Molycorp Gains As China Caps Unlicensed Rare Earth Mining

Molycorp Gains As China Caps Unlicensed Rare Earth Mining

Molycorp Inc (NYSE:MCP) stock surged higher on Wednesday along with other rare earth companies. Avalon Rare Metals Inc (TSE:AVL) (NYSEMKT:AVL) also shot up and CEO of the company Donald Bubar in an email statement to Bloomberg told that there is no material change in the business of the company, and increase in price of the stocks was due to “renewed interest”.

Analyst Luisa Moreno of Euro Pacific said that the stocks gained due to steps taken by China. Stocks are advancing because China has launched a campaign to shutter down the unlicensed mines in China’s Ganzau. Moreno holds the view that the funds are buying various related companies.

China monitoring rare earth mines

Earlier this month, the Government of China stated that it is deeply monitoring the export quota for rare earth minerals in the second half of the year. For the full year, the exports totaled to 31,001 tonnes.

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Molycorp Gains As China Caps Unlicensed Rare Earth Mining

China – Dominant Producer Of Rare Earth

China is one of the most dominant rare earth producing countries and produces 95 percent of the rare earth elements. The country produces 17 elements, which are widely used in manufacturing the goods as diverse as from iPads to low emission cars.

In China, the ministry of commerce stated that the country will allow the exports of 15,500 tonnes of rare earths for six months up to December, as per the statement. The quota limit for the initial half was 15,501 tonnes.

China had disappointed the trading partners when it fixed production caps along with export quotas on rare earth elements. China defended its decision of setting the limit with the argument that it seeks to safeguard the resources and the environment in order to encourage sustainable development. However, the export quotas is usually not used.

As per data from customs, total export in the fiscal 2012 from China totaled 16,265 tonnes, which was slightly more than half of the actual quota set at 30,966 tonnes.

Baotou Halts production

Last week, Baotou Steel Rare-Earth, China’s largest rare earth producer stated that it is likely to put a halt over its production for the coming six months at an ore processing plant because the government has set caps on production.

According to Global Times, Baotou is stopping the production in order to bring balance in the market says a filing made by the company with the Shanghai Stock Exchange.

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