Methodology

1. Purpose and rationale

No transparent, freely available, rules-based global equity benchmark exists to track the rare earth element production industry. The RareEarth Index (REI) fills that gap. The index is a published reference, designed for investors, researchers, policymakers, and financial product issuers who require a defensible benchmark for the rare earth equity universe.

Rare earth elements (REEs) are the seventeen metallic elements spanning the lanthanide series plus scandium and yttrium. Despite the name, most are not geologically scarce. What is scarce is the combination of economically viable concentrations and the highly specialized processing infrastructure required to convert ore into separated, usable materials. That infrastructure is heavily concentrated in a small number of countries and companies.

Several REEs — particularly neodymium, praseodymium, dysprosium, and terbium — are essential to the permanent magnets used in electric vehicle drivetrains and wind turbine generators. No commercially viable substitutes exist for these applications at scale. The energy transition is materially dependent on rare earth supply, and the rare earth supply chain is materially dependent on a small number of public companies. The RareEarth Index tracks those companies.

The RareEarth Index is a companion to the Climate50 Index. Climate50 tracks the demand-side companies of the energy transition: electric vehicles, renewable generation, grid infrastructure, and energy storage. The RareEarth Index tracks the upstream supply side that makes those technologies possible.

2. Index objective

The RareEarth Index does the following:

• Provides a transparent, replicable benchmark for the global rare earth equity universe.
• Captures companies with material rare earth exposure as their primary business activity, not peripheral or incidental involvement.
• Reflects the full geographic diversity of rare earth production accessible to international investors.
• Serves as a reference index for investors, researchers, policymakers, and financial product issuers tracking the critical minerals supply chain.

3. Relationship to Climate50 Index

The RareEarth Index is a companion to the Climate50 Index, a US and Canada-focused equity benchmark of fifty public companies whose core businesses directly enable the low-carbon economy. Climate50 captures the demand side of the energy transition. The RareEarth Index captures the upstream supply side.

Several Climate50 constituents have material REE input dependency, particularly in transportation electrification and renewable energy generation. The RareEarth Index provides the supply chain context for those exposures.

Both indices share a common design philosophy: rules-based eligibility, transparent methodology, and strict screens against peripheral or aspirational exposure. Neither index includes companies on the basis of marketing claims, stated intentions, or marginal activity in the relevant theme.

4. Eligibility framework

4.1 Activity screen

A company must derive the majority of its enterprise value from at least one of the following activities:

• Primary extraction of rare earth element-bearing ore, including combined mining operations where REEs represent a primary or significant co-product.
• Processing, cracking, or chemical separation of rare earth concentrates into individual rare earth oxides, carbonates, or metals.
• Manufacturing of rare earth permanent magnets or REE-bearing alloys as a primary product line.
• Hydrometallurgical or pyrometallurgical recycling of end-of-life products to recover rare earth content (urban mining).
• Advanced-stage exploration with a defined NI 43-101 or JORC-compliant rare earth resource, where the project represents the primary asset of the company.

4.2 Exclusion screen

The following are excluded, regardless of stated strategy or external classification:

• Companies for which rare earth exposure is a minor by-product of a primary business in another commodity.
• Companies that own royalties or streaming interests in REE projects without direct operational involvement.
• ETFs, closed-end funds, and other investment vehicles.
• Companies under active bankruptcy proceedings or with trading suspended for more than ten consecutive trading days.
• State-owned enterprises that are not publicly listed on an accessible exchange.

4.3 Listing and liquidity requirements

All constituents must meet the following minimum criteria at each reconstitution review:

• Listed on an eligible exchange: NYSE, NASDAQ, TSX, TSXV (with liquidity waiver), ASX, LSE Main Market or AIM, Oslo Børs, Euronext, HKEX, or SGX.
• Minimum market capitalization of USD 50 million, calculated as the 30-day average of daily closing market cap in USD-equivalent terms.
• Minimum average daily traded value of USD 500,000, calculated over the trailing 90 trading days in USD-equivalent terms.
• TSXV liquidity waiver: companies listed on TSXV must clear a higher liquidity bar of USD 1,000,000 average daily traded value to compensate for the venue’s lower baseline liquidity.
• Financial statements available in English or with an audited English-language translation.

