Rare earth metals are making headlines again as China unleashes its newest economic weapon.

Chinese, Japanese, and North American rare earth experts confirm China is preventing rare earth minerals from being loaded onto ships bound for Japan, according to the New York Times.

Now is a good time to point out that Japan is one of the biggest importers of rare earths, accounting for some 17% of the market; China doles outs 95% of the world’s supply and uses 51% of it for itself.

China, of course, is denying any such exportation lockdown...

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That's why investors are bidding up rare earth suppliers like Molycorp, Lynas, and our 70-cent stock just waiting for greater valuation.

And to be honest, it doesn’t matter at this point if the Chinese government backs off and allows resumption of rare earth exports to Japan.

The damage is done.

China has already made the point that the country has considerable economic leverage over Japan — and pretty much the world — these days.

Rare earth supply has become economically disruptive.

China’s new rare earth leverage only highlights the growing risk that the United States and other countries face by relying almost exclusively on the Middle Kingdom's supply.

Without these materials, our military is screwed. We need rare earths to build Predator missiles, night vision goggles, the Abrams tank, and the Aegis SPY-1 radar systems, for example.

Losing access to these materials would be a real kick in the pants for the Pentagon.

Rare earths are necessary to build and operate hybrid cars... 700 pounds of neodymium are needed to build a three-megawatt windmill... green technologies, medical devices, computers, and cell phones will all be gravely affected if companies and manufacturers are cut off from supply of these elements.

Faced with this threat, U.S. rare earth companies are looking to reopen old mines and find new deposits. Boeing just agreed to find rare earth deposits using remote sensors.

Unfortunately, building the supply chains alone could take up to 15 years... And the processing plant would cost $500 million to a billion dollars.

There’s only one solution here: We need to cut off our dependency on China's supply.

We also need to place heavy emphasis on securing alternative supplies as quickly as possible.

Three ways to play this situation

One, buy Molycorp. The mining company has pushed to increase production to 5,000 metric tons by January 2011 and to 20,000 metric tons per year by the close of 2012.

Two, diversify with Rare Element Resources — a play in gold and rare earth at the Bear Lodge property in Wyoming. While it has no revenue to speak of yet, and won’t show profitability until 2015, it’s still finding a good supply of rare earth elements.

Three (and what I recommend doing), is to go after junior mining stocks that are exploring and mining areas with rare earth deposits.

There's a ready supply of rare earths in Greenland, and I'm putting the finishing touches on a brand-new report that outlines the region and the company that's about to change the face of rare earth metals as we know it.

As the rare earth story reaches a fever pitch, one particular stock is set to explode…

We’ll have our report in the next few weeks.

Stay Ahead of the Curve,

Ian L. Cooper