Canadian rare earth miners boosted by China cuts

TORONTO Wed Dec 29, 2010 12:00pm EST

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TORONTO (Reuters) - Shares of junior Canadian miners with rare earth prospects gained sharply on Wednesday as manufacturers and investors eyed alternative producers of the minerals after main supplier China slashed export quotas.

China accounts for 97 percent of the world's production of rare earths, minerals crucial to producing high-tech goods such as smartphones, electric cars and wind turbines.

While deposits exist in Australia, the United States and Canada, exploration and production lags China significantly.

The market gap opened by China's export curbs will likely be filled first by developing mines like Molycorp's (MCP.N) Mountain Pass in California and Lynas's (LYC.AX) Mount Weld in Australia.

But those deposits are skewed toward "light" rare earths such as cerium and lanthanum, while "heavy" elements such as dysprosium, terbium and europium are more in focus in Canada.

Shares of junior miner Avalon Rare Metals (AVL.TO), which is developing its Nechalacho project in Canada's Northwest Territories, jumped 40 percent on the Toronto Stock Exchange to C$6.40 by mid-morning.

Vancouver-based Rare Element Resources Ltd RES.V(REE.A), which owns rare earth properties in the United States, was also 40 percent higher, at C$14.54, on the TSX Venture Exchange.

Great Western Minerals (GWG.V), Avalon and Stans Energy RUU.V are all clamoring to bring heavy rare earth projects online, with production projected for 2013 and beyond.

Another Canadian company, Dacha Strategic Metals (DSM.V), said it had paid $3.5 million for 12,000 kg of dysprosium. Its shares were 9 percent higher.

There are at least 26 publicly traded companies in Canada that have rare earth projects at some stage of development. But good quality, economically feasible deposits are scarce.

Despite the name, the rare earths are a relatively abundant group of 17 chemical elements. They were originally described as rare because they were unknown in their elemental form and difficult to extract from the rocks that contained them.

(Reporting by Alastair Sharp; editing by Rob Wilson)

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