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TheStreet Open House

Sector Snap: Rare Earth Metal Miners Rise

Stocks in this article: AVLMCPREE

NEW YORK (AP) â¿¿ Shares of rare earth mining companies jumped Wednesday as Wall Street saw good news in the Chinese government's announcements about the state of its rare earth metal reserves.

The Chinese government issued a report defending its restrictions on exports of the metals, saying its reserves have declined because of excessive and sometimes illegal mining. It also cited serious environmental damage from the mining operations. China has about a third of the world's rare-earth deposits but accounts for over 90 percent of their production. Beijing alarmed global manufacturers by imposing export quotas in 2009.

Rare earths are 17 minerals used to make goods including hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapor lights and camera lenses.

Gabelli & Co. analyst Brian Chin said that in addition to defending the quotas, the Chinese government is announcing that it will impose stricter environmental standards on mining companies and continue to crack down on illegal mining in addition to consolidating the industry and making it more efficient. He said China has been following those policies for the last few years, but this is the first formal announcement of its plans.

He said the regulations will have the effect of limiting production and raising costs for Chinese producers, benefiting international companies that have long faced stiffer regulation and struggled to compete against Chinese exports.

Shares of Vancouver, British Columbia-based Rare Element Resources Ltd. advanced 58 cents, or 12.7 percent, to closed at $5.15 on Wednesday while shares of Greenwood Village, Colo.-based Molycorp Inc. climbed $1.77, or 8.6 percent, to $22.43. Toronto-based Avalon Rare Metals Inc. stock rose 8 cents, or 5.2 percent, to $1.63.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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