TORONTO (miningweekly.com) – Shares in rare-earth-elements (REEs) firm Molycorp jumped 15% on Monday, after Dahlman Rose & Co analysts raised their price target on the company to $85 a share, from $49.

Colorado-based Molycorp is the only rare-earth oxide producer in the US and currently produces around 3 000 t/y of commercial rare-earth materials from its Mountain Pass, California operations.

The company is targeting 20 000 t/y by the end of 2012, and plans to produce a range of rare-earth products, including high-purity oxides, metals, alloys, and permanent magnets.

China is the biggest producer of REEs, at more than 90% of global supply, but has been putting curbs on export volumes to feed domestic demand.

The government said last week it had cut its export quota on rare earths by 35% for the first half of 2011 from a year earlier, and shares in rare-earth producers, developers and explorers, including Molycorp, surged on the news.

“China has recently decreased rare-earth element export quotas, a development which we believe should be supportive of the price of these materials,” the analysts wrote in a note on Monday.

“Further, the company has entered into several partnerships, which we believe create long-term value for shareholders.”

Molycorp said on December 21 it had signed an agreement with Japan's Hitachi Metals, on joint ventures to produce rare-earth alloys and magnets in the US. Two weeks earlier, Sumitomo Corp announced it had signed a memorandum of understanding to buy $100-million of Molycorp shares and provide the firm with $30-million of low interest rate debt financing, in exchange for supplies of rare-earth metals.

Molycorp was trading at $57,50 a share by 16:06 in New York on Monday. The stock was priced at $14 in the company's July 2010 initial public offering.

Dahlman Rose also increased its price assumptions for rare-earth metals, based on the decreased export quotas out of China.

“China is attempting to balance the need to export these raw materials, which are critical in numerous technology applications, with a desire to maintain adequate supplies for future domestic consumption,” the analysts wrote.

“Further, we understand that China intends to reduce the amount of pollution generated by the REE industry, this should increase the cost structure of Chinese REE producers and further limit supply.”
 

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