Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions.

This past week, an Inner Circle member asked us about one of the mining stocks involved in the quest for rare earth metals. China’s iron grip on the rare earth market is a key factor in the pricing of these minerals, Pat notes, and he looks at how this stock is working to contest it with a re-opened mine and a new acquisition.

Q: Dear Pat: I would appreciate your views on Molycorp and its prospects. Thank you.

A: Molycorp (symbol MCP on New York; www.molycorp.com) will soon complete the full reopening of its rare earth metals mine in the Mojave Desert, near Mountain Pass, California. The mine closed in 2002 due to low rare earth prices.

By the end of 2012, Molycorp hopes to be producing 19,050 tonnes of rare earth metals a year. In 2013, it hopes to push that up to 40,000 tonnes.

Rare earth elements are used in a variety of modern devices and applications, including catalytic converters and petroleum refining; magnets in small and large motors; glass additives and glass polishing compounds; rechargeable batteries; television and computer screens; lighting; X-ray machines; and lasers.

In the three months ended December 31, 2011, Molycorp’s revenue rose sharply, to $132.9 million from $21.7 million a year earlier. Earnings per share jumped to $0.41 from a loss of $0.11. The gains resulted from the reopening of the mine.

However, despite the mine’s successful restart, Molycorp’s share price remains low—it’s down over 65% from its high of $79.16 in May 2011.

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Mining stocks: Molycorp combats higher prices and rare earth smuggling

The stock reached its high because rare earth prices hit a peak in response to lower Chinese export quotas. (China accounts for around 95% of global production of rare earth metals.)

However, the higher prices then led to lower demand, mainly because users substituted rare earths with cheaper materials and increased recycling. Rare earth producers are also raising production to take advantage of the higher prices.

High prices have also encouraged extensive smuggling of rare earths out of China. Estimates place smuggled rare earths as high as 20,000 tonnes per year, against official export quotas of around 31,000 tonnes. Smugglers use a range of methods, including injecting rare earths into pottery, which they then ship out of the country. The metals are later extracted when the pottery reaches its destination.

Molycorp recently announced an agreement to buy Neo Material Technologies (symbol NEM on Toronto) for $1.3 billion. Neo Material is a rare earth processing company that converts the raw elements into products such as magnetic materials.

The deal gives Molycorp a greater range of products to sell. As well, Neo Material has plants in China.

In the most recent Inner Circle Q&A, Pat looks at international moves to limit China’s control of rare earth metals and how this could affect Molycorp. He also examines whether Molycorp can cut its risk thanks to the Chinese plants it inherits with its new acquisition. He concludes with his clear buy-hold-sell advice on the stock.

Inner Circle members see Pat’s analysis and recommendations on the stocks that other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this unique investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

Pat McKeough responds to many personal questions on specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions.

Last week, an Inner Circle member had a particularly intriguing question about commodity stocks. Specifically, he wanted Pat’s opinion on a company that is using a revolutionary technology in an area in which traditional methods don’t work.

Q: Pat: Your views on DNI Metals, please. It’s very early stage but uses an interesting technology to extract minerals.

A: DNI Metals, (symbol DNI on Toronto; www.dnimetals.com), aims to produce a number of metals from its Alberta Black Shale project, located about 900 kilometres north of Calgary. These metals include molybdenum, nickel, uranium, vanadium, zinc, copper, cobalt, plus specialty metals (scandium, lithium and thorium).

Traditional mining methods won’t work on black shale rock, so the company will use a process called bioleaching to remove the metals.

Using this process, DNI will dig up the ore, pile it onto a leaching pad and irrigate it with a solution containing certain bacteria. The tiny organisms then “chew up” the rock and expel the metals as waste. The metals are then piped into a refinery and separated.

Commodity stocks: First bioleaching mine opened in Finland

In nature, bioleaching is triggered spontaneously by micro-organisms in the presence of air and water. Commercial technologies modify this process so the metal can be recovered faster.

On December 31, 2011, DNI held cash of $2.7 million, or $0.04 a share. It’s using up its cash at a rate of about $162,000 a quarter, so it has enough to carry on its exploration and development at the current pace.

