A report that the Chinese government is about to reduce the number of licensed rare earth miners in the country by 40% has given North American-based miners a nice boost today. The report is cited at streetinsider.com.
China currently has 113 licensed rare earth miners and late last month raised its export quota from about 30,000 tons of rare earth oxides to just less than 31,000 tons. The government has been trying to shut down small mining operations that it says are damaging to the environment.
U.S. producers Molycorp Inc. (NYSE: MCP), Avalon Rare Metals Inc. (NYSEMKT: AVL), and Rare Element Resources Ltd. (NYSEMKT: REE) are all up more than 5% and the Market Vectors Rare Earth/Strategic Metals ETF (NYSEMKT: REMX) is up nearly 3% on the report.
In the real world, nothing much has changed. China did not meet its export quota last year, and probably won't again this year. This is due not to increased competition, but to lack of demand which has also driven down rare earths prices. Another problem for rare earths miners is that more and more substitutes are being discovered for the expensive rare earths.
And recall only Molycorp has a plan to begin production before 2015. The company is on target both regarding timing and budget, but if the market for the minerals stinks Molycorp could be too late anyway.
Still, the real world often doesn't intrude on the world of exuberant equities traders and this is definitely one of those times.
Shares of Molycorp are up 5.6% at $12.76 in a 52-week range of $9.40 to $54.35. Volume is about double the daily average of 6 million shares traded.
Shares of Avalon are up 5.8% at $2.00 in a 52-week range of $1.36 to $4.22.
Rare Element's shares are up 5.6% at $4.68 in a 52-week range of $3.05 to $8.35.
Shares in the REMX ETF are up 2.9% at $13.73 in a 52-week range of $12.11 to $20.43.
Filed under: 24/7 Wall St. Wire, China, Commodities & Metals