Rare Earth Mining Companies Set To Explode And Here’s Why
June 12 | Posted by Kevin Monaghan | Top Story
Rare Earth mining companies made global headlines last year when China announced it would limit exports. That was a wakeup call to the rest of the world, who depended on China as they produced about 90% of the world’s rare earths. It sent mining companies scrambling to fill a global need to diversify rare earth production from China. Most companies were years from production at sites, but interest in their stock has sent market caps in these mining companies sky high and racing for production.
Molycorp (MCP). This company immediately jumped on every trader’s radar after China first announced it was cutting exports of rare earths. It was pretty much the only active rare earths mining company in the Western Hemisphere. Investors scooped up shares of Molycorp as everyone was scrambling to pick up mining companies outside of China. The company has pulled back from its high of $79.16 and currently trades around $50. Analysts, such as Morgan Stanley, have high expectations for this company as they have a $90 price target on this stock. What’s the downside? The company has recently announced it would issue 10,000,000 new shares at the current price which we see as a negative for stockholders in the short term, but is a cheap way to raise money to grow future revenues. Also, insiders at Molycorp have recently sold shares in the company as well.
Rare Earth Elements (REE). This company operates in the red on future hopes of rare earth production earnings, but with rare earths becoming increasingly scarce, investors are still betting on Rare Earth Elements future earnings prospects. The company was able to ride the rare earth wave, but the excitement has come out of this stock as of late. We’ve got no vested interest in the stock, but we keep an eye on it as a potential name to invest in, in this sector.
United States Antimony Corporation (UAMY.OB). Yes, a penny stock. Not stocks we normally pay attention too, but this stock has soared about 400% recently and has actually some well named money managers interested in the stock. Normally penny stocks are “pump and dump” type stocks, so we’re only bringing it to your attention. Antimony itself is the metal of interest from this company, in that the antimony oxide that is produced is primarily used in conjunction with a halogen to form a synergistic flame retardant for coatings, plastics, rubber, fiberglass, textile goods, paints, and paper. Two assumptions have been propelling this stock higher. First, the threat of Chinese export cuts could lead users of antimony a more reliable distribution source, in which they would be willing to pay a premium for. Secondly, the company may have the capacity to ramp up production by 2013 with revenues going from $9,000,000 this year to $100,000,000. In addition, Antimony is usually found alongside deposits of Silver. At this point these assumptions are very speculative, but the recent price action has caught our attention.
Penny stocks are usually a place for dreamers and scam artists alike so please be aware of that when you’re doing your own research into this company. In addition, speculation is very high with all three stocks mentioned, please keep that in mind when conducting you’re own analysis.
Disclosure: Author, Kevin D. Monaghan, Senior Partner at Elite Investment Group, has no position in the above mentioned companies.
Tags: Antimony, China, MCP, Metals, Mining, Molycorp, Oxide, penny stocks, Rare Earth, Rare Earth Elements, REE, UAMY.OB, United States Antimony, US Antimony
