A year ago, Molycorp (MCP) was a company with IPO plans that interested few. Now it's on its way to becoming a conglomerate in rare earth materials.
The insane increase in the value of Molycorp derives from a worldwide panic over the price and availability of rare earth minerals. Worldwide demand for rare earth minerals comes to around 50,000 to 55,000 tons a year, according to Mark Smith, Molycorp CEO, and China produces close to 97% of the total. In 2009, China's export quotas sat at approximately 50,000 tons. In 2010, China dropped it to 30,000 tons and will cut it this year to 24,000 tons. As a result, the price for some rare earth oxides such as neodymium oxide have risen from $20,000 a ton in 2009 to $165,000 a ton, according to our own spot checks.
There’s a lot of noise on your TV with the latest crisis/threat/disaster du jour, so it’s not surprising that REEs have been lost in the shuffle. Rare earth elements are disappearing faster than you can say “gadolinium.”
The share price is not the cheapest, but it’s far from overvalued. I think the potential alone of the water filtration technology they have, makes the shares worth a long look.
