Molycorp to raise US$420 M in IPO for rare earths mine

Molycorp, owner of the Mountain Pass rare earth element mine in California, is going ahead with an initial public offering topping US$420 million so it can ramp up North America’s only current source of the metals needed for hybrid cars, wind power turbines and other high tech applications.

Developing new sources of rare earths is becoming more important as time goes by because China, which produces about 95% of the world’s supply, is continually cutting its export quotas.

Molycorp, based in Greenwood Village, Colo., is looking at issuing 28.125 million shares at a price between US$15 and US$17 per share with an overallotment option for an additional 4.2 million shares. The company’s subsidiary, Molycorp Minerals will use the funds to modernize and expand the Mountain Pass mine and production facility. After restarting production at Mountain pass in early 2009 (mining stopped in 2002), Molycorp said it wanted to ramp up production to 40 million lbs. of rare earths per year by 2012.

Molycorp spokesman Jim Sims was unable to comment on any aspect of the IPO or the development of the mine restoration.

The plan as of last summer was to dewater the mine over a span of a year and then remove overburden for another year to expose an area of fresh ore that will be needed to meet Molycorp’s 2012 production goals.

In June, Molycorp announced that it had signed a letter of intent with Toronto-based Neo Material Technologies (NEM-T), which produces neodymium-iron-boron magnetic powders and other rare-earth-based engineered materials to customers in China, the U.S., Japan and Europe. The companies have agreed to cooperate in the rare earth “mine to magnets” supply chain to their mutual benefit. Neo will provide Molycorp with technical assistance and know-how with respect to production of rare earth metals, alloys and magnets and Molycorp will consider potential supply agreements.

Neo has been reliant on China for its rare earths, however, the company set up shop in China years ago to secure its supply for products manufactured there. The Chinese government limits how much rare earth products Neo can export for use elsewhere so having a source outside of China would be advantageous.

There are several other rare earth projects outside of China that are being developed in addition to Mountain Pass.

Avalon Rare Metals (AVL-T) is developing the Nechalacho project near Thor Lake, N.W.T. A prefeasibility study recently put development costs at $8899.7 million with production starting in 2015.

Two of Great Western Minerals‘ (GWG-V) more advanced projects are the Hoidas Lake project near Uranium City, Sask. and the Steenkampskraal mine in South Africa.

Australia’s Lynas Corp. is developing the Mt. Weld rare earth deposit in Western Australia, complete with a advanced materials plant located in Malaysia. The company says the project has the capacity to supply up to 20% of the global rare earths market for 30 years. Production is supposed start in 2011.