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Molycorp Shares Popped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of rare-earth miner Molycorp (NYSE: MCP  ) gained as much as 16% today on heavy volume.

So what: Today's news was a joint venture agreement with Japan's Hitachi Metals that will put Molycorp closer to its goal of doing more than just mining rare earths. The JV would produce rare-earth magnets that could be sold to a variety of industries including technology, health care, and alternative energy. For Molycorp, the move fits with a strategy that it calls "mine-to-magnets."

Now what: It's all very exciting with Molycorp -- the upcoming reopening of its Mountain Pass mine, the lingering questions about the supply of rare earths coming from China, and, of course, the soaring share prices of Molycorp and rare-earth-related investments like Rare Element Resources (AMEX: REE  ) and Market Vectors Rare Earth/Strategic Metals (NYSE: REMX  ) . Of course, it's also all very speculative as investors bet on unpredictable policies from the Chinese government and a company (Molycorp, that is) that has managed a cumulative $84 million loss on $22 million in revenue since 2008. Could this work out for investors? Sure, just as any gamble has a chance of paying off. For those looking to invest though, Molycorp is a solid pass.

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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his Motley Fool CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookiees were harmed in the making of this article.

Read/Post Comments (3) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 22, 2010, at 12:44 AM, spikerdog wrote:

    It would seem Matt needs to do a little more homework on the rare earths market. Depending on your source for facts, China controls up to 98% of the rare earth market. They are used in everything our modern world requires to operate (as we know it). True, there are many hyped companies not worthy of your investment dollars, e.g. Hudson Resources, and MCP may not fit all your defined parameters as investment-grade, but what alternatives in this sector would you offer? I suppose you trust the Chinese (just ask Japan). I'm glad my cost basis is $28 and I keep raising my stop-loss. Just because it's a big mover in a short period of time does not mean "stay out", but you should watch it closer than your GE holdings :>)

  • Report this Comment On December 22, 2010, at 2:08 PM, rodgerreno wrote:

    spikerdog ---look in the mirror--rare earth is not that important--i think that you are giving 15 elements in 1 ore a little more bang than they have achieved so far--magnets,lasers and lenzes are not everything.

  • Report this Comment On December 23, 2010, at 12:23 PM, Maksani wrote:

    Every trader has their own valuation minutia. I own MCP because they just made a 100 million dollar deal with Hitachi to build a factory right here in the US. My investment is in manufacturing as well as mining. Some may think it is based on speculation but I would seriously doubt a company like HIT which is already undervalued would risk that much without having looked at the raw material supply first. The deal on the morning of 12/21 was done in a matter of minutes so that says they did not need to negotiate....just shake hands.

    This company's value has nowhere to go but up with such a tight supply of rare earth elements for electronics manufacturing.

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