American Resources Policy Network
Promoting the development of American mineral resources.
  • Supply chain tug-of-war: Molycorp’s acquisition and what it means for the Rare Earth’s sector

    The Rare Earths sector was rocked last week by news of a deal in which Molycorp — the U.S. industry leader ramping up new operations at the old Mountain Pass (California) Mine — tabled a $1.2 billion offer for Toronto-based Neo Materials, which produces a range of Rare Earths powders used in permanent magnets and other applications, with facilities in 10 countries, but fully half of its revenues generated in China.

    On its surface, early analysis pronounced the deal as another step for Molycorp up the Rare Earths value chain, if not all the way from “mining to magnets,” as the catch-phrase goes, then at least from mining to refining the notoriously hard-to-separate REEs.

    But at least one metals expert hangs his favorable assessment on the access the deal gives Molycorp to a Chinese market that currently consumes 70% of global Rare Earths production.

    Analysts seem united in seeing the acquisition as net-positive for Molycorp. The cloudier question at the far end of the supply-chain is: will the deal benefit Rare Earths fabricators and end-users in the U.S. or in China?

    Witness the first question on the March 9 conference call held by the heads of Molycorp and Neo Materials to discuss the deal:

    From a regulatory standpoint, Neo Materials has export [quotas] that allow them to export rare earths out of China. Will the Chinese government… seamlessly honor those quotas? And then… you will be exporting rare earths from Mountain Pass into China, have you had any conversations with the U.S. Government and will they be taking a look at this…?

    To be sure, it’s possible that REEs mined in California could be shipped to China for refining, and then shipped back to U.S. and non-Chinese users under the terms of Neo Materials’ current export quotas. It’s also possible, however, to envision a situation in which REEs mined in California and refined in China — a country that currently consumes 70% of total REE production — could be impacted by future policy developments that would make it difficult or even impossible to bring them back into the global market.

    A weekend piece at WSJ Online captured the back-and-forth:

    Ed Richardson, president of the U.S. Magnetic Materials Association, says the plan is worrisome. The U.S. is already ‘dangerously dependent on China’ for rare-earth-magnet materials, including to supply its weapons systems, Mr. Richardson said in an email. Molycorp’s ‘export of U.S. rare earth assets into China will only exacerbate this problem,’ he added.

    Mr. Smith [CEO of Molycorp] played down the political and historical implications of the deal that now ties Molycorp, Magnequench and China. He said sending rare-earth oxides to China is a bid for “higher volume, higher margin” that will only reduce production costs in the U.S. and by implication boost supply of the metals for industrial users. “It does not in any way deplete our ability to serve the market outside of China whatsoever,” Mr. Smith said.

    There’s a history here. As metals analyst Rick Mills recounts, Neo Materials is parent company of Magnequench, formerly a U.S. REE magnet materials maker. Bought in 1995 by a firm that proved to be controlled by Chinese state-backed companies with ties to the highest levels of the ruling Politburo (two of the Chinese firms were run by in-laws of Deng Xiaopeng), Magnequench’s new management shut down its Indiana operations and shipped the processing facilities to China.

    Has Molycorp wrestled back into the U.S. control Rare Earths processing facilities lost more than a decade ago to China — or has China pulled into its orbit a chunk of newly-emerging U.S. Rare Earths production?

    Welcome to the geo-politics of resource development. Geology and economics may tell us where the metals are and whether they can be profitably brought out of the ground — but politics and the clash of nations will have their say, especially when the resource is scarce and its value, not just to commercial development but to national security, is great.

  • Happy Rhenium Month!

    In light of the recently announced investment deal between Molymet of Chile and U.S. Rare Earths miner Molycorp, which has significant strategic implications outlined by our very own Daniel McGroarty this weekend, it is only fitting that American Resources continues our ongoing educational campaign to highlight the breadth of U.S. mineral needs by designating “rhenium” as metal of the month for February.

    Rhenium is a specialty metal highly relevant to the aviation industry as part of high-temperature superalloys used in the manufacture of jet engines, as well as the chemical industry.  While not a Rare Earth Element (REE) itself, rhenium is extremely scarce in the earth’s crust and is almost exclusively recovered in very limited quantities as a byproduct of molybdenum and copper refinement.

    With the U.S.’s foreign import dependency rate currently standing at 86% for its rhenium supply and China and Kazakhstan topping the list of our foreign supplier nations, the element has all the makings of a critical mineral from a U.S. point of view.  The Department of Defense (DoD) has taken note, the question is – will our policy makers?

    Stay tuned for more for rhenium-related updates on blog, as well as on Twitter and Facebook throughout the month of February.

  • From rare earths to rare metals: Molymet takes a stake in Molycorp

    American Resources followers know their Rare Earths from their rare metals, and that distinction is key to understanding a strategic investment that’s getting a lot of attention right now: Molymet of Chile’s $390 million investment in Molycorp, the U.S. Rare Earths miner. But while most analysts are looking for the commercial synergies in the deal, [...]
  • Will Canada step in to fill REE void?

    With China’s restrictive rare earths export policies having triggered a rush for other nations to get their hands on the sought-after set of critical minerals, Canada has hopes of filling the REE void left by China, according to the Gemcom Software Mining blog. A nation already rich in a broad variety of mineral resources, Canada is [...]
  • Rhodia, Areva team up to develop REE and Uranium

    Rhodia Rare Earth Systems, one of only two rare earths producers in Europe, has entered into a cooperative agreement with French nuclear group Areva, according to AFP. The agreement between the two companies spells out a plan to jointly develop and exploit previously untapped deposits containing a mix of uranium and rare earths elements (REEs). [...]
  • China and Molycorp: what could have been

    The New American recently provided an in-depth look at Chinese investments into the world’s minerals and metals supply. I’ve included an excerpt below, but I recommend you click here to read the full article. While the piece was certainly compelling, I want to point out a few key facts that were not included. The author, [...]
  • Molycorp buys rare earths processor

    Molycorp, the leading edge of the U.S. re-entry into Rare Earths production, has acquired a controlling share in Estonia-based Silmet, one of only two rare earths refineries in Europe. The deal will allow Molycorp to double its planned production capacities to roughly 6,000 tons per year.