Until recently, rare earth metals were off the radar. But as green technologies like wind turbines and hybrid cars gain traction, these metals are gaining luster, since they’re essential ingredients. An added kicker: China controls over 95 percent of the market and is tightening exports.
Enter Molycorp (MCP)
, the only U.S. producer of rare earth metals. The Colorado-based company restarted its production this year in California, after a 10-year hiatus. And Molycorp plans to double its production by 2013, eventually producing one-quarter of the world’s supply.
Surging rare earth metal prices are Molycorp’s ace in the hole. Lanthanum, a metal used in electric car batteries, saw price hikes of 87 percent in the first quarter alone.
The downside is that Molycorp isn’t profitable, as start-up costs linger. In the first quarter, the company posted a loss of 3 cents a share versus a 16-cent loss a year earlier, disappointing analysts. But revenues climbed 770 percent to $26.3 million, versus $3 million last year, partly fueled by higher rare earth prices.
The company has ambitious goals though. It recently bought a controlling interest in Estonia-based AS Silmet, a rare earth metal processor in Europe. Another purchase, Arizona-based Santoku America, gives Molycorp a foothold in producing neodymium, used in wind turbines. The end game, according to the company, is offering integrated services from mining to processing.
More price hikes coming
Given high demand and tight supply, Molycorp’s future looks bright. Of seven analysts listed on Yahoo Finance, five have buy recommendations, with two holds.
JP Morgan analyst Michael Gambardella even lifted his price target on Molycorp from $66 to $74. His reason: rare earth metal prices show no signs of slowing down.
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