The Bottleneck That Could Break the West

Rare earths aren’t rare, but the ability to refine them is. And that’s where the next great fortunes will be made.

In the previous episode, we explored critical minerals more broadly and examined the case for a commodity supercycle along with four stock picks.

If I had to sum it up in one line, it would be this: the house is being built before the foundation is poured.

The real opportunity isn’t in the drones, electric vehicles, or Star Wars-style spacecraft that dominate the headlines. It’s in the overlooked materials that make them possible.

As anticipated, today we’re diving deeper into that theme with a focus on rare earths. And yes, for those wondering, we will be venturing even further down the rabbit hole, eventually all the way to individual minerals.

I recently had a conversation with someone who claimed that rare earths are abundant and the hype surrounding them is overblown.

Let’s start there and unpack two key ideas: the “abundance” theme and the “hype” theme.

The Abundance Paradox

Rare earth elements are indeed not actually rare in geological terms. Despite their name, these 17 elements are relatively abundant in Earth's crust. Even the two least abundant rare earth elements, thulium and lutetium, are nearly 200 times more common than gold.

However, the abundance argument overlooks a key point: the difference between geological presence and economic viability. Rare earths may be relatively common, but they are rarely found in concentrated, mineable deposits. In plain English, you can find them almost anywhere, but it only makes sense to extract them if the concentration is high enough to justify the cost. Although these elements exist all over the world, discovering deposits rich enough to support mining is rare.

Then, once you find them, you can't access the minerals right away.

For rare earth projects specifically, development typically requires 15–20 years or more to bring a major new mine into operation. The complexity increases further when you consider that separation, beneficiation, and processing facilities often take even longer to develop than the mining operations themselves. This means that projects started today may not reach full production until 2040 or beyond.

But mining is just the first step.

The real challenge comes afterward, because separating rare earth elements is incredibly difficult due to their nearly identical chemical properties. Unlike most metals, which behave quite differently, rare earths are very similar to one another. Industrial-scale separation requires hundreds of steps using advanced solvent extraction techniques, which again, in plain English, means it's extremely complex and extremely costly. And that’s where China leads:

The investment opportunity lies precisely in the gap between geological abundance and processing capability. While the elements exist everywhere, the ability to economically extract and refine them is extremely limited and geographically concentrated.

Run Boy, Run

I have to emphasize the scale and gravity of this dependence.

It represents more than a market advantage; it constitutes a strategic technological and economic moat that will take decades to overcome. This is a multi-generational challenge. New projects take 15 to 30 years to become operational, there is a severe shortage of skilled professionals in the West, and reducing reliance on China would require scaling up alternative production by a factor of ten to twenty: demanding hundreds of billions in investment.

China’s rare earth dominance represents a comprehensive strategic advantage, built over decades through coordinated government policy, massive investment, and systematic industry development. The rest of the world is not just behind China in rare earths, it operates in a fundamentally different league. This dominance gives China unprecedented leverage in global technology supply chains and geopolitical negotiations. Rare earth elements have become one of the most concentrated strategic resources in modern history, and governments around the world are now racing to secure supply and will continue to do so.

“Mr. Baron, but why the fuss? Can’t the West just import them and that’s it?”

Would you be comfortable being locked into a system of dependence, especially one that could be weaponized at any moment? This system empowers China to control global supply chains for nearly all high-tech products destined for Western industrialized nations. We've already witnessed this play out recently:

"The whole car industry is in full panic," said Eckard, CEO of Magnosphere, based in Troisdorf, Germany. "They are willing to pay any price."

This isn't the first time strategic materials have been used as leverage. The current situation mirrors the rare earth crisis of 2010–2011, when China slashed export quotas and imposed tariffs to strengthen its domestic industry. Tensions escalated during a territorial dispute with Japan, prompting China to halt rare earth exports entirely. Prices soared more than tenfold, and global manufacturers were left scrambling to keep production alive.

The US National Defense Stockpile contains $912.3 million in total assets as of March 2023, representing a catastrophic decline from its historical capacity. When adjusted for inflation, this represents just 1.2% of the 1962 value of $77.1 billion. This dramatic shrinkage has occurred precisely when strategic mineral dependencies have reached unprecedented levels. The most alarming finding is that items in short supply increased by 167% from 2019 to 2023, growing from 37 to 99 materials.

This means the problem goes beyond economic risk. If high-tech production falters, so does defense readiness because defense IS high tech. In a time of war, that dependence becomes a threat.

