Shares of Molycorp (NYSE: MCP) cruised higher yesterday after two important news items hit the market.

First off, the company said a recent analysis showed that there are 36% more proven and probable reserves than previously anticipated at Mountain Pass. The study showed that there are 18.4 million short tons of rare-earth ore at an ore grade of 7.98%. That should give the company plenty of ore to mine for the foreseeable future.

Second, China says it is attempting to reform its rare-earth trade association to improve management and environmental efforts in the country. The association will bring a wide range of members together, including Aluminum Corporation of China (NYSE: ACH) and China Minmetals, to help promote sustainable development in the sector.

The group will also work on a new price mechanism and attempt to ease international trade disputes. It's these disputes that have put a target on China's rare-earth industry, but it's doubtful this will lead to free trade, as the association doesn't appear to be backing off protectionism.

The report out of China could have a positive impact on Molycorp, although speculating on what China will do is tough. There are WTO complaints brought against the country regarding rare-earth minerals, and the future of the export quota is unknown.

Rare Element Resources (AMEX: REE) and Avalon Rare Metals' (AMEX: AVL) stocks didn't respond as strongly to the report, despite the fact that significant Chinese environmental regulations may lead to a supply shortage long-lasting enough for them to go further in their development. Molycorp and Lynas will take most of the early gains for rare-earth minerals' short supply, but mines further down the pipeline may be able to reach production if China cuts exports.

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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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