GMO, REE, MDW: Energy Department Latest to Forecast Short Supply of Rare Earth Metals

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In not so recent past, rare earth stocks were subject to wild speculation followed by a long drawn correction phase. Now after a month long consolidation, rare earth stocks such as General Moly Inc (NYSE: GMO), Rare Element Resources Ltd (NYSE: REE), and Midway Gold Corp (NYSE: MDW) are back in action. The ?news? fuelling the renewed interest in these stocks is the United States Department of Energy forecasting a supply shortage of rare earth metals in the short to medium term.

The Energy Department is the latest to blow the short supply issue and expects at least five rare earth metals?dysprosium, terbium, europium, neodymium and yttrium to remain supply-challenged till 2015. While the department, in its assessment, said the supply constraints are expected to decrease in the medium to long term, the news of a potential short supply situation from a credible source such as the DoE is enough for smart money to pump up these stocks. This potential shortage is sure to drive up the costs of rare earth metals as markets have already seen in the case of MolyCorp. Rare earth metal supply has been constrained due to lack of capital, long lead times, trade policies, besides other factors. Meanwhile, the demand of permanent magnets which require neodymium and dysprosium, used in wind turbines, electric motors and a number of other electric appliances, is increasing continuously.

MolyCorp is probably the best pick in the industry with existing operations and profitable track record, but these small cap stocks are likely to outperform the markets if rare earth metals indeed fall short of demand. General Moly Inc (NYSE: GMO), for example, has already jumped 20 per cent in the last month on the back of positive developments related to its Mt. Hope rare earth project in the state of Nevada. This high beta stock is likely to see more buying now that the Mt. Hope project nears completion.

Rare Element Resources Ltd (NYSE: REE) has updated about its Bear Lodge project in Wyoming. In addition, the company is making progress at its other projects including Bull Hill, and Whitetail Ridge. Midway Gold Corp (NYSE: MDW) is not exactly a rare earth play as its core business is gold exploration. However, many rare earth metals are found in commercially viable amounts in gold mines. As it is an exploration stage company, Midway?s story is still to unfold. However, the current price of $2.19 looks attractive after falling significantly from $3.??

Source: http://www.smallcapnetwork.com/GMO-REE-MDW-Energy-Department-Latest-to-Forecast-Short-Supply-of-Rare-Earth-Metals/s/via/3445/article/view/p/mid/1/id/288/

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