Critical Mineral Playbook

July 15, 2025

Full report can be found here

Part 1: Rare Earths – Scarcity vs Scare Tactics

Welcome to the world of critical minerals, where investor need to separate fact from political fiction. In Part 1 of our series, we outline the fundamentals of rare earth geology, market structure and economic reality of investor returns. We also explain our process for finding value and skuttle several myths.

What makes a Mineral ‘Critical’?

  • ‘Critical Minerals’ appears to be a modern iteration on the age-old challenge of resource economics: scarcity, substitution and supply diversity.
  • We believe that the true value of a mineral is not always obvious. Typically, something becomes ‘critical’, after you run out and can’t replace it.
  • Today’s supply chains are particularly fragile to due supply concentration in China and poor substitutability.
  • The past year has seen China place export controls on antimony, gallium, germanium and rare earths.
  • These are not randomly selected. They represent strategic vulnerabilities in which China has a dominant market share.

Rare Earths Paradox: Not rare, only valuable if separated

  • Despite the name, ‘rare earths’ (‘RE’s’) are paradoxically not rare; they are ‘everywhere’ with moderate abundance in the earth’s crust.
  • But they are only useful if separated from each other with only 4 of the 17 valuable if isolated (NdPr, Dy, Tb). But separation is the most formidable barrier to entry we have encountered across the commodity complex.
  • We estimate a new vertically integrated mine and separation plant will take 10 years and cost ~A$4.0bn (US$2.6bn). But there is no guarantee of success, let alone generating returns to justify the risk.
  • In our view, competing with China ‘head on’ makes little sense given the market structure. Particularly the price setting by a state-run duopoly.
  • But recent news of the US DoD price floor with MP materials has potentially levelled the playing field. But based on history, we are sceptical about forecast ramp up assumptions and flag risk in a single source of supply.

How to play it? Highly strategic

Our framework for investing in the sector involves leverage existing IP and finding strategic alternatives to select parts of the supply chain:

  • Back incumbent producers.
  • Target select, upstream segments producing concentrate.
  • Support disruptive processes and technology (Ionic clay, FJH).
  • Ensure project fundamentals are strong enough to be profitable with or without government support.

No Easy Fix… But opportunities do exist

In our view, there is little ability to quickly or easily resolve the current supply chain problems. But the current policy setting does create opportunities for investors. We urge capital allocators be mindful of the technical complexities that span metallurgy, niche markets and project execution.