There are 17 rare earth elements (REEs) in all — 15 lanthanides plus yttrium and scandium – and many of them make up key components of technologies used in modern life. From cellphones to laptops to wind turbines and fluorescent lights, rare earths are certainly ubiquitous in the modern world.

Rare earths are commonly referred to in two groups, the heavy and light rare earths. Heavy rare earths such as dysprosium tend to be of higher value.

Rare earths can also be grouped together according to their uses. Those used to make magnet rare earths include praseodymium, neodymium, samarium and dysprosium, while phosphor rare earths – or those used in lighting – include europium, terbium and yttrium, with cerium, lanthanum and gadolinium sometimes being included as well.

Other rare earths are also used in catalysts, ceramics, battery alloys, military weapons and various other industrial applications.

Rare earth magnets are the strongest type of magnet by weight and volume, making them essential in smaller electronic devices such as cell phones. Magnet rare earths are in high demand, but others, such as cerium and lanthanum, are vastly oversupplied to the point where some analysts have suggested that companies treat them as waste.

China accounts for the vast majority of the world’s rare earth supply. It produced 95,000 tons of rare earths in 2014, with the US coming in a very distant second at 7,000 tons of production.

Despite a ruling against China’s rare earth export quotas by the World Trade Organization (WTO) in 2014, many analysts believe that the market still lacks transparency and that China will retain its hold on the space. Notably, China’s domestic production quotas haven’t been affected by the ruling, and the country also recently removed its export tariffs on REEs, bringing prices down.

There was a burst of interest in rare earths in 2010 when prices rose to 20 or 30 times previous levels. As the Financial Times notes, China reigned in exports in an effort to give an advantage to domestic electronics producers, making supplies scarce for the rest of the world.

However, after companies such as Molycorp (NYSE:MCP) and Australia’s Lynas Corporation (ASX:LYC) began to invest in production outside of the country in order to meet demand, prices fell dramatically, as did the share prices of both companies. Molycorp filed for bankruptcy in June 2015, after its share price fell from about $74 in 2011 to $0.075.

To be sure, that’s deterred plenty of investors from the space, but some still believe there is opportunity to be had, suggesting that end users would be willing to invest in rare earth companies outside of China due to the prospect of a more secure supply.

John Hykawy of Stormcrow Capital has suggested looking at companies that are cost competitive at low prices with long term projects in stable geopolitical jurisdictions producing materials that are needed (such as magnet materials). He also favours companies that tackle the rare earth separation process themselves (rare earths are usually found together and can be difficult to separate. Some developers argue that producing a concentrate to sell to a third party rare earth separation facility is more effective than developing one’s own process).

Companies that checked all the boxes for Hykawy as of January 2015 included Rare Element Resources (TSX:RES) and Arafura (ASX:ARU).

For Ryan Castilloux of Adamas Intelligence, companies that have gone back to the drawing board to come up with new and interesting business models could be worth a look. He cited Medallion Resources (TSXV:MDL), Pele Mountain Resources (TSXV:GEM) and Texas Rare Earth Resources (OTCMKTS:TRER) as three companies that fit that description in an interview at the 2015 PDAC conference in Toronto.

Certainly, the rare earths space is a complicated one, and it can be tricky to properly assess projects and follow the market. However, with the ever increasing importance of rare earths in modern technology, there is certainly opportunity to be had for those willing to do their due diligence.

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