Bioleaching is now in use at the Talivaara mine in Finland. However, that mine faced start-up problems and environmental issues.

In the most recent Inner Circle Q&A, Pat looks at DNI’s prospects of successfully financing and building a mine with the added risk of a technology that has only a limited track record. He concludes with his clear buy-hold-sell advice.

Inner Circle members see Pat’s analysis and recommendations on the stocks that other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this unique investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

The sales left IAMGold with 38% of the Sadiola mine and 40% of the Yatela mine, both located in Mali; 90% of its new Essakane gold mine in Burkina Faso; 100% of the Doyon mine in Quebec; and 100% of the Rosebel mine in Suriname, South America.

In addition, IAMGold also has a 1% royalty interest in the Diavik diamond mine in the Northwest Territories. It also owns the Niobec niobium mine in Quebec. Niobium is a rare metal that when used as an additive makes steel stronger, more heat resistant and easier to weld.

In the three months ended September 30, 2011, IAMGold’s revenue jumped 84.0%, to $431.9 million from $234.7 million a year earlier. Gold production rose, partly because the Essakane mine started up in late 2010. Revenue also benefited from higher gold prices. Cash flow more than doubled, to $0.56 a share from $0.26 a share a year earlier.

IAMGold now holds over $1.1 billion U.S. in cash and gold bullion. That gives it lots of options to spur its share price. For example, it could raise exploration spending, make an acquisition or buy back shares.

It could also continue its recent dividend increases: IAMGold raised its semi-annual payout by 25% with the January 2012 payment, to $0.125 a share from $0.10. This was the company’s third dividend increase in the past year. IAMGold’s steadily rising dividend reflects high gold prices and the company’s strong cash flows. The shares now yield 1.2%.

IAMGold is still a buy.

ENDEAVOUR SILVER $10.39 (Toronto symbol EDR: TSINetwork Rating: Speculative) (1-877-685-9775; www.edrsilver.com; Shares outstanding: 87.6million; Market cap: $910.2 million; No dividends paid) operates the Guanacevi and Guanajuato silver/gold mines in Mexico.

In the three months ended September 30, 2011, Endeavour’s revenue rose 93.0%, to $38.8 million from $20.1 million a year earlier (all amounts except share prices in U.S. dollars). Cash flow per share more than doubled, to $0.24 from $0.11. Rising production and sharply higher gold and silver prices were the main reasons for the gains.

The company is nearly finished expanding the Guanajuato mine. That will push up its silver production by 12.1%, to 3.7 million ounces from 3.3 million ounces in 2010.

In addition, Endeavour has announced further positive drilling results from the recently discovered Daniela vein at Guanajuato. The company now has two drill rigs working on this vein, and they have already extended it by more than 600 metres.

The company has lots of room to further increase its mines’ reserves, plus it has three other properties with exploration potential.

Endeavour is a buy for aggressive investors.

In the three months ended September 30, 2011, Amerigo’s cash flow was $0.03 a share, down from $0.06 a year earlier. However, that was the result of a strike that is now over.

Amerigo has just declared its semi-annual dividend of $0.02 a share. That gives the stock a high 8.0% yield. The dividend appears safe, but a prolonged period of low copper prices could lower the cash the company has available for dividend payments.

Amerigo is still a buy, but only for aggressive investors.

Meanwhile, Imperial’s cash flow per share rose 17.8% in the nine months ended September 30, 2011, to $0.86 from $0.73 (adjusted for the two-for-one split).

The company aims to use the cash flow from its Mount Polley and Huckleberry mines in B.C. to build a mine at its Red Chris copper/gold property in northwestern B.C.

Imperial’s prospects for higher production could also make it a takeover target.

Imperial Metals is a hold.

Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions.

This week, an Inner Circle member asked Pat about one of Canada’s major mining stocks. Labrador Iron Ore Royalty has quietly built a position as a world leader in iron ore. Now it faces several challenges in today’s volatile commodity markets.

Q: Hello Pat: What is your opinion of Labrador Iron Ore Royalty Corp.? Would it be a buy now or in the future? Thanks.

