In the last few weeks a curious meme has been propagating throughout the rare-metals ecosystem, both online and off. It started on a few obscure blogs, but quickly reared its ugly head at outlets such as Benzinga, Seeking Alpha, TheStreet, Street Insider and even CNBC.
I’m talking about the rare-earth companies that aren’t.
A handful of commentators have got it into their heads that companies such as China Shen Zhou Minerals and Resources  (AMEX:SHZ), Qiao Xing Universal Resources  (NASDAQGM:XING), General Moly  (AMEX:GMO) and Thompson Creek Metals Company  (NYSE:TC) are rare-earth companies. Those a little late to the game have simply been copying the garbage put out by the earlier hacks, and before you know it, a Potemkin village of new rare-earth companies has been born.
We can thank the Van Eck Rare Earth / Strategic Metals ETF  (REMX) for some of the confusion – or more specifically, the apparent inability of giddy investors and commentarati to actually read and comprehend the description of this fund, beyond the third and fourth words of its title. Perhaps that’s a little too much to ask these days, I don’t know. Two of the four companies above (General Moly and Thompson Creek) are featured in this fund. Again – for the record, they neither produce rare earths nor are they developing rare-earth projects.
The same goes for the other two companies, but the reason for their emergence as faux rare-earth companies is less clear. Others who have spotted the issue have suggested that something nefarious might be afoot. In the past month, China Shen Zhou Minerals and Resources has seen its stock more than double; Qiao Xing Universal Resources almost doubled before settling at an increase of around 55% in the same period. these might be good stocks; they might even be good mining companies. They are not, however, rare-earth companies.
I suppose this is yet another illustration of the need to Do Your Own Due Diligence, folks….