Shares of rare-earth producer Molycorp jump on China move

CHICAGO (Reuters) - Shares of Molycorp Inc (MCP.N) rose nearly 10 percent on Tuesday after China announced it was cutting its rare-earth mineral export quotas.

In early trading on the New York Stock Exchange, shares of the Greenwood, Colorado-based company, which owns a rare earth mine in Mountain Pass, California, were up 10.5 percent to $54.69.

The surge, which extends the nearly 10 percent jump Molycorp posted on Monday, came after China cut its first batch of rare earth export quotas for next year by more than one-tenth, in the face of a threat by the United States to complain to the World Trade Organization over the export limits.

China produces about 97 percent of rare earth elements, which are used worldwide in high-technology, clean energy and other products that exploit their special properties for magnetism, luminescence and strength.

China's Commerce Ministry allotted 14,446 tonnes of quotas to 31 companies, which was 11.4 percent less than the 16,304 tonnes it allocated to 22 companies in the first batch of 2010 quotas a year ago.

The Ministry said in a short statement on its website (www.mofcom.gov.cn) that it had added more producer companies to the quota list, but has cut volumes allocated to trading companies for the metals used in high-tech goods.

The export quotas were based on export volumes from the beginning of 2008 to October 2010, it added, without giving details.

Prices have surged for these minerals, used in everything from iPods to fluorescent light bulbs, since authorities in Beijing slashed their rare earth exports by 40 percent this summer, saying China needed them for its economic development.

Japanese companies, which bore the brunt of China's action, have been scrambling to secure reliable supplies of the minerals.

Last week, Hitachi Metals Ltd (5486.T) signed a joint venture with Molycorp to help ensure a steady supply of the minerals.

That followed word earlier this month that Sumitomo Corp (8053.T) agreed to invest $130 million in Molycorp to secure a seven-year supply of the materials.

Since debuting in late July at $14, Molycorp's stock has nearly quadrupled in value.

China's actions have also lifted the shares of Canadian-based Rare Element Resources RES.V (REE.A), which owns rare earth properties in the United States, which surged 15.45 percent on Tuesday to $11.73.

(Reporting by James B. Kelleher)