Molycorp secures US$390M for growth

U.S. rare earths producer Molycorp (MCP-N) is giving Chile-based Molymet 12.5 million shares in exchange for US$390 million. 

That works out to US$31.20 apiece — a 10% premium to Molycorp’s 20-day volume weighted average share price as of Jan. 30.  

Molycorp says the proceeds will help it grow its business strategy growth elements and pursue future opportunities.

As part of the transaction, Molycorp, which is the biggest rare earths producer outside of China, will welcome one Molymet executive to join its board.  

Molymet is the world’s leading processor of both molybdenum and rhenium. 

Molybdenum is commonly used as an alloying agent in steel, while rhenium is mainly used in super-alloy turbine blades for jet engines and land-based, gas-powered turbines.  

Molymet boasts plants in Chile, Mexico, Belgium, Germany and China, and a US$1.8-billion market capitalization.

“We are making this investment in Molycorp because we are very bullish on the upside potential of the company, as well as the highly synergistic technologies and market positioning of our respective companies,” Molymet’s executive chairman and chief executive, John Graell, says in a statement. 

Graell is expected to join Molycorp’s board once the transaction closes, which requires governmental approvals and meeting customary conditions. 

Molycorp says it’s on track to bring a rare earth production facility online at its Mountain Pass rare earths mine in California. The new facility is expected to run at a 19,050-tonne annual rate  by late 2012.  

In early January, Molycorp announced it had signed offtake agreements for 78% of that initial, phase-one production, and is working on selling another 6%.   

Mountain Pass has 2.2 billion lbs. of rare earth oxide reserves and 4.6 billion lbs. of total resources, which could be mined for more than 30 years. 

On the funding news, the company’s shares were off 4% to US$29.69 as 7.4 million shares changed hands.