How to Invest in Critical Metals

How to invest in critical metals: Options to choose from

Rare earths are one of the most familiar critical metals groups, especially for investors who remember the rare earths price spike that happened in 2010 and 2011. Interest has since experienced peaks and troughs, but some still believe the metals are a compelling investment.

The rare earth elements group is made up of 15 lanthanides, plus yttrium and scandium, and each has different applications, pricing and supply and demand dynamics. China accounts for the vast majority of the world’s rare earths production, although other countries are attempting to step up.

Manganese, another critical metal, is currently attracting some attention due to its up-and-coming applications in the lithium-ion battery sector. However, about 90 percent of global manganese production is consumed by the steel sector, where it improves strength, toughness and stiffness.

Magnesium is known for its wide range of high-technology applications, with over 80 percent of global production coming from China. Tungsten and tantalum are both conflict minerals, meaning that many of the smaller companies exploring for these metals are focused on finding deposits in safe, secure places. China dominates the tungsten market, and tantalum is a key component in capacitors, with only a few mines solely dedicated to production of the metal.

Those interested in investing in very rare critical metals also have options. Scandium is one critical metal that is currently produced only in very small amounts, but could have enormous potential, and tellurium is another that some market watchers have expressed optimism about in the past.

How to invest in critical metals: Where to start

Choosing which critical metals to invest in can be tricky, and unfortunately once you've made that choice you'll still have work to do. That's because figuring out how to actually invest in critical metals is often a difficult task. Why? Put simply, most of these metals are not traded on public exchanges, meaning that it's difficult, if not impossible, to invest in them directly.

For that reason, many investors choose to invest in critical metals mining companies. Taking that path can also be hard, partially because mining of many critical metals is done mainly by large, diversified miners — for example, major miner Anglo American (LSE:AAL,OTCQX:AAUKF) is a key manganese producer. It's also common for critical metals mining companies to be privately owned.

As a result, investors often choose to gain exposure to critical metals by investing in small companies in the exploration stage. These companies can be risky to invest in, but with a little research it's certainly possible to find some that are worthwhile. All in all, if you're interested in critical metals, the best way to start is by jumping in and looking at the facts.