How to Invest in Rare Earths in Australia

The rise of Australian rare earths producer Lynas

Rare earths have been mined in Australia since 2007, but in 2010, China and Japan engaged in a bitter dispute over fisheries and trawling activity in the East China Sea.

The disagreement saw China, which at the time mined over 93 percent of global rare earths output, halt exports of the minerals to Japan, which needed them for its heavy and high-tech industries. While the dispute between China and Japan eventually simmered down, Japan started to look elsewhere for rare earths in a bid to diversify its purchases.

Enter Australia. Japan found and poured money into a domestic company called Lynas Rare Earths (ASX:LYC,OTC Pink:LYSCF), which before then had been a small player sitting on a rich deposit of the obscure minerals. Its Mount Weld mine in Western Australia was operational, but it was very much a small operation.

It’s worth noting that China had an interest in Lynas even before Japan. Lynas, which to this day markets itself as “the only producer of scale of separated rare earths outside of China,” was almost gobbled up by China before Japan ever came knocking.

In 2009, state-owned China Non-Ferrous Metal Mining offered AU$252 million for a 51.6 percent stake in Lynas, but the offer was quashed by Australia’s Foreign Investment Review Board on the grounds of concern for non-Chinese buyers.