Great Western Minerals Group Ltd (fka GWG)

[MWM]

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Molycorp rises as China raises Rare Earth stakes

MCP, GWG.V, UCU.V, QRM.V, TMT, RTM, ALV

China’s control of Rare Earth metals is providing Molycorp Inc. (NYSE:MCP), owner of the largest US deposit of the minerals, with the most valuable currency in the industry for acquisitions.

Great Western Minerals Group Ltd. (CDNX:GWG) and Ucore Rare Metals Inc. (CDNX:UCU) may become “Moly” targets after shares of the Colorado based Molycorp tripled since its US IPO last July as China choked exports.

Molycorp is now valued at 117 times earnings before EBITA (interest, taxes, depreciation and amortization) this year, according to data that includes net debt, the highest of any diversified metals producer.

The rise in Molycorp’s market value to US$4.1B makes takeovers cheaper as it tries to compete with Chinese producers that control 95% of the World’s supply of elements used to make magnets for Raytheon Co’s. (NYSE:RTN) Tomahawk cruise missiles and Toyota Motor Corp’s. (NYSE:TMT) Prius sedans.

While Molycorp’s mine in the Mojave Desert once met almost all the World’s Rare Earth demand, it has yet to turn a profit, and does not have subtantial amounts of the “Heavy” Rare Earth metals that command the highest prices.

Great Western, which plans to start production at a South African mine in 2013, and Canada’s Quest Rare Minerals Ltd. (CDNX:QRM) and Avalon Rare Metals Inc. (AMEX:AVL), which control “Heavy” Rare Earth deposits, may also be takeover targets for “Moly”.

Ross Bhappu, Molycorp’s Chairman, declined to comment about potential acquisitions.