Molycorp Inc (NYSE:MCP)

The Chinese illegal Rare Earth Crackdowns should continue to play an important roll in strengthening prices as we move forward. The fact that the Baotou REE Products Exchange is to launch a new Spot Trading Platform next month, and they've spent millions setting this up only strengthens the Chinese commitment. In concert the Chinese government has eliminated hundreds of rouge miners and has consolidated the legitimate miners into just a few companies and revoked many mining licenses. You now have to be able to handle the waste and protect the surrounding communities. This means only a few companies have the resources to meet their new criteria.

As I look at how this thing is evolving in China I see a Rare Earth's syndicate forming, where price fixing is certainly a possible outcome. Of course this is speculation at this early stage but the Chinese government has stated in so many words that their Rare Earths are a limited national resource they don't want squandered and so much land has been poisoned that they had to take action. Its apparent they want to collect export taxes for the raw materials illegaly being trucked out of their southern boarders and provide incentives for companies to locate their businesses inside China to produce finished Rare Earth products at reduced rates. The Baotou REE Products Exchange is being formed to support this initiative. I see it as only a matter of time before it becomes mandatory that you'll have to buy your Rare Earths through them if you want to do business in China or export the raw oxides.

This isn't rocket science, we're coming off a historically low price bottom. The economy and manufacturing are rebounding. Once Molycorp (MCP) gets their Chloralkali Facility up and running Molycorp (MCP) is targeting cash costs of $6/kg–$7/kg for their rare earth oxides at Mountain Pass. Everyone else will still be in the mid-teens. Last quarter Molycorp (MCP) received $44.71 per kilogram and we'll likely see higher prices in the quarters to follow... and if the Chinese continue to look after their self interests I can only see a positive outcome for Molycorp (MCP).

If you've read my posts since April you know the writings on the wall and you can now see the Tsunami coming. Add in a huge short interest, rising prices and bullish technicals and "any" positive catalyst will move this stock forward.

You can't look at any company in the Rare Earth mining sector today without considering the elephant in the room.