China dominates the market for rare earths—the arcane metals that are vital in an array of technology products—from iPhones [made by Apple] to wind turbines. When China began to limit exports, prices for the metals and the stocks skyrocketed.
Right now, none of the rare earth companies outside of China are ready to bring new material to market any time soon. What's more, only two are on schedule to do it before 2015.
If China continues to limit exports, and demand continues to grow, the rest of the world is looking at a significant shortage until these companies can get online.
That's why there's a global rush right now not only to find quality rare earth deposits, but also to find ways to accelerate the process.
That, however, is not an easy proposition. There are feasibility studies, huge amounts of testing, permit applications, costs in the hundreds of millions of dollars.
It is not a case of a eureka find and then instant processing—and profiting.
CNBC decided to look into a basket of names and handicap which ones are in the best position to mine rare earths—and profit from them.
Molycorp and Lynas are the two best-known names in the space. Molycorp is the only U.S.-based company, and it expects the mine at Mountain Pass, Calif., to begin producing in the second half of 2012.
Lynas is based in Australia and has done all its mining. It is waiting for the completion of a processing plant in Malaysia. They might beat Molycorp to market by a few months.
Then, there's a major drop-off. The other two companies that have seen incredible pops in their stock are years away from bringing a meaningful amount of rare earths to market.
Rare Element Resources traded at $1.80 on July 1, 2010. It's now over $14. It also recently raised about $50 million in financing. All this for a company whose Bear Lodge, Wyo., property won't be producing rare earths until 2015 at the earliest. Avalon is looking at 2015 as well, and that's a stock that tripled since this summer.
Some other names that are either traded on pink sheets or in Canada: Quest Rare Minerals , Ucore Rare Metals , Arafura Resources , Tasman Metals , Matamec Explorations and Frontier Rare Earths .
Almost all of them have seen astronomical gains in their share price.
"The underlying rare earth prices have gone up more than the company prices have and we don't see any abatement in the pricing," said James Tuer, president of Hudson Resources , a Canadian rare earth company with a property in Greenland. They're looking at 2016 for production.
"I don't see a reduction in the underlying rare earth prices," he added. "In fact, I see the prices going up.
"So I don't think that we're anywhere close to a frothy or a bubble in all these rare earth companies."
If he's right, then the hundreds of millions that investors have plunged into rare earth stocks would have been a good bet. But it will take a long time to find out.