JP Morgan and Lynas Behind New Rare Earth Metal ETF Where is Industry?

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We received a hat tip this morning from a MetalMiner reader that the first rare earth ETF, REE Fund, has received approval from the Swiss Financial Market Authority, FINMA this morning. The fund will open on May 31 of this year and has received this approval to operate only in Switzerland. It will invest in firms involved with rare earth metal mining, refining and manufacturing, according to the fund’s website. Interestingly enough, the fund lists Lynas Corporation as a “supportive member. Lynas Corporation, a publicly traded company, owns a rare earth deposit at Mt. Weld in Western Australia and is developing an Advanced Materials Plant for the processing of concentrates in Kuantan, Malaysia. JP Morgan made a $450m investment in Lynas back in November 2009 though it no longer is a “substantial holder of Lynas stock. This announcement signifies to us that Rare Earth metals have hit mainstream if the finance folks have already developed a fund to speculate in these metals, we can assume that many believe the Rare Earth metal companies are poised for growth.

Why should industrial buying organization sound the alarm bells?

The funds are not organized quite like other metal ETF’s (either by pricing shares based on an index or actually taking a physical position in the underlying metals). Instead, the REE fund will actually invest in approximately 30 companies worldwide that “promise to be part of the leadership in the emerging REE industry, according to the fund’s promotional flyer. The concept, “mine to market means the ETF will make investments in firms that span the gamut of mining, refining, processing, alloying etc. For the first time, we see the financial community take an almost preemptive role in developing financial products in advance of the industrial firms who have yet to secure raw material supply or make strategic investments in key rare earth metal companies.

Our colleagues over at RareMetalBlog posted an article back in March covering another fund from Dacha Capital to develop physical inventories of rare earths.

MetalMiner will dive deeper into these developments over the coming days. But major industrial buyers will want to pay close attention to these developments before the “herd enters the fray.

–Lisa Reisman

Comments (4)

  1. Anonymous says:

    vaporware is jumping from software to commodities

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