Saturday, September 17, 2011

China Puts the Squeeze on Rare Earth Metals: Top Rare Earth Stocks

China, producer of 95 percent of the world's rare earth metals, is cutting way back on the production of these elements by nationalizing and shutting down the producers. China's excuse is reducing pollution, but the extended consequence is higher prices on fluorescent light bulbs. Rare earth metals, also known as rare earth minerals or rare earth elements, are used for such applications as superconductors, magnets, electronic polishers, car batteries, luminescent materials, lasers, optical-fiber communication systems, welding, night vision goggles, rangefinders, and radar.

The rare earth metals include:

Other metals and elements are often (incorrectly) referred to as rare earth metals such as lithium and manganese. However, many of the companies involved in the mining of the rare earth metals are also involved in mining some of the other scarce elements.

Rare Element Resources Ltd. (REE) is a Vancouver, Canada based company involved in the exploration and development of rare earth mineral and gold properties mostly in Canada and the United States. The company, which was founded in 1999, is debt-free with 1.68 in cash per share. However, it has recently generated negative earnings.

Another example is Molycorp, Inc. (MCP), another company involved in the rare earth industry, based in Greenwood Village, Colorado. The company has $200 million in debt, and over $680 million in cash, with $8.11 in cash per share. The stock trades at 13 times forward earnings.

Neo Material Technologies, Inc. (NEM.TO) (NEMFF.PK), is a processor of rare earth metals, and trades on both the Pink Sheets and the Toronto Stock Exchange. This Toronto, Ontario based company processes rare earths, magnetic powders, and other metals. The company distributes cerium, lanthanum, europium, neodymium, dysprosium, yttrium, and other materials. The stock has a price to earnings ratio of 9 with a forward PE of 6. It also has an extremely favorable price earnings growth ratio of 0.33. Earnings for the latest quarter were up an incredible 229% on a 172% revenue increase.

A more conservative and diversified approach to rare earth investing is through the Market Vectors Rare Earths/Strategic Metals Exchange Traded Fund (REMX).

To see a free list of over 25 rare earth metals stocks, which can be downloaded, sorted, and updated, go to This site also has a list of lithium stocks, which are not technically rare earth stocks, by are often included in the same investment arena.

Disclosure: Author did not own any of the above at the time the article was written.

No comments: