New ETF Alert: This Rare Earth Fund Stands Out in the Crowd

The number of U.S.-traded exchange-traded funds (ETFs) has grown so rapidly that it is inevitable that many new funds will be very similar to existing ones. In the case of the Sprott Rare Earths Ex-China ETF (REXC), there’s a clear distinction for just about anything that came before it.

REXC debuted on Tuesday, so it currently has a mere $2 million in assets. But given that the Vaneck Rare Earth Strategic Metals ETF (REMX) is about the only peer in existence, REXC has at least attempted to do something unique. 

The fund focuses specifically on companies whose main business (majority of revenues) is derived from mining, production, or refining of rare earth minerals. By excluding Chinese firms, the brand new ETF aims to identify and own companies that are devoted to what has become an urgent national priority, in the U.S. and elsewhere outside of China.

In the strategic minerals market, the landscape is being redrawn by a single fundamental question: Can the West actually function without the East? 

For years, the rare earth industry was synonymous with a single dominant player, making any investment in space a de facto bet on one nation's export policy. However, the arrival marks a definitive shift toward a bifurcated supply chain. It is the first vehicle designed to capture the growth of the industry while explicitly excluding the current global leader.

The Case for REXC

The case for this “ex-China” approach is built on the accelerating trend of national security-driven infrastructure. Governments across North America and Europe are pouring billions into fast-tracking domestic mining and refining capabilities to ensure that the materials for everything from high-end semiconductors to aerospace guidance systems are sourced from friendly jurisdictions. 

REXC represents a high-conviction bet on these emerging non-China champions. In place of Chinese firms, the focus here is on miners in Australia, Canada, and the U.S. that are poised to benefit most from this massive capital reallocation.

However, there are significant risks that make this industry more like a public version of a venture capital strategy. While the world is racing to build new mines, the specialized knowledge and infrastructure required to refine these minerals into a usable form remain heavily concentrated in the very region REXC seeks to avoid, China. 

This creates a lag between the mining of the ore and the generation of actual revenue. Furthermore, by excluding the largest and most established players, the fund is inherently more volatile, tethered to smaller companies that face steep climbs in a high-interest-rate environment.

With REXC, the bet is essentially on a future where the supply chain is completely re-engineered. This is not dissimilar to what is being contemplated concerning AI firms versus legacy software businesses. 

Will the new wave of upstart companies really knock the incumbents to the curb? Or is the hype way ahead of the realistic long-term deliverables? REXC is here to help answer that question, over time, in the form of an ETF.

Rob Isbitts created the ROAR Score, based on his 40+ years of technical analysis experience. ROAR helps DIY investors manage risk and create their own portfolios. For Rob's written research, check out ETFYourself.com.