A clean energy transition and a global push to bolster advanced defense technological capabilities is putting rare earths at the forefront of geopolitical strategy. In the rare earths supply chain, China has been the dominant player in this space. For investors looking for equities exposure in companies focused on rare earth minerals, it typically meant exposure to China. However, that’s no longer the case.
The Sprott Rare Earths Ex-China ETF (REXC) changed that narrative when it launched on April 15. The fund, which tracks the Nasdaq Sprott Rare Earths Ex-China Index, offers investors a targeted way to capitalize on the de-risking of the global mineral supply chain by avoiding companies domiciled in China.
See More: Sprott Launches REXC: The First Ex-China Rare Earths ETF
Breaking the Monopoly
Quite simply, innovation doesn’t happen without rare earths. These elements are necessary for production of innovative technological advancements from electric vehicle (EV) motors, wind turbines, missile guidance systems, and smartphones.
Historically, China has held a controlling interest in rare earth mining as well as processing and refining capacity. This near-monopoly creates greater risk as trade friction or export restrictions from Western sanctions can disrupt global supply chains for high-tech industries outside of China.
“China dominates the rare earth market by controlling roughly 70% of global mining, over 90% of refining capacity and the vast majority of magnet production,” noted Jacob White, Sprott’s Director of ETF Product Management, in a report: Rare Earths as a National Security Asset: Why Ex-China Supply Matters.
By excluding Chinese companies, REXC gives investors exposure to burgeoning rare earths ecosystems in other parts of the globe. This includes miners, processors, and recyclers in jurisdictions like Australia, Canada, and the United States.
In 2026, economic security goes hand in hand with national security. Governments across the G7 are pouring billions into subsidies to fund domestic critical mineral projects to ensure they are dependent on their own supply chains. REXC is poised to capture these legislative tailwinds. Regulatory measures like the U.S. Inflation Reduction Act are prioritizing non-Chinese sourcing for EV tax credits. This can include sourcing from companies found within REXC’s portfolio—those focused on mining, separation, refining or production of rare earths.
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Pure-Play Exposure
However, for investors who wish to avoid the risk associated with Chinese state-owned enterprises, REXC is a compelling option with its pure-play exposure. The fund specifically targets minerals that will see exponential demand grow as the world electrifies and other technological advancements proliferate.
The fund is heavily diversified, providing exposure across large, medium, and small companies. At the same time, it has a high-conviction portfolio of 34 companies (as of April 14).
By removing China exposure, REXC mitigates the risk from geopolitical uncertainty and regulatory shifts. REXC provides a tactical tool for investors who believe that the future of energy independence hinges on a supply chain that begins and ends outside of Chinese borders.
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Disclosures
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Funds that emphasize investments in small/mid-cap companies will generally experience greater price volatility. Diversification does not eliminate the risk of investment losses. ETFs are considered to have continuous liquidity because they allow an individual to trade throughout the day. A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses, affect the Fund’s performance.
Sprott Asset Management USA, Inc. is the Investment Adviser to the ETFs. ALPS Distributors, Inc. is the Distributor for the ETFs and is a registered broker-dealer and FINRA Member. ALPS Distributors, Inc. is not affiliated with Sprott Asset Management USA, Inc. or VettaFi.
Exchange Traded Funds (ETFs): SETM, LITP, URNM, URN, COPP, COPJ, NIKL, SGDM, SGDJ, SLVR, GBUG, METL, and REXC
Physical Bullion Funds:PHYS, PSLV, CEF, and SPPP.
Gold and precious metals are referred to with terms of art like store of value, safe haven and safe asset. These terms should not be construed to guarantee any form of investment safety. While “safe” assets like gold, Treasuries, money market funds and cash generally do not carry a high risk of loss relative to other asset classes, any asset may lose value, which may involve the complete loss of invested principal.
