The run in rare earth mining stocks continues. As I mentioned in
How Beijing's Policies Could Mean no More
, I think that we'll be hearing a lot more about these companies
These stocks offer tremendous potential for investors. The risk
is pinpointing the legitimate contenders in the race to replace the
stockpiles that China has decided to hold back from rest of the
As I previously told you, rare earth elements really aren't all
that rare; finding substantial deposits that are economically
feasible to exploit is what takes time, effort - and capital. Here
are a couple of my favorite players.
Since I last covered
Rarest Resources Offer Biggest Gains
back in October, the stock has shot up 110 percent, and is up over
330 percent since its August IPO. As you can see from this chart,
this former small-cap is probably surprising even the most
speculative of investors.
The company, which is reopening a rare earths mine in the Mojave
Desert that's been closed since 2002, now has a market cap of $4.7
***In my previous article, I also covered
Avalon Rare Metals (
and a lot has been happening for this Canadian company. Avalon
moved off the often-overlooked over-the-counter market. Since
joining Amex on December 27
, Avalon's shares are up 21 percent, and double where they were
trading when I pointed them out in October.
Investors looking for broad exposure could be attracted to
Molycorp - and who knows, as Molycorp becomes more cash-rich and in
a position to make acquisitions, Avalon might show up on that
company's short list of targets.
Why buy both stocks? Because Molycorp's Mountain Pass,
California, mine is mainly a source of the light rare earth
elements, which have lower atomic numbers, and not the heavy ones
with atomic numbers of 62 and higher.
That's where Avalon comes in. The company owns the Nechalacho
Rare Earth Element Deposit located in Canada's Northwest
Territories. Avalon thinks this property is one of the
best-undeveloped deposits of heavy rare earth elements anywhere.
They're the ones that are going to be especially in demand in the
next four or five years -- just about when Avalon expects that site
to start producing. The biggest drawback that Avalon is facing is
that it will have to extract the minerals via underground mining,
rather than the cheaper open pit method.
In addition to now trading on the AMEX, Avalon also gained some
prestige by being added to the S&P-TSX Global Mining Index and
the S&P-TSX Base Metals Index.
***Right now I'm also looking at another Canadian exploration
Quest Rare Minerals (TSX-V: QRM; OTC.PK: QSURD),
which is a candidate to follow Avalon onto the AMEX and into more
mainstream U.S. trading beyond over-the-counter market and
Toronto's Venture Exchange.
Like Avalon, Quest Rare Minerals is hunting for rare earth
deposits, but is focusing its attention on the Strange Lake area of
north-eastern Québec, the Kenora area of north-western Ontario and
the Plaster Rock area of north-western New Brunswick. This former
gold miner was named the 2010 Prospector of the Year by the Quebec
Mineral Exploration Association for its Strange Lake discoveries.
And Strange Lake is expected to reach production stage in 2016, as
a lower-cost open-pit mine, which gives Quest a cost advantage over
In Canadian trading, Quest Rare Minerals was the best performer
on the Venture Exchange in 2009, climbing 5,530 percent in value.
For 2010, gains were a more muted 53 percent. If the company
decides to head over to the AMEX, its shares could see the same
kind of pop that Avalon's have.
If you haven't been paying much attention to the rare earths
brouhaha, now is the time to take a look. Many of the exploration
companies are still small, and their stocks have a lot of room to
run - especially if China continues to clamp down on its exports of
I've prepared a special report about investing in small-cap
stocks that offers every investor valuable insights into ferreting
out the best companies available.
You can find this report here
and you'll have the opportunity to sign up for a risk-free
Small Cap Investor PRO
. Right now, we have an average gain of 46 percent on open
positions, with gains on 89 percent of open positions.
Keep sending in your comments on rare earth investing to
. I'll be publishing comments and answering questions in tomorrow's