3. Rare Element Resources Ltd. (TSX:RES)

Rare Element Resources is an early pioneer in their sector. The company has a 100% interest in the Bear Lodge property in Wyoming, which, according to the US Geological Survey, is one of the largest disseminated rare earth deposits in North America. Along with high grade light rare earth elements the deposit contains lesser amounts of heavy rare earths and the occurrence of gold. On June 14th Rare Element Resources reported a resource update and provided an indicated mineral resource of 4.9 million tons at 3.77% REO and an inferred mineral resources of 17.81 million tons at 3.03% REO; setting the stage for the company’s upcoming summer drill program.

In May, U.S. investment bank Dahlman Rose initiated coverage on Rare Element Resources with a buy rating and $21 price target. “We like the straightforward metallurgy that is present at the company’s Bear Lodge deposit and access to infrastructure that is present at this deposit. In fact, we believe that these aspects make the company an attractive candidate to be acquired by a producing rare earth company over the medium-term.”

But not everyone agrees with Dahlman Rose research analysts Anthony Young and Anthony Rizzuto. On June 23 it was reported that the short interest in three U.S. quoted rare earth miners, including Rare Element Resources, has continued to build since April and stands just off record highs. Will Duff Gordon, research director for Data Explorers, notes “despite the recent substantial share-price correction in all three stocks, it seems that short sellers still believe them to be overvalued.”

Whether you’re bearish or bullish on the sector expect the debate on rare earth elements to rage on and, in the meantime, the one thing that both bulls and bears can be assured of is share price volatility across the board. We connected with the company’s President Donald Ranta to get his take on the price sustainability of rare earth elements and to learn more about the Bear Lodge deposit – CLICK HERE – for the interview.

4. Quest Rare Minerals Ltd. (TSX-V: QRM)

By 2015, rare earth experts say global demand could reach 200,000 tonnes, with demand outside China about 70,000 tonnes, seemingly creating a massive deficit. But within three years, the two leading rare earth element miners, Lynas and Molycorp, will have the potential to produce over 60,000 tonnes of rare earths a year between them leaving a relatively small window for rivals. “The ore grade really links into the production costs,” said Jacob Securities analyst Luisa Moreno. “A project could simply be not feasible if the grades are really small.” Quest Rare Minerals has ore grades below 2% but the Canadian miner is banking that they can make up the difference in their $ per tonne since their properties are reportedly rich in heavy rare earths.

The company is based in Montreal, Quebec and has something that many others in its peer group do not have, namely, multiple projects. Quest is developing three rare earth projects in two separate exploration areas: the Strange Lake and Misery Lake areas of northeastern Québec and the Plaster Rock area of northwestern New Brunswick.

Multiple projects focusing on heavy rare earth elements were enough to get Dundee analyst Rodney Cooper on board. Earlier this year Mr. Cooper rated Quest Rare Minerals as a buy with a 12-month price target of  $8.88. A target which will undoubtedly appeal to certain Chinese investors since the number 8 is consider lucky and three 8s are very lucky. The report, however, proved to be rather unlucky for both Quest Rare Minerals and Dundee. Quest inadvertently issued a press release announcing the details of the buy recommendation, something which is not allowed by the Investment Industry Regulatory Organization of Canada (IIROC) as it contravenes Canadian Securities regulations. Later that same day Quest issued a press release retraction in what was an interesting turn of events.

Lately, things have been going much more smoothly for Quest. On Monday, June 27th executives, directors and guests of the company rang the Opening Bell at the New York Stock Exchange in recognition that Quest Rare Minerals began trading on NYSE Amex last month. “We are delighted to celebrate this milestone for Quest,” said Peter J. Cashin, Quest’s President & Chief Executive Officer. “Listing our shares on NYSE Amex continues to facilitate trading of our shares in the United States and expanding our investor base.” The company’s shares closed today on the TSX at $6.40, up $0.16 on the day.

5. Dacha Strategic Metals Inc. (TSX-V: DSM)

Dacha Strategic Metals is in the rare earth elements business but, interestingly enough, Dacha is not a mining company. And perhaps more interesting to Dacha’s investors, yesterday the company hit a 52 week high closing at $0.89. The company has effectively created the world’s first and only stockpile of rare earth elements and offers investors and industrial consumers the ability to participate in the physical ownership of these critical elements. Similar to a physical trust.

As of June 24, 2011, in addition to its metal inventory, which had an estimated fair market value of $96.1 million, Dacha’s equity investments had an estimated fair market value of approximately $2.7 million along with a cash position of approximately $4.7 million for a total of $103.5 million, or $1.39 per share, based on 74.4 million shares outstanding.

We recently discussed the value proposition of Dacha Strategic Metals with the company’s President & CEO, Scott Moore, and addressed the company’s normal course issuer bid share buy-back that was announced earlier this month. For the interview – CLICK HERE – to read more about Dacha Strategic Metals and the company’s unique business model.

For 5 Most Interesting Rare Earth Stocks – Part 1 – CLICK HERE.