VanEck Launches New Mining ETF Targeting Rare Earths

VanEck Launches New Mining ETF Targeting Rare Earths

The VanEck Vectors Rare Earths and Strategic Metals UCITS exchange-traded fund (ETF) is already listed on the London Stock Exchange in USD and GBP and on Xetra in EUR.

While rare earth elements and strategic metals may not be as well-known as precious and industrial metals, they are integral components of many advanced technologies today and in the future. Rare earth metals and strategic metals are used in a wide range of applications and can be found in satellite components, microchips, LCD TVs, smartphones, aircraft, and rockets, as well as renewable energy technologies such as electric cars and wind turbines.

There are currently 17 rare earth metals on the periodic table: cerium, dysprosium, erbium, europium, gadolinium, holmium, lanthanum, lutetium, neodymium, praseodymium, promethium, samarium, scandium, terbium, thulium, ytterbium and yttrium.

There are also 27 elements considered strategic metals: antimony, arsenic, beryllium, bismuth, cadmium, chromium, cobalt, gallium, germanium, hafnium, indium, lithium, magnesium, manganese, molybdenum, niobium, rhenium, selenium, strontium, tantalum, tellurium, thallium, titanium, tungsten, vanadium, zirconium and zirconium.

Martijn Rozemuller, CEO of VanEck Europe, said, "These raw materials play an important role for technologies such as these that are critical to combating climate change. Powerful magnets, such as those installed in wind turbines or electric motors, require, among other things, neodymium, which is a rare earth. Lithium, meanwhile, is the basic raw material for modern batteries used in electric vehicles. As the decarbonization of the economy continues, there is now fierce competition for these raw materials. Demand is already high and will certainly increase in the future."

As is often quoted, rare earth elements, despite their name, are relatively abundant in the earth's crust. Their "rarity" stems from the fact that they are difficult to mine, and they never occur in high concentrations and are usually mixed with other elements.

The specialized nature of the rare earth mining process means that these companies are not on the radar of many investors. This ETF aims to open up this opportunity to more people who may benefit from the growing importance of these key commodities.

The fund uses direct physical replication to track the MVIS Global Rare Earths/Strategic Metals Index. The index constructs a universe of eligible stocks by screening companies in developed ad emerging markets that derive at least 50% of their revenues from the production, refining, or recycling of rare earth metals and strategic metals. Companies that are considered likely to derive at least 50% of their revenues from these activities are also included in the eligible universe.

At the end of September, two-thirds of the index's weight was allocated approximately equally to stocks from China (35.0%) and Australia (29.1%). This is followed by the United States (15.0%), Canada (10.9%), and the Netherlands (4.4%).

The index contains 21 names, with all constituents operating in the materials sector. Notable holdings include Zhejiang Huayou Cobalt (7.5%), China North Rare Earths (6.6%), Ganfeng Lithium (6.3%), Standard Lithium (6.1%), Shenghe Resources (6.1%), Tronox (5.8%), Orocobre (5.7%) and Lynas (5.7%). The ETF has an expense ratio of 0.59%.

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