INDUSTRIAL METALS / MINERALS

Molycorp's Mountain Pass REO $781m project expansion now fully funded

Insider stock sales notwithstanding, Molycorp says it's on time and on budget for both phases of its Mountain Pass rare earth oxides facilities expansion and modernization project.

Author: Dorothy Kosich
Posted: Friday , 17 Jun 2011

RENO, NV - 

The western hemisphere's sole rare earth oxides producer, Colorado-based Molycorp, announced Thursday it has now fully funded its US$781 million expansion and modernization project at its flagship Mountain Pass rare earth facility in California.

"Full funding of the capital plan of Project Phoenix is a major milestone in Molycorp's overall rare earth ‘mine-to-magnets' business plan," the company said in a news release.

"Project Phoenix is now fully funded, and we remain on time and on budget for both Phase 1 and Phase 2 of this estimated $781 million expansion and modernization project," said Molycorp CEO Mark A. Smith.

 "Beginning next year, we expect to significantly ramp up production of 10 different high-purity rare earth oxides-light and heavy rare earths-as well as a variety of rare earth metals, alloys, and permanent rare earth magnets," he said. "We also remain on track to emerge as the world's lowest-cost manufacturer of rare earth oxides, which will be a particularly powerful growth driver for our downstream manufacturing operations."

Smith noted Molycorp's recent acquisitions "have enabled us to manufacture rare earth metals and neodymium-iron-boron and samarium-cobalt alloys, which has moved us closer to realizing our full ‘mine-to-magnets' business plan."

Final capital funding of Project Phoenix was achieved through the successful closing on June 15, 2011, of a $230 million offering of Molycorp's 3.25% Convertible Senior Notes due 2016. The notes are convertible at any time into shares of Molycorp common stock, cash, or a combination of both.

The company also announced the closing of a secondary public offering of 11.5 million shares of Molycorp common stock at a price per share of $51. Analysts worried that the sale of nearly 14% of the company's shares by major stockholders may be a sign that insiders see more rare earths competition is coming.

As the Wall Street Journal reported Thursday, "Molycorp has been a blockbuster hit for investment firms Resource Capital Funds and Pegasus Capital Advisors LP and commodities trader Traxys Group." Those three backers turned a $200 million Molycorp investment into a paper profit of about $2.3 billion in 30 months, or $2.6 million of profit per day.

Resource Capital offered 5.7 million shares and Pegasus 3.3 million for sale. Resource Capital now holds a 16.5% Molycorp stake while Pegasus owns 9.5%, according to the WSJ.

With Project Phoenix, Molycorp hopes to produce 19,500 metric tons of REO equivalent per year from Mountain Pass, located near Las Vegas on the California-Nevada border. Production will increase to 40,000 metric tons annually by the end or 2013. The company now sells products to customers in Europe, North and South America, Asia, Russia and some former Soviet Union nations.

Metatags: Molycorp, Molycorp insider stock sales, Mountain Pass facility expansion, Project Phoenix, rare earth oxides, REO products manufacturing, Project Phoenix financing, U.S. rare earths mining, U.S. rare earth manufacturing