Rare Earth Stocks Rise on Chinese Purchase Plans

china flagWord from China that the country is likely to purchase up to 10,000 tonnes of rare earths sent the prices of companies that explore for the minerals on a tear last week. 

China Daily reported last Tuesday that six of China’s rare earth producers — Baotou Steel Rare Earth Hi-Tech Co, China Minmetal Rare Earth Co Ltd; China Nonferrous Metal Industry’s Foreign Engineering and Construction Co Ltd; Chinalco Rare Earth Jiangsu Co Ltd; Rising Nonferrous Metals Co Ltd and Ganzhou Rare Earth Mineral Industry Co Ltd. — are on the list of vendors. The material will be put towards feeding China’s strategic minerals stockpile, which began last year. Most of the REEs will be higher-value medium and light rare earths, as opposed to the cheaper light rare earths, said China Daily.

The news sent the prices of several REE companies that trade on the TSX into double-digit territory, with Avalon Rare Metals (TSX:AVL) leading the charge. The company with its flagship Nechalacho Deposit at Thor Lake, Northwest Territories, gained 11 percent, adding to an 80 percent spike over the last three months, noted MINING.com. Other gainers included Tasman Metals (TSXV:TSM), Texas Rare Earths Resources (OTCMKTS:TRER), Rare Element Resources (TSX:RES), and ASX-listed Peak Resources (ASX:PEK), which is exploring the Ngualla rare earth project in Tanzania.

Mining Weekly noticed that Molycorp (NYSE:MCP) also saw a share price increase that coincided with the Chinese purchase news. The Colorado-based firm was up 58 cents last Tuesday to $7.77, adding to further gains of 40 cents a share a week earlier, the publication said.

REE stocks have been rising in recent months, in line with increases in the prices of rare earth oxides, particularly higher-value heavy rare earths such as terbium and dysprosium. The price gains can largely be attributed to a policy by the Chinese government to crack down on illegal rare earth mines, thus stemming the supply flow of REEs into the market. In 2012 the crackdown stopped production of roughly 30,000 tonnes of rare earths.

But while the Chinese purchase signal was clearly seen as a catalyst, by rare earth companies, for rising prices, that in fact may not happen. China Daily reported market analyst Du Shuabing, as saying that despite a brief uptick in August, prices will remain depressed in the fourth quarter.

Company news

Mark Smith, the former CEO of Molycorp, has been tapped to be the CEO and a director of NioCorp Developments Ltd. (TSXV:NB). Niocorp, formerly Quantum Rare Earth Developments Ltd., is focused on its niobium project in Elk Creek, Nebraska. There is a connection between Niocorp and Molycorp, in that Molycorp drilled 110 holes at Elk Creek in the 1970s and 80s.

Manila Standard Today reported that the Philippines government is exploring an old iron mine for deposits of rare earth elements. The Mines and Geosciences Bureau is currently surveying the now-defunct mine for deposits of scandium and yttrium. The Philippines are trying to develop their rare earths deposits and has asked the Chinese Geological Survey to help them identify exploration sites, said Manila Standard Today.

Rare Earth Minerals PLC (LSE:REM) was not among REE juniors that saw gains last Tuesday. The London-listed firm fell over 7 percent, despite narrowing pre-tax losses outlined in its half-year results. Rare Earth Minerals said that it reduced its losses to £323,000 from £356,000 in the six months to June 30.

Matamec Explorations (TSXV:MAT) gave an update on its Kipawa project, a joint venture with Toyotsu, a subsidiary of Toyota (NYSE:TM), for developing the heavy rare earth elements deposit. Matamec said the JV partners agreed to start the second pilot plant for beneficiation, with the expectations of achieving higher rare earths recovery rates — a first step toward improving the economics of the project. A feasibility study was completed on Kipawa on September 4, 2013.

 

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article. 

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