China's monopoly on the materials would be broken.
Unfortunately, the discovery may not have the impact many had hoped, which means prices for rare earth metals will continue to soar. That's bad news for countries like the United States and Japan, which count on the scarce materials for high-tech industries.
Developed countries require rare earths to manufacture a wide range of high-tech products, including flat-panel displays, computers, hybrid car batteries, cell phones, solar panels and some advanced weapons systems.
For instance, there are more than 50 pounds of rare earth metals under the hood of a Toyota Motor Corp. (NYSE ADR: TM) Prius. Terbium can cut the electricity demand of lights by up to 80% and fractions of dysprosium can significantly reduce the weight of magnets in electric motors.
But China, which produces 97% of the world's rare earth metals, has drastically reduced its exports over the past several years, driving prices skyward.
Citing "environmental protection," China cut its rare earth exports to just 30,259 metric tons in 2010 from 67,521 metric tons in 2005.
That has caused runaway price increases for many of the 17 metals.
Over the past year dysprosium, used in specialized magnets, shot up from $300 per kilogram to $1,900 per kilogram and even higher. Neodymium has spiked to $450 per kilogram from $45 per kilogram late last year.
The Market Vectors Rare Earth Metals ETF (NYSE: REMX) is up 7.25% year-to-date and 32% over the past 12 months, as a result.