Molycorp’s Expansion across the Rare Earth Supply Chain
On April 18, 2011, Molycorp, a U.S. based producer of rare earth metals and owner of the largest rare earth mine outside of China, announced that it has acquired a processing facility to manufacture rare earth magnets. According to CNET, Molycorp paid $17.5 million to Japan-based Santoku for its U.S. subsidiary, Santoku America, based in Arizona. The acquisition provides Molycorp with the ability to manufacture finished products from the rare earth metals produced from its mines. This primarily involves the manufacturing of neodymium iron boron magnets which are considered essential across a host of prominent clean technology applications including hybrid, electric vehicles, permanent magnet wind turbines, and solid oxide fuel cells. In addition to the NdFeB magnets, the new plant will also process samarium cobalt magnets which are feature heavily across a number of defence applications.
Going forward, Santoku will act as distributer for the specialty alloys being produced at the Arizona facility. Japanese companies in particular are faced with a significant supply risk brought about by an enormous demand for rare earths and a reliance on the Chinese rare earth metals production industry.
Molycorp has become a hot item for investors in the wake of China’s decision to place strict quotas of exports of rare earth metals. As China currently accounts for 95 percent of global rare earth production, rare earth prices have skyrocketed. Similarly, operations at previously redundant rare earth mines such as Molycorp’s Mountain Pass, California facility are now being ramped up in order to capitalise on the growing demand for rare earth supplies located outside China.
The acquisition reflects a desire by Molycorp to consolidate the NdFeB supply chain and capitalize on the huge rare earth deposits present at the Mountain Pass site. The Mountain Pass facility was only recently reopened. Production had been previously halted due to environmental concerns and an inability to compete with the low costs previously associated with the Chinese rare earth industry.
As a part of its evolving expansion plans, earlier this month Molycorp also paid around $89 million for a majority stake in AS Silmet, a rare earth processing facility in Europe. With prices for rare earth having increased ten-fold since July 2010, mining companies with global rare earth assets such as Molycorp are now well and truly back in the game and are further expected to acquire an expanding presence across the wider rare earth product supply chain.
Article by Euan Sadden, appearing courtesy the Matter Network.
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