5. Index design and construction

5.1 Parameters

5.2 Weighting methodology

Constituents are weighted by modified market capitalization. Each company’s weight is its free-float market capitalization expressed as a proportion of the aggregate free-float market capitalization of all index constituents, subject to a hard cap of 10% on any single name.

Where one or more constituents breach the 10% cap, excess weight is redistributed pro rata across all remaining uncapped constituents. This redistribution is applied iteratively until no constituent exceeds the cap.

The RareEarth Index does not apply regional caps, sector caps, or minimum weight floors. The index reflects the eligible market as it exists, subject only to the single-name cap.

5.3 Tiebreaker

If the eligible universe at reconstitution exceeds 35 constituents, the index includes the 35 companies with the highest 30-day average market capitalization in USD-equivalent terms. Companies that meet eligibility but fall outside the top 35 are added to a watch list for the next reconstitution.

If the eligible universe at reconstitution falls below 25 constituents, the index publishes with the available eligible companies and notes the universe is below target. No relaxation of eligibility criteria is applied to reach the target floor.

5.4 Currency treatment

The index is calculated in USD. Constituents listed in foreign currencies (AUD, CAD, GBP, NOK, EUR, HKD, SGD) are converted to USD at the daily closing spot exchange rate sourced from a publicly available reference such as the Federal Reserve H.10 release. Currency conversion does not affect constituent eligibility or weighting calculations, which are performed in USD-equivalent terms.

6. Index sectors

Each constituent is classified into one of five sectors based on its primary activity. Sector classification is assigned at reconstitution and reviewed at each quarterly rebalance. A constituent is assigned to a single sector — the sector representing the largest share of revenue or, for pre-revenue companies, the largest share of project capital expenditure.

7. Rare earth element focus

Eligibility is not limited by element. All seventeen rare earth elements are within scope of the activity screen. The index does not weight, filter, or rank constituents by element exposure.

For analytical and reader-facing purposes, the index publishes element exposure data alongside each constituent profile, with particular attention to the eight elements most directly linked to the energy transition. This is presentational emphasis, not a formal scope restriction.

8. Index maintenance

8.1 Rebalance

The index rebalances quarterly in March, June, September, and December. At each rebalance, constituent weights reset to reflect current free-float market capitalizations, subject to the 10% single-name cap. No additions or deletions occur at quarterly rebalances except where required by a corporate action.

8.2 Reconstitution

The index reconstitutes semiannually in June and December. At reconstitution, the full eligible universe is screened against all eligibility criteria. Companies that no longer meet requirements are removed. New qualifying companies are evaluated for inclusion. The index targets a constituent count of 25 to 35 companies.

8.3 Corporate actions

The following corporate actions trigger immediate index review outside of the scheduled reconstitution cycle:

• Merger, acquisition, or takeover resulting in delisting of a constituent.
• Trading suspension exceeding ten consecutive trading days.
• Bankruptcy filing or equivalent insolvency event.
• Spin-off of a business that separately qualifies for index inclusion.
• Material change in business activity such that a constituent no longer meets the primary activity screen.

9. Anti-greenwashing and anti-speculation filter

Inclusion in the RareEarth Index requires demonstrated rare earth activity, not aspirational exposure. The index applies the following standards:

• No credit is given for companies that have announced REE exploration programs but hold no defined resource.
• No credit is given for companies that have rebranded toward critical minerals without a corresponding change in operational activity.
• No credit is given for companies with rare earth assets representing less than 50% of net asset value or projected revenue, unless the company has no other material assets.
• Junior explorers are eligible only where a JORC or NI 43-101 compliant resource estimate has been published and the REE project is the company’s primary corporate asset.

The principle is broader than rare earths. The Clay Indices family applies the same posture across all indices: a project’s name reflects what it actually measures or includes, not what would be marketable to include.

10. Classification disputes

Eligibility and sector classification require judgment in cases where company structure does not map cleanly onto the methodology. This section sets out how those calls are made and recorded.

10.1 Activity screen borderline cases

A company may have a meaningful rare earth business that nonetheless represents less than half of enterprise value. Common patterns include:

• Diversified miners with a growing but minority REE segment.
• Chemical companies with REE separation as one of several specialty divisions.
• Companies in transition: currently primary in another commodity, building primary REE capacity for a future date.

