What Got Into Ucore Rare Metals (UURAF)? Maybe Just Reality. MCP & REE Compared

Whatever got into Ucore Rare Metals, Inc. (PINK:UURAF) today, it appears to be the right thing. This relatively obscure rare earth miner - in comparison to the likes of Molycorp, Inc. (NYSE:MCP) and Rare Element Resources Ltd. (AMEX:REE) anyway - is up 24% today, on no real news. To be fair, REE and MCP are up a little today as well, but nowhere near as firmly as UURAF is. What's up?

In the absence of any direct news, one can only assume that somebody's knows something about an upcoming announcement. That, or this is the response to more worries that China was going to mandate another cut in production. It did so last month, putting the kibosh on the fluorescent lamp market. In the meantime production has been restored, but not until the price of the underlying rare metal jumped 30% - the goal of the maneuver in the first place.

The semi-good news for the three stocks in question is that they're all U.S.-based, and as such don't feel the effects of China's REE-market 'tweaking'. The bad news is, neither Ucore Rare Metals nor Rare Element Resources Ltd. nor Molycorp is actually producing significantly yet, making the price changes of any rare earth elements a little meaningless for the trio.

Yet, UURAF is soaring. How so? Because stocks don't trade based on their value - they trade based on the expected value 6 months to 2 years down the road. The challenge with that mentality is the 'expected value' is a moving target. If you can apply a little psychology to the valuation forecast though, there's still good money to be made by trading these stocks.

As for what that means regarding Ucore Rare Metals right here and right now, the surge is a clue that investors have finally started to believe what's been said for months now... the company is sitting on a mountain of uranium and rare earth elements. In fact, its REE resource is estimated to be one of the largest deposits of heavy and light rare earth elements in the United States. It's particularly rich with the heavy elements, which is good - they tend to be worth more.

One of the other major deposits of REEs is held by none other than Molycorp, Inc. - its Mountain Pass (California) project that should begin production in mid-2012, and hit its peak production of 40,000 metric tons of rare earth oxides per year by 2013.

Rare Element Resources Ltd. is placing the bulk of its time, attention, and resources on the Bear Lodge Property in Wyoming, which is reported to be yet-another "one of the biggest deposits of rare earth elements in North America". It's said to be a mix of heavy and light REEs, but with more heavy than light elements.

While a dollar figure for the value of each of these dig-sites has been presumed (sometimes by the companies themselves), that's a dangerous game to play. Geological estimates can be wrong, and it may end up costing more to dig the elements up than what they can be sold for; that's the reason Molycorp closed the Mountain Pass site several years ago.

What we can be certain of, however, is the value of each company. This is where Ucore Rare Metals and its $75 million market cp stand out. Molycorp is a $3.4 billion company, while Rare Element Resources is a $285 million company... yet it's not clear which one will be the most profitable once prediction begins. For that matter, it's not even clear which one will be able to produce the absolute biggest profit once production begins.

And the fact is, UURAF has as much potential to start production soon (well within five years) as the other two do, but still hasn't gotten any real media attention. That's the heart of the opportunity though. There's also a (fading) rumor that Ucore Rare Metals is a potential target of Molycorp's.

Any traders who were willing to roll the dice an MCP or REE may want to start a little due diligence on a much-smaller/potent UURAF. Other investors certainly are.