Molycorp (MCP), owner of the largest-producing rare-earth mine outside of China, supplies rare earth metal oxides, metals, alloys and magnets. The company’s products have critical uses in a range high technology products. After a six-fold price increase over nine months following its initial public offering (IPO) in August 2010, Molycorp lost 71% of its value, bottoming in December 2011.
The dramatic rise following its IPO coincided with soaring rare earth metal prices as China, the worlds primary supplier of rare earth metals, announced plans to curb exports of these minerals. Rare earth metal prices softened in 2011 and have leveled-out in recent months, along with Molycorp’s stock price.
On March 9, 2012, Molycorp announced the acquisition of a Canadian rare earth magnet manufacturer, a move toward vertical integration cheered by investors as the stock ramped off its bottom on a surge in volume.
Technically, the stock has formed a constructive five month bottoming pattern and broke out of that pattern on heavy volume at the end of March. The stock is currently testing the breakout area.
From a trading perspective, the overall stock market is in a corrective phase so any new buys should be approached with caution. Nonetheless, Molycorp deserves consideration here and at least a high place on the watch list.