Denver mining company Molycorp (NYSE:MCP) is spending nearly $1 billion to re-enter the rare-earth-mineral industry, a business that is currently 97% dominated by China. Rare-earth-minerals are elements that are spread widely throughout the Earth’s crust in small pockets, which makes them difficult to mine in an economic sense. The elements are needed to make super-magnets, which are used in everything from missile-guidance systems to compact fluorescent light bulbs.
At one time the United States’ Mountain Pass mine was the world’s largest producer of these rare elements, but in last two decades China has ramped up production which led to price drops that forced Mountain Pass to close in 2002. Last year China decreased its rare-mineral export quotas, leading to a 1,500% price increase from 2009 to 2010.
Molycorp (NYSE:MCP) is now making a significant investment to try and revive the dead industry. The company began selling the rare minerals at its mine in October and saw a third quarter net income of $43.7 million versus the previous year’s third quarter loss of $10.1 million. Unfortunately, Molycorp (NYSE:MCP) wasn’t the only one with the idea of entering the rare-mineral market. Miners from Australia, Kazakstan, Mongolia, and Afghanistan are coming to market, which has caused Molycorp’s stock to plummet. Industries dependent on these minerals that were weary of leaving their fate to China have also begun looking for alternatives. Though it seems like the future of Molycorp (NYSE:MCP) is uncertain, CEO Mark Smith maintains that the company is in a good position. CNNMoney quoted Smith who said, “Look, we just do not see any way that the market for rare earths is going to reach equilibrium between now and 2015.”
Competitors to Watch: Avalon Rare Metals Inc (AMEX:AVL), Thompson Creek Metals Co., Inc. (NYSE:TC), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), 3M Company (NYSE:MMM), PolyMet Mining Corp. (AMEX:PLM), General Moly, Inc. (AMEX:GMO), Karat Platinum Inc. (KRAT), TapSlide, Inc. (TSLI), Denia Enterprises Inc (DNIA), and Thompson Creek Metals Co., Inc. (NYSE:TCM).
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