Molycorp Inc. (MCP), owner of the largest rare-earths deposit outside of China, soared the most since the shares began trading more than two years ago after executives and a director bought stock in the company.
Molycorp jumped 19 percent to $8.62 at 2:15 p.m. in New York, after earlier gaining 20 percent, the most intraday since the company’s initial public offering in June 2010.
John Ashburn, an executive vice president and the company’s general counsel, bought 10,000 shares and Charles Henry, a director, purchased 45,192 shares, according to filings made after the close of trading on Nov. 21. Chief Executive Officer Mark Smith purchased 20,000 shares at $6.20 each, according to a Nov. 19 filing.
The shares have tumbled 64 percent this year partly because of a slump in prices for rare earths, a group of 17 chemically similar elements used in wind turbines and hybrid cars. China supplies about 95 percent of demand for rare earths, which have slumped since mid-2011, after a spike caused by China’s decision to slash exports in 2010.
Molycorp plunged to its lowest last week after the Greenwood Village, Colorado-based company said in a Nov. 9 filing that the U.S. Securities and Exchange Commission began an investigation over the accuracy of its public disclosures.
“It looked like a good buy at these prices,” Jonathan Hykawy, an analyst at Toronto-based Byron Capital Markets Ltd. who recommends buying the stock, said today in an e-mail. He said some short sellers have been buying shares to cover their positions.
China plans to offer subsidies to large, state-owned rare-earth producers in the country, the Financial Times reported yesterday.
That may signal China is trying to spur a recovery in the industry after illegal mining led to overcapacity and lowered prices, said Laurence Balter, an analyst at Fox Island, Washington-based Oracle Investment Research.
“It’s in China’s best interest to maintain price integrity as they shut down illegal mining,” Balter, who recommends buying Molycorp stock, said today in a telephone interview. “Too low is just too low.”
Jack Lifton, a founder of rare-earth consulting firm Technology Metals Research LLC, said the subsidies are small and more of a symbolic gesture that indicates the government has taken a direct interest in unregulated mining.
“They’re paying lip service and acknowledging there’s a problem,” Lifton said today by phone. “What the government would like to do is choke off illegal mining and get control of the whole system. It would firm up prices.”
Jim Sims, a spokesman for Molycorp, said in a voicemail today that Molycorp executives who have bought shares are presumably doing it because of confidence in the company’s future.
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