Scammers promising quick profits from investing in rare earth metals are conning investors out of thousands of pounds, according to financial watchdogs.
High pressure sales tactics by phone, email and the post are trying to lure investors to part with their cash , says the Financial Services Authority.
Although these metals are valuable and are key components of electronic equipment ranging from mobile phones to wind turbines, the name ‘rare earth’ refers to the difficulty in mining them not their scarcity.
Most of the metals are abundant in some countries, but the extraction process often means mining hundreds of tons of rock to unearth small amounts of ore.
Cold callers are contacting investors with a sales pitch claiming the reserves of rare earth metals are falling but that demand is increasing, with the message that prices are ‘set to soar’
Investment claims are a con
The FSA says the problem with this claim is that rare earth metals are mostly traded privately rather than on a public exchange, unlike metals like gold and silver, so finding and tracking prices is difficult.
A spokesman said: “Because of this it’s very difficult for an investor to work out whether they are paying the right price and may mean making a loss when selling their investment.
“The other issue is that rare earth metals are mined abroad which means that UK authorities cannot monitor the quality of what is being produced – or even if they exist.”
Another problem for investors is rare earth metals have varying purity that affects their cost – but investors have no idea whether they are buying and trading poor or high grade stock.
The FSA also warns rare earth trading is a bulk transaction, and small stock holders are often excluded from the market, making their holdings next to worthless.
FSA warning
The FSA added that this scam was the latest in a series of cons involving fraudsters purporting to sell high value investments at cheap prices, including carbon credits, fine wines, overseas property, crops and land without planning permission.
Thousands of investors have lost millions chasing these worthless investments.
The FSA advises that most firms selling and promoting rare earth metals as an investment are not authorised to do so. They urge investors only to deal with companies that are registered and authorised.
By doing so, investors have recourse to the Financial Ombudsman Service or the Financial Services Compensation Scheme should things go wrong with the investment.
