (ASX: REE)
RareX is focused on developing rare earth deposits in Australia including its Cummins Range rare earths project in the East Kimberly region of Western Australia.
The RareX share price has soared more than 150% in the last month following a series of exciting announcements. On 30 September, its first batch of assays received returned exceptional thick, high-grade results. Furthermore, on 7 October, it announced the start of drilling at a highly prospective location, 84km north of Lynas Corporation's Mt Weld. RareX represents a highly prospective exploration project and potential nearology play given its drilling proximity to Lynas. However it carries significant risks as do most exploration players.
American Rare Earths Ltd (ASX: ARR)
American Rare Earths entered into the lucrative US rare earth market in 2019 following the acquisition of the La Paz rare earth project in Arizona. This acquisition secures ARR as the only listed ASX company with direct exposure to the US rare earths market.
The company has received significant attention in recent weeks following the US President's executive order intended to stimulate domestic production and processing of identified critical materials including rare earths. ARR is in the early stages of its exploration project and presents similar risks to that of RareX.
Foolish takeaway
China's monopoly on rare earths increases the importance of establishing a reliable supply chain outside China. I believe Lynas has taken the global spotlight as an established producer and could be a strong medium to long term investment.