A: Labrador Iron Ore Royalty Corp., (symbol LIF.UN on Toronto; www.labradorironore.com) holds a 7% gross overriding royalty (or 7% of the selling price for all iron ore produced, sold and shipped), and a 15.1% equity interest in Iron Ore Company of Canada (IOC). On top of that, Labrador Iron Ore gets a $0.10-per-tonne commission on all iron ore that IOC makes, sells and ships to steelmakers around the globe.

IOC, which has produced iron-ore concentrate and pellets since 1954, is Canada’s largest iron-ore producer, and is among the world’s top-five makers of iron-ore pellets. Rio Tinto (symbol RTP on New York) is IOC’s operator and majority shareholder, with 58.7% of its shares. Mitsubishi Corp. of Japan holds the remaining 26.2%.

IOC operates a mine, a concentrator (a machine that separates ore from waste rock) and a pellet plant at Labrador City, Newfoundland. The company also has year-round port facilities at Sept-Iles, Quebec. IOC has proven ore reserves for at least 30 years of production at current levels, along with the potential to add to its reserves through exploration and development drilling.

Mining stocks: Exporting to all the world’s major markets

IOC transports the iron-ore concentrate and pellets to its port facilities at Sept-Iles, using its wholly owned Quebec North Shore and Labrador Railway, a 418-kilometre rail line that links the company’s mine to the port. From there, the products are shipped to markets throughout North America, Europe and Asia.

This mining stock’s unitholders receive quarterly distributions of $0.25 a unit, which yield 3.1% on an annualized basis. Each payment consists of a $0.133 common share dividend and a $0.117 interest payment.

If you hold these units outside an RRSP, the dividend portion qualifies for the dividend tax credit, and the interest portion is taxed at the same rate as ordinary income.

You can see Pat’s recommendation on Labrador Iron Ore Royalty Corp. in this week’s Inner Circle Q&A. In his buy-hold-sell analysis, he looks at the long-term outlook for iron ore prices amid slower economic growth as well as the effect of the stronger Canadian dollar on the company’s prospects.

Inner Circle members see Pat’s analysis and recommendations on the stocks other members have asked about in each week’s Inner Circle Q&A. You can view it immediately when you become a member of this special investment group. You will get Pat McKeough’s answers to your personal investment questions, full access to our members-only Inner Circle website, and many other membership privileges. Click here to get started right away.

(Note: If you are a current member of the Inner Circle, please click here to view Pat’s recommendation. Be sure to log in first.)

CanAlaska will receive roughly $2.2 million from the unit sale. That’s equal to 22% of this uranium stock’s $10.1 million market cap. It will use the cash to further explore and develop its 21 uranium projects in Saskatchewan’s Athabasca Basin region, sometimes referred to as the “Saudi Arabia of uranium.”

Uranium stocks: CanAlaska has one of the largest positions in the Basin

Since September 2004, the company has acquired one of the largest land positions in this area, totalling over 2.5 million acres. To date, it has spent over $75 million exploring its properties and delineating multiple uranium targets.

It’s a long way between the exploration phase, which is now underway, and the commercial production phase, when the company starts making money. But we think CanAlaska has a better-than-average chance of success.

We updated our advice on CanAlaska Uranium in our September 23, 2011, Stock Pickers Digest hotline, which you can immediately view when you take a 1-month free trial to Stock Pickers Digest. Click here to learn how you can start profiting from Stock Pickers Digest right away.

(Note: If you are a current Stock Pickers Digest subscriber, please click here to view Pat’s recommendation. Be sure to log in first.)

We receive a number of questions on mining stocks from members of our Inner Circle service. This week I received this question from a member who wonders whether the market is giving this stock enough respect.

Q: Could I please have your opinion on Thompson Creek Metals? There is a lot of local enthusiasm in B.C., but the market does not seem to share the same optimism. Thanks.

A: Thompson Creek Metals Co. Inc., $7.78, symbol TCM on Toronto, www.thompsoncreekmetals.com), is a Canadian molybdenum producer with mining, milling, roasting and marketing operations in Canada and the U.S.

