Molycorp Shares Plunged: What You Need to Know

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 mineral miner Molycorp (NYSE: MCP  ) fell 14% today after China increased its export quota for the minerals.

So what: China upped its quota by 3% to 31,130 metric tons for 2012, reversing a recent trend of drastic cuts. Molycorp's stock has been held up since its IPO because of rare earth quota cuts in China and a resulting rise in prices of the minerals. That advantage seems to be falling apart, and when the company's mine does come online the price for its rare earth minerals will likely plunge further.

Now what: If investors were looking for China to keep cutting its quota this move is a shocker, but I don't think it's all that surprising. Molycorp, Lynas, and many others have mines scheduled to come online in the next few years and there's no great reason for China to hoard material if the world market is opening up.

It's risks like this that put Molycorp on my short list, and risks like this that will keep it there in 2012.

Interested in more info on Molycorp? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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