Source:Mining Weekly                  Date: 14 September, 2011

A surplus in light rare earth minerals may result in a drastic drop in prices within the next two years. The worries are the result of a recent rise in the sale of Molycorp stock shares amongst insiders. Experts worry investors are abandoning the Inner-Mongolian firm.

While it could be argued that core shareholders bought into the company at far lower prices and are cashing out to diversify their investments, some do not believe so.

This isnt diversification, this is an abandonment, counter Byron Capital Markets analyst Jon Hykawy.

Stockholders have sold a total of 24 percent of their shares. This activity could be a result of a projected surplus of certain rare earth minerals for 2013. This would result in a devaluation of those minerals. A new mine in South Africa is expected to meet demands for lanthanum and cerium. Rare earths such as these account for 83 percent of Molycorp's planned production. However Hykawy recommended heavy rare earths as a better investment.

Rare earth minerals are used in a wide range of high-tech hardware and gadgets, including smart phones, P3 players, and hybrid cars. Global dependence on these materials has grown with the huge number of high-tech commodities that have reached the market. However, China, the world's number one producer of rare earths has limited its exports.

Molycorp stocks fell 6 percent last week to USD 55.04 on the New York Stock Exchange (NYSE).