When it comes to metals investing, there are a few classifications you should know about. You’ve heard of the first – precious metals (or the noble metals): gold, silver, platinum and palladium. Then there are the “base metals:” copper, zinc, nickel, aluminum, etc. A lesser-discussed category is the group of fifteen to forty or so (depending on how they are counted) rare earth metals (or rare earth elements and minerals).

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Investing in The Rare Earth Metals Sector

Three Reasons To Invest In Rare Metals

1. They’re rare. By nature, their supply is limited. This means there is much more upside available in terms of demand. And when electric cars, cellphones and other gadgets of the new green-tech age (for lack of a better descriptor) need considerable amounts of these metals and more and more people are expected to start buying smartphones, etc. It only makes sense to get into this market.

2. China, China, China. Speaking of “more and more people,” the worldwide population boom is only accentuated in this country which is still making the transition into a consumerist economy. More and more rural Chinese are moving to urban centres in hopes of making a more prosperous life. They are buying these same smartphones. Oh – and China is also in possession of the world’s largest deposits of these same metals. Convenient! (It is also now officially the world’s largest gold producer).

3. Profit from a general boom in commodities as a result of increased infrastructure spending. Many rare metals miners are also engaged in the mining of other base metals and even precious metals. Rare metals are hard assets, and the commodities boom worldwide is set to continue as other countries come on board to the resource mining wagon for their own domestic needs.

“A typical hybrid car contains over 30kg of rare earth elements and new sources of supply will be needed to meet the growing global demand, which currently is supplied almost entirely by China.” – Avalon Rare Metals

Companies That Mine Rare Metals

You’ll want to look to the diversified mining companies like BHP Billiton (NYSE: BHP), which mines manganese, and AngloAmerican (OTC: AAUKY), which produces ferrous and other industrial metals.

Aside from these large-cap producers, you will have to actively seek out junior producers that focus on rare metals mining, such as Canada’s Avalon Rare Metals (TSX: AVL). Avalon is a junior mineral exploration and development company that mines in Canada’s NorthWest Territories, Ontario and Nova Scotia provinces. Many of the minerals it mines, as noted above, are in increasing demand for “environmentally-beneficial high technology applications.” Avalon’s site notes that indium and gallium, for example, are needed in solar energy projects, while terbium and europium are used in flat panel display technologies.

Rare metals investing in itself is not for the average investor, but if you are reading this you are probably someone interested in individual stocks and are able and willing to do a bit of your own research to learn more about what you invest

in. If this is not you, you should speak with your broker for more information. I’m not a mining expert or a financial advisor – I’m just sharing some of the basics.