As the transition towards renewable energy continues to inch forward day by day, perhaps the most abundant thematic – electric vehicles (EVs) – is leading the charge.
Lithium (and arguably, nickel and cobalt) is typically considered the darling child(ren) of the battery metals segment. However, one often-overlooked segment has opened up a compelling value proposition.
Rare earths, which, coincidentally, aren't all that rare (in the ground anyway), have garnered attraction lately.
The group is comprised of 17 metals that are essential to technological functions in society.
Rare earths ASX mining shares open a compelling proposition
According to Dr Kingsley Jones, analyst at Jevons Global Investment Advisory, "[t]he EV market thematic is driving higher demand for rare earth metals".
In a recent note, Jones covers the market for rare earths. In it he builds a core basket of portfolio companies to gain exposure to the space.
He said that demand has accelerated for the basket of rare earths within ASX mining shares. This is due to their use in high-performance magnets used in electric motors and generators.
In particular, the "rapid uptake of EVs and the very large generators used in wind turbines to provide renewable energy" has underpinned the demand.
Aside from that, China refines and produces more than 60% of the world's unprocessed rare earth oxides.
Not to mention, rare earths are notoriously hard to extract anyways. The reason? "Host minerals are difficult to process and the rare earths are hard to separate," Jones says.
With that, the analyst and his employer suggest five companies for investors to hone in on for exposure to rare earths from mine to metal, all the way downstream.
These include Arafura Resources Limited (ASX: ARU), Hastings Technology Metals Ltd (ASX: HAS) and Australian Strategic Materials Ltd (ASX: ASM). I've covered the other two here.
This basket of stocks provides a diversified offering of names with exposure to rare earths at different points along the value chain, Jones says.
Take a look at the returns for each of these shares for the past 12 months on the chart below.
