Rare Earth Producer Molycorp to Acquire Rare Earth Processor Neo Material Technologies in $1.3 Billion Deal

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Researched by Industrial Info Resources (Sugar Land, Texas)--U.S. rare earth miner Molycorp Incorporated (NYSE:MCP) (Greenwood Village, Colorado) has announced plans to acquire Canadian rare earth processor Neo Material Technologies Incorporated (TSX:NEM) (Toronto, Ontario) in a $1.3 billion deal. The transaction broadens Molycorp's position as a vertically integrated company, responsible not only for rare earth production from the company's flagship Mountain Pass mine in California, but also the development and distribution of rare earth products.

Neo Materials produces magnet powders and other rare earth products, which are key materials in the production of high-tech products such as cell phones, computers and tablets, electric and hybrid vehicles, wind turbines, and magnetic imaging devices. The acquisition significantly broadens Molycorp's geographic footprint. In addition to its mine in California, the company also owns rare earth production facilities in Arizona and Estonia. Neo Materials boasts 20 sales, production, and research and development facilities in 10 countries, including Canada, the U.S., Germany, the U.K., Japan, South Korea, China, Thailand, Singapore and Barbados.

The connection with China, the world's largest producer and consumer of rare earth products is very significant for Molycorp. Speaking at a press conference about the acquisition, Molycorp President and CEO Mark Smith said: "It will create one of the world's leading vertically integrated rare earth technology companies with global reach. This transaction will give Molycorp exposure to the world's largest, fastest growing rare earth consuming-market, namely China, which now consumes about 70% of global rare earth production."

China accounted for about 38% of Neo Materials' revenue of $800 million in 2011. The company's customers include well-recognized names such as Philips, Panasonic, Epson, Samsung, Hitachi and BASF. While the transaction still needs regulatory approval as well as the approval of Neo Materials' shareholders, it is expected to be completed in the second or third quarter of this year.

Molycorp's flagship facility is the Mountain Pass rare earth mine and mill in San Bernadino County, California. The mine had been closed since 2002, and Molycorp began the restart and modernization of the mine, which it refers to as Project Phoenix, last year. In late February, Molycorp announced that it was beginning the sequential startup of the mine at an initial production rate of 2,800 tons of rare earth ore per day. The facility will reach its Phase I annual production rate of 19,050 tons per year of rare earth oxide in the third quarter of this year.

Molycorp is getting ready to kick off its Phase II expansion of the mine, which will increase production to approximately 40,000 tons per year. "This transaction leverages Neo Materials' existing infrastructure to allow Molycorp to ramp up its overall production once Project Phoenix begins in 2013," said Smith. Molycorp is also constructing a 30-megawatt natural gas-fired combined heat and power facility to power the operation, as well as a chlor-alkali plant to provide chlorine and caustic soda for the mining process. The power plant will use liquefied natural gas (LNG) until a feeder line to the facility is completed, which is expected to occur in April. Together, the projects have an estimated combined total investment value of $895 million.

The acquisition of Neo Materials will provide Molycorp with a product line and broader customer base for the facility's output when it achieves full production capacity, which is expected to occur in the summer of next year.

Information on these and other Metals & Minerals Industry projects is available in Industrial Info's North American Industrial Project Database.

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