One of the world's last processors of rare earth metals outside China is buying mining rights in Greenland to reduce dependence on Russian Ore and Stabilize Prices.

Electric car motors, offshore wind turbine and smart bombs are some of the modern products that use rare earth metals. The demand for electric vehicles has gone up.

Dozens of small companies mine and process rare earths around the world. Only two commercial-scale factories outside of China are able to separate semi-processed Ore into usable Material for Magnets.

Toronto-based Neo Performance Materials buys semi-processed Ore from Russia, the United States, and Australia, as well as the chemical processes at factories in China. The chemical processes are done in Malaysia by another company.

Hudson Resources is a small mining company based in British Columbia. Neo's Magnequench division is the corporate descendant of a former GM subsidiary that pioneered magnetic applications of rare earth metals in the 1980s.

G.M. decided to dispose of the operation in 1996.

Constantine Karayannopoulos, the chief executive of Neo, said his company would begin mining and processing in Greenland in two to three years. The semi-processed material will be sent to the chemical separation factory in the former Soviet republic of Estonia.

Neo wants to free itself of the need to buy resources. When tensions are high, these prices surge up to 10-fold before crashing once tensions ease.

Mr. Karayannopoulos wants the flexibility to feed 100 percent of his own production or 50 percent of his own. It will be possible to sell rare earths at fixed prices on long-term contracts with automakers if there is an in-house source of raw material.

This winter, Neo will begin construction on a factory in Estonia that will turn rare earths into magnets. The European Union is offering financial assistance for the creation of a mines-to-magnets supply chain in Europe.

Although it is a part of North America, it is also a part of the EU.

Russia and Utah are the main suppliers of rare earths to the factory inEstonia. The west has imposed sanctions on Russia but not on rare earth metals.

In the past, companies have tried to mine rare earths in the area. A group of people, including a Chinese state-owned enterprise, tried to open a rare earths mine at the southern tip of the island. Local opponents and regulators were concerned about the risk of radioactiveContamination of the Environment.

The deposit in Sarfartoq being acquired by Neo had 97 percent less radioactive material per ton than the deposit at the southern tip of Greenland, according to a Canadian geologist.

He said that the radiation levels at Sarfartoq are not as high as in Maine.

The deposit on the western coast of the island is smaller than the one in the south. Mr. Karayannopoulos said the deposit still had enough rare earths to meet Neo's needs for at least 30 years and possibly for a century.

The ocean currents along the west coast of the island keep it free of ice during the winter.

Rare earths, a group of 17 elements near the bottom of the periodic table, are not radioactive. Over the past 40 years, rare earth separation factories in Japan, Australia, France and the United States have been closed due to disagreements over how to dispose of the contaminants.

China is the main producer and separator of rare earths. Russia is the fourth largest rare earths miner.

The United States and Australia are close to each other. Most of the American material is mined in California and then sent to China for processing. The restarting of chemical separation in California will be subsidized by the president and governor.

China halted rare earth metal exports to Japan in late 2010 due to a territorial dispute.

The value of the industry is small since rare earths are used in trace amounts. The value of rare earth material sales is estimated to be $2 billion, and the value of magnetic powders and other rare earth materials is estimated to be $8 billion.

The initial payment of $250,000 will be made by Neo to Hudson, followed by $3.25 million once the deal is approved by the government. Mr. Karayannopoulos was optimistic that the plan would not be blocked like the Chinese-backed project was.

Hudson has the right to 5 percent of the proceeds from a sale or initial public offering of the subsidiary within five years.

Carmakers in the US are starting to demand the same rare earths supply as their European counterparts. G.M. plans to build a factory in Texas that will use rare earths from California to make magnets.

Mr. Karayannopoulos predicted that the American auto market would follow Europe's lead.

He wants to do the same thing in North America.