Thursday, April 7, 2011

Molycorp (MCP) (REE) (AVL) Soar on Rare Earths Bill

Shares of Molycorp (NYSE:MCP), Rare Element Resources Ltd. (AMEX:REE) and Avalon Rare Metals Inc. (AMEX:AVL) are skyrocketing today after a new bill was introduced by Colorado Congressman Mike Coffman which "seeks to curtail dangerous reliance on China for critical materials."

Coffman said, "Currently, the world is nearly 100 percent reliant on Chinese exports for these critical materials and China’s trade policies of restricting rare earth exports pose a serious threat to both the economic and national security of the United States."

The bill, H.R. 1388, the Rare Earths Supply-Chain Technology and Resources Transformation Act of 2011 (RESTART Act), would allegedly establish a domestic rare earth industry in the United States.

This is about as stupid as a bill as you could get, and irresponsible at best, as the last thing we need to create another government agency and increase the crony capitalism that has already poisoned the country.

It's not China that is dangerous, simply because they've developed their industry while the United States has caved to radical environmental groups, making it extremely difficult to do any type of mining in a profitable manner.

The market is already working these things out, and the creating of another government agency and expanding the government in the United States, which is already bankrupt, is a disastrous idea. That's what's dangerous here.

Major provisions of the bill include:

Directing appropriate federal agencies to expedite the permitting process in order to increase the exploration and development of domestic rare earth elements, without waiving environmental laws, and establishing a multi-agency Task Force to carry out this process;

Setting up a Defense Logistics Agency (DLA) rare earth inventory - where DLA enters into long-term supply contracts and then makes the supplies available for purchase to federal government contractors - to generate a domestic market and facilitate the domestic sourcing of rare earth alloys and magnets;

Making loans, backed by the federal government, available to start production should lending from the capital markets not be available;

Requiring the various cabinet Secretaries to appoint Executive Agents for rare earths;

Establishing a rare earth program at the U.S. Geological Survey.

This thing needs to immediately be killed. Companies are already expanding operations and making moves to expand operations in response to demand. We don't need a bigger government to interfere with the market. Period.

Molycorp was trading at $65.89, gaining $3.83, or 6.17 percent, as of 11:21 AM EDT. Rare Element was trading at $14.57, rising $1.43, or 10.88 percent. Avalon Rare Metals was trading at $9.12, up $0.43, or 4.95 percent.

2 comments:

Anonymous said...

Molycorp has stated that the reason they left the rare earth market was because Chinese sources were selling massive amounts of the materials at very low prices. They could not compete and closed down their mine. Why do you blame environmentalists for problems caused by Chinese "begger-thy-neighbor" export policy market effects?

kumanari said...

We don't need more gubment but we DO need the RE's. I fear anything gubment touches, bound to go backwards.We do need to establish strategic reserve, if you don't understand this you will be riding a bike and chopping wood.