Molycorp meets Molymet, secures US$390M in funds

U.S. rare earths producer Molycorp (MCP-N) is giving Chile-based Molibdenos y Metales (Molymet) 12.5 million shares in exchange for US$390 million. That works out to US$31.20 apiece – a 10% premium to Molycorp’s 20-day volume weighted average share price as of Jan. 30.  

In a statement, Molycorp’s president and CEO, Mark Smith, said the proceeds will go towards helping the company “pursue the growth elements of our business strategy” and future opportunities.

As part of the transaction Molycorp, which is the biggest producer of the rare earths outside of China, will allow a Molymet executive to join its board.  

Molymet is the world’s leading processor of specialty metals molybdenum and rhenium. Molybdenum is commonly used as an alloying agent in steel, while rhenium is mainly used in super-alloy turbine blades in jet engines and land-based gas powered turbines.  

The company boasts plants in Chile, Mexico, Belgium, Germany and China, and a US$1.8-billion market cap.

“We are making this investment in Molycorp because we are very bullish on the upside potential of the company, as well as the highly synergistic technologies and market positioning of our respective companies,” said Molymet’s executive chairman and CEO, John Graell, in a statement. Graell is expected to join Molycorp’s board once the transaction closes, which requires governmental approvals and customary conditions to be met.

Molycorp says it’s on track to bring a rare earth production facility at its Mountain Pass rare earths mine in California online. The new facility is expected to run at a rate of 19,050 tonnes a year by late 2012.  

In early January, Molycorp announced it had signed offtake agreements for 78% of that initial, phase-one production, and is working on selling another 6%.   

Mountain Pass has reserves of 2.2 billion lbs. rare earth oxides and total resources of 4.6 billion lbs., which could be mined for more than 30 years.

On the funding news, the company’s shares were off 4% to US$29.69 as 7.4 million shares changed hands.