Rare Earths: A Strategic Opportunity Beyond China

July 16, 2026 | (7 mins 09 secs)

Steve Schoffstall explains why rare earths have become a critical geopolitical and investment theme as countries look to reduce dependence on China's dominant supply chain. Schoffstall highlights how these essential materials power everything from defense systems and AI data centers to smartphones and EVs, and he introduces the Sprott Rare Earths Ex-China ETF (REXC), a strategy designed to capture opportunities in the growing rare earths market outside China.

For the latest standardized performance and holdings of Sprott Rare Earths Ex-China ETF, please visit REXC. Past performance is no guarantee of future results.

Video Transcript

James Connor: Steve, thank you very much for joining us today. One of the most important issues facing governments around the world today is the scarcity of critical resources. This includes uranium, lithium, copper and rare earth elements. Most people have heard of many of these commodities, but not many are familiar with rare earth elements, including me. I want to start right here. What exactly are rare earth elements?

Steve Schoffstall: Great question, and it’s one we get often. Rare earths are 17 chemically similar elements. They're considered a subsection of critical materials. If you think of critical materials as an umbrella term, rare earths fall under that umbrella. Despite their name, rare earths aren't actually rare. They're found throughout the earth's crust. What makes them rare is that they're usually not found in concentrations that make mining them economically viable. As we'll discuss, they're used for many purposes and are becoming increasingly important in today's economy.

James Connor: Maybe you can touch on some of the uses.

Steve Schoffstall: Absolutely. Some of the big ones would be defense. Anywhere where you're starting to see missile guidance systems or radar technology, they're used there. When we think about technology, we see it used in AI data centers, whether in the motors that help keep them cool. It's used in some optics. In consumer technology, we see it used in display screens, whether it's TVs or cell phones.

Often, those colors are made possible by rare earths. On your cell phone, the thing that actually makes it vibrate is a rare earth magnet. We also see uses in robotics and energy, such as wind turbines. We also see it used in EVs, where rare earth magnets are used in motors.

James Connor: There are many things that we use on a day-to-day basis, but we're just totally oblivious to the fact.

Steve Schoffstall: That's exactly right. I think we take many of these rare earth uses for granted, and a lot of what we use in everyday life is made possible because they're readily available.

James Connor: One of the big issues that we've become aware of here in the last year or 2 years is the fact that China dominates so many aspects of the rare earth supply chain. Can you speak to that?

Steve Schoffstall: This is a development that's happened now over the course of the last three decades or so. If you were to go back to the early and mid-1990s, the U.S. was the leading producer of rare earths. Through a hat tip to China's growing economy, they were able to take control of the rare-earth industry. Today, they now control about 69% of mining.

If you look at refining and magnet production, over 90% of the market is controlled by China. Now they're starting to put in place port controls, which makes it a little harder for countries to access these rare earths, which are critical to national and economic defense. Because of that, we're seeing many Western countries look beyond China and put in place programs and investments to move production and reshore it so they don't have to worry about being at the whims of the Chinese government.

James Connor: I'm glad you brought that up about the export restriction. Many of the prices associated with these rare earth elements are just going through the roof. A common one is dysprosium, used in magnets and also known as DyTb. The price has risen from $100 per kilo to $900 per kilo because of these restrictions. This really speaks to the investment case for these rare earth elements.

You and your team at Sprott have developed a new ETF product that enables investors to invest in rare earth elements. Can you tell us more about this new product?

Steve Schoffstall: Absolutely. This is a strategy that we're really excited about. It's the Sprott Rare Earths Ex-China ETF, ticker REXC. This is the only ETF anywhere that is solely focused on providing exposure to rare earths. There are plenty of ETFs out there with varying levels of exposure to rare earths, ranging from 5-6% to the teens or even the high 20s.

But this product focuses specifically on rare earths. We bring our pure-play strategy, which we're known for. We're at this point screening about 1,000 mining companies twice a year, reviewing their financials and understanding what they produce and mine.

We're focusing on companies with at least 50% of their revenue tied to rare earths, whether through mining, smelting or other production elements. It's allowed us to have a differentiated product. It’s ex-China-focused because much of what we're seeing in the investment landscape is creating opportunities outside China as countries look to reshore and offer incentives to increase production, particularly in Western countries.

But it's different from other existing ETF strategies, which might market themselves as rare earth ETFs. But when you really start drilling down past just the name of the fund, what you'll see are usually very diversified strategies or strategies that are concentrated in other metals. To put it in perspective, our strategy has about 96% exposure to rare earths. Other strategies, as I said earlier, could be in the single digits.

James Connor: How many companies are in the ETF?

Steve Schoffstall: There are currently 34 companies in the ETF. When we break down the exposure, you're going to find about 48% from Australia, about 40% from the U.S., and another 8% or so from Canada, so very much weighted to those three countries, about 95-96%. When we look at the capital structure, large-cap stocks account for about 38%, mid-cap stocks about 16%, and the rest are in the small-cap range.

James Connor: If someone would like to learn more about Sprott and its new rare earth ETF, where can they go?

Steve Schoffstall: They can head over to sprottetfs.com to view everything about REXC. We also have an Insights section on our website where we post monthly commentaries and video content that provide investors with the opportunity to learn more about critical materials, precious metals, and, specifically, rare earths.

James Connor: Steve, thank you very much for taking the time to speak with us today and for sharing your thoughts.

Steve Schoffstall: It's great to be back. Thanks, Jimmy.