Names like BHP Group Ltd (ASX: BHP) and Fortescue Metals Group Limited (ASX: FMG) get plenty of investor attention because of the huge cash flow generated by their iron ore divisions.

But, there are other ASX shares that are exposed to different commodities.

Rare earth ASX shares could be one of the most interesting areas of the resources space. Examples of rare earths include neodymium (Nd) and praseodymium (Pr).

Examples of uses for rare earth elements, according to Geoscience Australia, include: magnets and super magnets, motors, metal alloys, electronic and computing equipment, batteries, catalytic converters, petroleum refining, medical imaging, colouring agents in glass and ceramics, phosphors, lasers and special glass.

This expert is bullish on rare earths

At the end of August, fund manager Emanuel Datt had allocated 23% of the fund towards rare earth ASX shares.

My colleague Tony Yoo has previously written about some of Datt's rare earth picks, which include Lynas Rare Earths Ltd (ASX: LYC) (which is down 25% since mid-August), Dreadnought Resources Ltd (ASX: DRE) and Lanthanein Resources Ltd (ASX: LNR).

Why is Datt optimistic about rare earth prices and rare earth ASX shares? He suggests that there could be higher tensions between China and Taiwan, which could lead to the "weaponization" of rare earth supply through supply restrictions. Datt explained:

We know that rare earths are absolutely essential for advanced technology applications, ie renewables, electric vehicles […] The second point was the market power. We've already discussed how China produces around 90% of rare earths globally on a downstream basis.

We're not looking or anticipating a full-blown war or anything like that between the two nations. But escalation in tensions, you know, sanctions and tit for tat retaliation. I think that will be enough to really get rare earth prices moving and demand being pushed forward effectively from rare earths uses, wanting to secure supply ahead of any potential restrictions.

What does Datt like about Lynas shares?

My colleague Tony Yoo reported on why Datt thinks that Lynas is the "gold standard" for rare earth ASX shares. Datt said:

It is an integrated producer with downstream processing facilities located in Malaysia and upstream operations in Western Australia.

Its customers are primarily Japanese and other nationalities who wish to diversify their supply from non-mainland Chinese sources.

Lynas Rare Earth share price snapshot

Since the start of 2022, Lynas has dropped by more than 30%.

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The S&P/ASX 200 Materials Index (ASX: XMJ) is doing poorly today, down 2.45% at the time of writing. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) is also struggling, losing 1.53% loss so far today.

Yet the share prices of these ASX mining stocks are up 6% or more this afternoon. Let's cover their recent developments.

Far East Gold Ltd (ASX: FEG)

Far East Gold is a copper and gold exploration company. Its shares are up 6.67% to 72 cents each in late afternoon trading. There's no news from Far East today, but yesterday the company announced it had started drilling at its Woyla Copper-Gold Project in Aceh Province, Indonesia.

The Woyla Project was explored by two companies, Barrick and Newcrest. In the 25 years that the project has been around, no other company has been able to do as much exploration and drilling on the tenement.

The company notes this is the first time drilling has commenced at the site and that it further de-risks the project.

Lanthanein Resources Ltd (ASX: LNR)

Lanthanein Resources is a mineral exploration company recording gains of 8.7% in late afternoon trade. Again, there are no announcements from the company today to make sense of the surge in the share price.

In fact, the most recent announcement from the company was posted on Friday last week. The company updated the market on its maiden drilling at its Lyons Prospect in the Gascoyne region of Western Australia.

Drilling is targetting high-grade rare earth elements (REE). Thirteen out of the total 30 holes have been drilled at depths of 1,068 metres. Analysis of the drilled materials for composition and quality was said to be underway.

Drilling at the site began on 12 September.

Artemis Resources Ltd (ASX: ARV)

Finally, Artemis Resources is a gold and copper explorer. Its shares are up 14.29% at the time of writing. The company's most recent announcement was posted on 13 September, identifying a large copper-nickel system at its Chapman project in Western Australia.

Eleven holes were drilled to a depth of 3,011.3 metres.

Artemis Resources executive director Alastair Clayton commented on the finding:

Intersecting broad shallow zones of continuous copper and nickel at Chapman is encouraging, especially as these mineralised zones appear to be related to the margins of regional gabbros and related structures. Drilling at Chapman undertaken in 2021 intersected high-grade copper mineralisation over a wide interval. We look forward to refining and developing additional targets to further explore this ~1km long prospective trend.

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Currently China is overwhelmingly the dominant global producer of the 15 elements that make up the group of rare earths.

According to Datt Capital chief investment officer Emanuel Datt, the tense current and prospective geopolitical situation has lit a fire under the fortunes of companies that extract these valuable minerals.

"Should the Taiwan situation worsen and/or should China use force to control Taiwan, it's likely there will be sanctions on goods sold to China and restrictions of the supply of strategic materials exported by China."

Datt's worries are underlined by this week's visit of US senator Marsha Blackburn to Taipei. That marked the third visit to Taiwan by American legislators this month, which has infuriated Beijing.

China considers the democratic island a part of its country and discourages other nations from recognising its sovereignty.

"I will not be bullied by Communist China into turning my back on the island," said Blackburn.

"Taiwan is our strongest partner in the Indo-Pacific Region. Regular high-level visits to Taipei are long-standing US policy." 

If China caused a worldwide rare earths shortage…

Datt fears that a cornered China could hold the world to ransom.

"China produces around 80% of the rare earth elements globally," he said.

"And given their critical nature in the production of a wide range of modern technologies, a logical first step would be China restricting this supply to the rest of the world in which it is in disagreement."

As such, Datt has started piling into ASX shares that are involved with rare earths production.

He named five stocks that fit the bill:

• Lynas Rare Earths Ltd (ASX: LYC)
• Iluka Resources Limited (ASX: ILU)
• Hastings Technology Metals Ltd (ASX: HAS)
• Dreadnought Resources Ltd (ASX: DRE)
• Lanthanein Resources Ltd (ASX: LNR)

Datt himself has bought Lynas, Dreadnought and Lanthanein shares.

Lynas reported bumper annual results on Friday, sending its share up 1.46%.

The company is globally "the gold standard" for rare earths producers, according to Datt.

"It is an integrated producer with downstream processing facilities located in Malaysia and upstream operations in Western Australia," he said.

"Its customers are primarily Japanese and other nationalities who wish to diversify their supply from non-mainland Chinese sources."

The other two players are in an exploratory stage.

"Dreadnought has made a new rare earth discovery with initial results demonstrating grades almost 3 times that of Hastings' deposit which is situated a short distance to the north," said Datt.

"Lanthanein has defined similar early rock chip samples as Dreadnought, which sits in a similar geological context. However, with a superior heavy rare earth ratio."

The post 5 ASX shares that could rocket from a rare earths crisis: expert appeared first on The Motley Fool Australia.