All investors really need to know about Molycorp's (NYSE: MCP) earnings report yesterday is that Project Phoenix is on schedule and on budget and that rare earth mineral prices are still rising. The fact that Molycorp missed analysts' estimates of $0.10 in earnings per share is a footnote in the bigger story.

Revenue increased 21% sequentially to $26.3 million on the back of increased prices. Average sales price in the quarter was $37.73 per kilogram, hurt by a price-capped contract with a customer. Without that contract, which ends before the Mountain Pass mine goes into full production, average sales price would have been $65.95 per kilogram.

The other good news is that prices within China appear to be rising as there's been a crackdown on illegal mining. As Lynas' mine comes online later this year and Molycorp begins full production in 2012, supply will start catching up with demand and could put pressure on rising prices. Continuing restrictions of exports and the crackdown of illegal mining in China are key to make sure that doesn't happen.

The trajectory of rare earth mineral prices over the next two years is also key to smaller miners like Rare Element Resources (AMEX: REE) and Avalon Rare Metals (AMEX: AVL) who are years from production.

Foolish bottom line
I've had my doubts that rare earth mineral prices would remain high once more product starts hitting the market. So far, prices have gone nowhere but up, and the word out of Molycorp was encouraging today. Shares are down because the company missed estimates, but the much more important thing is that Project Phoenix is on schedule. Molycorp needs to get up and running ASAP so it can take advantage of high prices before someone else does.

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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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