Rare Opportunity

What the hell are you talking about?

These 17 chemical elements, with names such as neodymium, dysprosium and europium, are used in the manufacture of objects ranging from lasers, aerospace components and nuclear batteries to camera lenses, energy-efficient light bulbs and self-cleaning ovens.

Where do they come from?

Today 95 per cent of the world’s supply comes from China. Deposits are dwindling fast and unless new sources are discovered, global demand will drastically exceed supply. California used to produce a fair amount, but closed its Mountain Pass mine because the Chinese undercut prices. Production has resumed there, but the Chinese still call the shots.

Why haven’t I heard of anyone investing in rare earth metals before?

Until last year, there was no investment market in rare earth metals. Manufacturers bought these substances directly from suppliers, meaning that rare earths represented a pure commodity play based on supply and demand.

What has changed?

Denver Trading, which acts as a broker to the industrial sector, decided to create a new business model for retail investors, licensing companies that it describes as ‘agents’ to sell small amounts of rare earths and arranging for them to be stored in bonded warehouses in London or Zurich. Purchases are certified as genuine by independent third-party experts.

How many companies are offering this service?

About 20 so far. If your email address is registered with any financial websites you’re bound to have received several enticing messages by now.

How are the prices of rare earth metals performing?

Well, some prices have risen dramatically, mainly because the Chinese have been curbing exports of rare earths and stockpiling them. This is the eye-catching part of the pitch. Who wouldn’t want to profit by 500 or 1,000 per cent? But prices have fallen of late — volatility goes with the territory.