The First Rare Earths ETF That Cuts Out China

Sprott today launched the Sprott Rare Earths Ex-China ETF (REXC), which it describes as the only ETF providing pure-play exposure to rare earths companies outside of China.

The launch comes at a moment when rare earths have arguably never been more geopolitically relevant. These 17 elements have always been important, finding their way into everything from smartphones and electric vehicles to missile guidance systems and wind turbines. 

But their strategic significance was thrust into the spotlight over the past year after China briefly cut off rare earth exports to the U.S. in retaliation for U.S. tariffs imposed during the trade war. 

That move was a wake-up call for the U.S. The trade war has been largely on ice since then, in part because it laid bare just how dependent America is on China for these critical materials.

China controls roughly 60% of global rare earth mining, and an even larger share of refining and magnet production.  

Billions in Government Backing

Recognizing the vulnerability, the federal government has been writing big checks to jumpstart domestic production.

The most significant deal came in July 2025, when the Pentagon entered into what MP Materials called a "transformational public-private partnership." The government purchased $400 million in MP Materials preferred stock, making it the company's largest shareholder. 

It also provided a $150 million loan to expand heavy rare earth separation at MP's Mountain Pass mine in California, the only active rare earth mine in the country, and agreed to set a price floor on MP's rare earth products and guarantee buyers for its magnets over the next decade.

The deal is designed to fund MP's construction of a second magnet manufacturing facility, dubbed "10X," which would bring its total U.S. rare earth magnet capacity to an estimated 10,000 metric tons annually. 

J.P. Morgan and Goldman Sachs committed $1 billion in financing for the project, and Apple followed with a $500 million investment of its own.

MP Materials isn't the only beneficiary. Earlier this year, USA Rare Earth signed a non-binding agreement with the Commerce Department for $1.6 billion in funding, paired with $1.5 billion in private-sector investment, to build out mining, processing, and magnet manufacturing on domestic soil.

Existing ETF Options Have Drawbacks

For investors who want exposure to this theme, the options have been to either pick individual miners like MP Materials, or go with the VanEck Rare Earth and Strategic Metals ETF (REMX).

With roughly $2.7 billion in assets under management and more than $1.6 billion of inflows over the past year, REMX is the dominant fund in the space by a wide margin. It's been around since 2010 and charges a 0.58% expense ratio.

But REMX is not really a pure-play rare earths fund. The ETF tracks the MVIS Global Rare Earth/Strategic Metals Index, which includes companies across the broader strategic metals sector. 

Its largest holding is Albemarle, at more than 9% of the portfolio, a company primarily focused on lithium production. Pilbara Minerals Ltd, another major lithium player, is the third-largest holding at more than 7%. 

At the same time, about 30% of the portfolio is allocated to Chinese stocks, including China Northern Rare Earth Group at roughly 7%. 

On one hand, that makes sense given China's dominance of the industry. On the other, it undercuts the thesis for investors trying to bet on the strategic push to move away from Chinese rare earth dependence.

The much smaller Global X Rare Earth & Critical Materials ETF (EART), with around $46 million in assets, runs into similar problems. 

It also holds Albemarle as a top position and includes copper and platinum miners like Southern Copper, Freeport-McMoRan, and Impala Platinum. Roughly a quarter of the fund is allocated to China. 

Neither fund, in other words, offers a clean way to play the rare earths reshoring narrative.

What REXC Brings to the Table

REXC is designed to fill that gap. The fund tracks the Nasdaq Sprott Rare Earths Ex-China Index, which targets companies globally that are involved in the mining, separation, refining, and production of rare earth elements while excluding companies in China.

The resulting portfolio looks markedly different from REMX. Roughly half the fund is allocated to Australian stocks, about 36% to the U.S., and 8% to Canada. It currently holds 34 positions and charges a 0.65% expense ratio, a fairly typical number for thematic funds.

It is, however, a top-heavy portfolio. Australia-based Lynas Rare Earths, the biggest rare earths producer outside of China, makes up about 23% of the fund, while MP Materials accounts for roughly 19%. Together, those two names represent more than 40% of the ETF. 

That's a feature if you believe they are the most important non-Chinese rare earth plays, and a risk if either company stumbles.

Strong Narrative

REXC enters the market with a compelling story at its back. Government funding is flowing, supply chains are being restructured, and the geopolitical motivation to diversify away from China isn't going anywhere.

The question, as always with thematic ETFs, is whether the narrative translates into returns. REMX, despite riding similar tailwinds, is up just 39% over the past five years, less than half the gain for the S&P 500—though this year it’s strongly outperforming with a 32% gain. 

Of course, REXC's tighter focus and exclusion of China could give it a different return profile over time, especially since two stocks make up more than 40% of the portfolio.

The fund launched today on the Nasdaq and joins Sprott's broader suite of ETF focused on metals and strategic materials.