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Molycorp Mountain Pass REE operation finally nears production

Rare good news from rare earths producer, Molycorp, propelled the company’s stock up 11% on the NYSE.

Wednesday’s announcement by Molycorp that it expects to commence production at its Mountain Pass, California, rare earth mining and processing facility in the fourth quarter sent the troubled company’s stock climbing.

The company said its chloralkali plant is now mechanically complete and that full-scale commissioning operations have commenced. The plant will recycle wastewater and produce hydrochloric acid and caustic soda used in the rare earth separations process.

Company officials said that, once fully operational and optimized, the plant is expected “to help the facility achieve its cash production cost targets, which the company believes will make it competitive with the lowest cost producers globally.”

Molycorp also announced that the final unit of its multi-stage cracking plant at Mountain Pass is now “mechanically complete and is being commissioned. The unit is part of a multi-stage chemical process designed to increase the facility’s current rare earth recovery rates, increase production throughput, and contribute to lower unit production costs.”

“These are the last major construction activities of [the $1.5 billion] Project Phoenix, the re-build of Mountain Pass, and we expect these units to be commissioned and enter into production in the fourth quarter of 2013,” said Constantine Karayannopoulos, Molycorp CEO. “Bringing these units online will help us focus on increasing production while continuing to reduce our production costs.”

The latest announcement follows a long wave of bad news for Molycorp including: the announcement that net income plummeted 551% last year, the filing of a class-action lawsuit by shareholders against Molycorp’s former CEO and former CFO accusing them of making “false and misleading statements” about Mountain Pass’ rare earths production timetable, as well as the company’s earnings, reportedly causing the stock to “trade at artificially inflated prices” between March 9, 2011, and Nov. 10, 2011.

To compound Molycorp’s problems, rare earths demand has decreased, along with rare earths prices. Molycorp’s shares were down 29% this year until Wednesday’s announcement, prompted an 11% increase in share value.

“While Molycorp is certainly still too speculative for average investors, today’s good news, coupled with the stock’s still-depressed price, might provide resource-savvy Fools with an attractive risk/reward tradeoff,” advised Motley Fool contributor Brian Pacampara Wednesday.

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