We’ve been warned before. In 1963, President Dwight D. Eisenhower reflected on the consequences of neglecting stockpiles in past wars:

“You will recall that, when we became involved in World War II, our lack of an adequate stockpile of strategic and critical materials gravely impeded our military operations. We were therefore forced into costly and disruptive expansion programs. The nation was compelled to divert, at a most critical time, scarce equipment and machinery and manpower to obtain the necessary materials... But even after this experience we had not fully learned our lesson.… After we became involved in hostilities in Korea, we went through experiences almost identical with those of World War II—only then did realistic stockpiling begin.”

Did the West forget these lessons once again?

In a one-year conflict scenario, current estimates suggest the U.S. stockpile would cover only about 40% of projected material requirements. This means today's inventory levels aren’t just low, they're dangerously inadequate, even for short-term disruptions.

The bottom line is this: America’s national security is at risk. The problem isn’t just economic, it’s strategic. And while Western governments may not want war, they are clearly not prepared for one. The deeper concern is that war would reveal just how vulnerable the West has become. A recent Govini report highlights this risk: 78% of U.S. military weapon systems are vulnerable to China’s dominance over critical minerals

First, the vulnerability is clear and so is the solution. For any nation outside China, the most urgent step toward securing a self-sufficient critical mineral supply chain is to invest in refining capacity. That’s why the global buildout of rare-earth oxide processing plants is already underway and poised to grow exponentially.

Second, Japan’s 2010 wake-up call offers a practical model: resilience through government-backed stockpiles, supply diversification, and recycling. Today, Japan maintains reserves covering 60 to 180 days of demand. The U.S. and Europe are beginning to move in the same direction. To meet even the lower 60-day threshold, Western stockpiles would need to double; for a 180-day buffer, they would need to increase four to six times. A coordinated Western build-up would not only improve strategic security, it would also establish a steady price floor for rare earths, especially for heavy elements like dysprosium and terbium, where physical supply is already under intense pressure.

And here we are: the investment thesis is outlined. Now we “just” need to review the entire sector and determine which company offers the best value.

Like a Kid in a Candy Shop

This post is already lengthy (and we all know long reads often go unread), so I’ll save the deeper company-level dive for the next follow-up piece, where we’ll really get into the weeds and compare each one. But it’s worth briefly flagging some of the most critical players shaping the rare earth supply chain outside China:

• MP Materials (US) – Operates the Mountain Pass mine in California, producing light REEs like neodymium and praseodymium. However, they’re still reliant on China for heavy REE separation, though a domestic facility is in development and expected to be fully operational by 2026. Already a well-known name and with heavy REE processing still two years away: not particularly exciting.

• Lynas Rare Earths (Australia/Malaysia) – Lynas has achieved what no one else outside China has: commercial-scale heavy rare earth production. Backed by Japan and the U.S. Department of Defense, with a new facility under construction in Texas. Amazing company but the price you pay is steep.

• Brazilian Rare Earths (Australia/Brazil) – Developing one of the world’s highest-grade rare earth projects in Bahia, with a diversified portfolio of critical minerals. Strong on infrastructure, low-cost energy, and backed by influential investors.

• Aclara Resources (Chile/Brazil) – Focused on ionic clay projects in South America with a clean, low-impact extraction process and strong geopolitical positioning. Its Carina project alone could supply ~13% of China’s current heavy REE output by 2027.

• USA Rare Earth (US) – Majority owner of the Round Top project in Texas, rich in dysprosium, terbium, and gallium. Also building a vertically integrated magnet plant in Oklahoma, with commercial output targeted for 2026–2027. Quietly building something big.

• Ucore Rare Metals (Canada/US) – Developing the high-grade Bokan Mountain project in Alaska, paired with its proprietary RapidSX™ separation tech in Louisiana. Promises faster, cheaper REE separation, now entering the final stages of commercialization.

Rare earths aren’t rare, but the ability to refine them is. And that’s where the next great fortunes will be made.

Each of these companies plays a different role in a still-fragile global supply chain. In the next post, we’ll dig deeper: who’s producing what, who’s still building, and which of these ventures might become the lynchpin of a Western rare earth renaissance.

Stay tuned for the fun. Your ideas and feedback are always welcome in the comments.

Sincerely,

The Boredom Baron

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The content of this article reflects my personal views and is provided for informational and educational purposes only. It does not constitute investment advice, financial advice, or a recommendation to buy or sell any securities or financial instruments.

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