This mining stock’s operations include the Thompson Creek mine in Idaho, a roasting facility in Langeloth, Pennsylvania, and 75% of the Endako mine and roaster in B.C.

Molybdenum is either mined directly or recovered as a by-product of copper mining. The metal helps strengthen alloys and high-temperature steels, and prevents them from rusting.

Although my team carefully researches all the stocks that members ask about, I personally review each and every recommendation. To ensure this close personal attention, only a limited number of members can be admitted to our Inner Circle. Under the pressure of world events, even more investors are asking for my personal investment advice. We are nearing our membership limit already. Click here to secure your membership in the Inner Circle right away.

Mining stocks: Molybdenum prices rise and fall with the economy

In the three months ended June 30, 2011, Thompson Creek’s revenue jumped 28.6%, to $190.9 million from $148.4 million a year earlier (all figures in U.S. dollars). That’s mainly because the company produced 30.4% more molybdenum in the latest quarter compared to a year earlier. As well, Molybdenum prices rose 2.6%, to $17.28 a pound from $16.84. Molybdenum has since dropped to around $14.70 a pound on uncertainty about the direction of the global economy.

Excluding one-time items, the company’s earnings jumped 54.3%. However, earnings per share fell 8.1% on 19.7% more shares outstanding. Cash flow rose 4.3% in the latest quarter.

As of June 30, 2011, the company held cash of $560.4 million, or $3.25 a share. Its long-term debt of $363.7 million is a reasonable 30.3% of its market cap.

Mining stocks: Thompson completes friendly takeover

On October 20, 2010, Thompson Creek completed its friendly takeover of Terrane Metals Corp. Terrane owns the Mount Milligan copper/gold project in central B.C. This project’s reserves should support a mine that will produce 81 million pounds of copper and 200,000 ounces of gold a year over its 22-year life. The mine could start up in 2013. This purchase allows Thompson Creek to expand into other areas beyond molybdenum.

Thompson Creek paid $700 million for Terrane, including $420 million in cash and 24.3 million common shares. Goldcorp (symbol G on Toronto) owned 52.4% of Terrane. As a result of the takeover, Goldcorp now owns roughly 8% of Thompson Creek.

While it was pursuing Terrane, Thompson Creek reached a gold-selling deal with Royal Gold (symbol RGL on Toronto). Under the terms of this arrangement, Royal Gold will receive 25% of the gold that Terrane’s Mount Milligan mine produces over its working life. In return, Royal Gold paid Thompson Creek $226.5 million when the takeover closed, and will pay $85 million more during the mine’s construction, for a total of $311.5 million.

A renewed global economic recovery would push up molybdenum prices. The metal offers opportunities for gains, but only for highly aggressive investors who are willing to accept substantial risk. The Terrane purchase gives Thompson Creek additional growth prospects. As well, the company is expanding the mill at Endako, with start-up projected for early next year.

The stock trades at 6.9 times this year’s forecast cash flow of $1.12 a share, based on today’s lower molybdenum price.

Thompson Creek Metals is okay for aggressive investors to hold.

The company’s cash flow per share rose 30.4% in the three months ended June 30, 2011, to $0.30 from $0.23. Higher gold and copper prices were the main reason for the gains.

Imperial aims to use the cash flow from its existing mines to build a $228-million open-pit mine on its Red Chris copper/gold property in northwestern B.C. The company bought Red Chris in 2007.

Imperial Metals is a hold.

Hathor’s main exploration properties are on the east side of the Athabasca Basin. Right now, it is focusing its exploration on the Roughrider zone at its Midwest Northeast property, where it has found significant uranium mineralization over the last couple of years. Roughrider could hold as much as 57.9 million pounds of uranium. It is also near Cameco’s Rabbit Lake mill.

Cameco holds cash of $1.2 billion, or $3.30 a share, so it can easily afford to buy other mining firms that enhance its long-term growth prospects.

Hathor is trading at $4 a share, or 6.7% above Cameco’s offer. That means Cameco may have to raise its offer to gain the support of Hathor’s shareholders or fend off a rival bid.

Cameco is still a buy.