In these cases, the activity screen applies as written: the company is excluded until REE represents the majority of enterprise value. The methodology does not anticipate future activity. A company building a refinery that will be its primary business in two years is eligible at that future date, not today.

The boundary is part of the claim. A reader of the index should be able to verify that every constituent meets the screen as of the reconstitution date, without reference to projected outcomes.

10.2 Sector assignment disputes

Several constituents legitimately operate across multiple sectors. Lynas Rare Earths conducts both mining and separation. MP Materials is moving from mining toward integrated production. Solvay (where eligible) operates in both separation and recycling.

Sector assignment uses the largest-share principle: the sector representing the largest share of revenue, or for pre-revenue companies, the largest share of project capital expenditure. Where two sectors are within five percentage points of each other, the index administrator selects the sector that better reflects the company’s primary public-facing identity, and the reasoning is recorded in the constituent profile.

10.3 Threshold proximity

A company within 10% of the market cap floor or liquidity floor is eligible if it clears the floor and ineligible if it does not. The index does not round in either direction. Threshold-proximate constituents are flagged in internal records to monitor for the next rebalance.

10.4 Recording of disputes

Where a borderline case is adjudicated, the disposition is recorded in the constituent’s published profile. This protects the methodology against later challenges of the form ‘why is X in the index’ or ‘why is Y not in the index’ — the reasoning is documented at the time of decision, not reconstructed afterward.

11. Geographic scope

The RareEarth Index is global. Unlike the Climate50 Index, which is limited to US and Canadian listings, the RareEarth Index reflects the internationally distributed nature of rare earth production.

China is the dominant force in rare earth mining, separation, and magnet manufacturing globally. Chinese-listed companies are eligible for inclusion where they list on HKEX or another internationally accessible exchange meeting the liquidity criteria. Companies listed exclusively on Shanghai or Shenzhen exchanges are excluded due to accessibility constraints for international investors.

The index applies no geographic caps or regional quotas. Readers should expect concentrated exposure to Australian and North American listed companies in the early years, reflecting the current distribution of publicly accessible rare earth equity.

12. Transparency and publication

The full constituent list, sector classifications, and index weights are published on RareEarthIndex.com and updated following each quarterly rebalance and semiannual reconstitution. The following information is published for each constituent:

• Company name, primary ticker, and primary listing exchange.
• Country of domicile and primary operating jurisdiction.
• Sector classification and the reasoning for sector assignment.
• Primary rare earth element exposure.
• Index weight as of the most recent rebalance.
• Market capitalization in USD-equivalent terms.

Historical constituent lists and weights are archived and freely accessible. Methodology changes are announced with a minimum of thirty days notice before taking effect.

13. Limitations and risk disclosure

The RareEarth Index is an informational benchmark and does not constitute investment advice. The following limitations and risks should be understood by users of the index:

• The rare earth equity universe is small and may be illiquid. Index constituents may experience significant price volatility.
• A large proportion of global rare earth supply is controlled by Chinese state-linked enterprises that are not represented in this index. The index does not capture the full economic landscape of the rare earth industry.
• Rare earth prices are not traded on public exchanges. The index tracks equity performance, not underlying commodity prices, and the correlation between equity performance and physical REE prices may be imperfect.
• Geopolitical risk is material. Export restrictions, trade policy changes, and government intervention in producing countries can significantly affect constituent valuations.
• The index administrator makes reasonable efforts to ensure accuracy but does not guarantee the completeness or timeliness of data. Users should verify constituent information independently before making investment decisions.

14. About the Clay Indices family

The RareEarth Index is part of the Clay Indices family, which publishes methodologies, definitions, and equity indices. The family is administered by George Clay.

Clay Indices treats methodology as a product. Every index publishes a complete, versioned methodology document. Every methodology is rules-based, with no discretionary overrides. The boundary of what each index measures is part of the claim, not a footnote to it.

Other published members of the family include the Climate50 Index, the Total Market Index, the TrueCost Index, and the Greek Index Series (Lambda, Theta, Rho). The full family is at clayindices.com.

© 2026 RareEarthIndex.com · Methodology v2.0 · Subject to change with thirty days notice. This document is published for informational purposes only and does not constitute investment advice.