Molycorp, Rare Element: Rare-Earth Winners, Losers


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NEW YORK ( TheStreet) -- Shares of rare-earth, strategic stocks were trading in mixed territory as the broader indices strengthened amid a good start to the earnings season led by better-than-expected fourth-quarter report from Alcoa. ( AA)

Rare Element Resources ( REE) is rising 2% Tuesday to $15.75. On Monday the company reported what it said it believed to be promising data derived from a drilling program at its Bear Lodge property northeastern Wyoming. "The assay results continue to demonstrate the continuity of the mineralized bodies at the Bull Hill SW resource area," the company's vice president of exploration Jim Clark said in a prepared statement. "Results from the 2010 drill program should allow us to expand the limits of the deposit and upgrade the resource category in our next .... compliant resource estimate." Clark expects that the next estimate will be completed early in the second quarter of 2011.

Molycorp ( MCP) was falling 1.1% to $54.01. Forbes reports that private equity firm Resource Capital has not made any returns yet from its $110 million investment in Molycorp., though the investment continues to look compelling given that the it's now worth about $1.5 billion based on the Molycorp's recent stock price.

Molycorp recently announced that it has secured the last of several environmental permits necessary to begin construction of a new rare-earth manufacturing facility at Mountain Pass, Calif. The company said it was a major milestone for Molycorp's $531 million project to construct a complete rare-earth mine-to-magnets manufacturing supply chain in the U.S.

General Moly ( GMO) is jumping 7.6% to $6.40. The stock has climbed by more than 9% since late December, when it was announced that China would be increasing caps on exports of rare-earth metals.

Lynas ( LYSCF.PK) is falling 5.2% to $2.01. In its most recent update on the project, Lynas said that its Concentration Plant at Mount Weld, Western Australia is due to begin operating in February, 2011, despite some pre-launch delays that the company had been addressing, and that its Lynas Advanced Materials Plant (LAMP) in Malaysia remains on schedule for its first production of rare-earth materials in the third quarter of 2011.

Avalon Rare Metals ( AVL) was higher by 0.6% to $6.756 in Tuesday trading. Last week the stock took a dip after it was lowered to hold from buy by Laurentian Bank.

Although many of these companies have yet to begin producing rare-earth elements, the belief that investors have in the potential of these companies to eventually cash in on the value of these materials when applied to technologies used in oil refining, batteries, TVs and military applications, magnets and more is palpable.

Rare-earth stocks outside China have been heating up with particular force since China's announcement in late December that it would cap rare-earth exports by 35% in the first half of 2011 versus the same time last year. More than 95% of the world's rare-earth minerals supply comes from China.

According to the Wall Street Journal, the surging costs of rare-earth materials from China's export restrictions is putting pressure on U.S. oil refiners; certain rare-earth materials such as lanthanum and cerium are used in the refining process.

Lynas said prices for these two materials have more than tripled between the second and third quarters of 2010, according the WSJ, which also reports that the price increase comes as refiners such as Valero Energy ( VLO) and Sunoco ( SUN) finally see operating improvement and begin to realize the benefits of selling off their weaker assets.
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-- Written by Andrea Tse in New York.

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