Molycorp to increase supply of rare earth materials to Hitachi Metals; the two call off US joint venture plans
|Molycorp’s Mountain Pass facility (Project Phoenix). Source: Molycorp. Click to enlarge.|
Under a new agreement, Molycorp, Inc., the Western hemisphere’s only producer of rare earth oxides (REO) and the largest REO producer outside of China, will supply Hitachi Metals with rare earth magnetic materials, including Didymium (a mix of neodymium and praseodymium) metal and alloy, as well as Lanthanum Oxide. The three-year deal, which extends and expands upon an existing supply relationship between the companies, significantly increases the amount of rare earth materials that Molycorp will provide Hitachi Metals.
Also, Molycorp and Hitachi Metals are suspending discussions for now on their December 2010 letter of intent to create a joint venture in the US to manufacture neodymium-iron-boron (NdFeB) alloy and permanent magnets made from the alloy. (Earlier post.) The companies were unable to reach agreement on certain key matters affecting the value of the joint venture to each party.
|Global rare earths supply and demand. Source: Molycorp. Click to enlarge.|
Rare earth materials and permanent magnets are utilized in a wide range of products, but are critical enablers for many clean energy technologies such as hybrid and electric-drive vehicles, wind turbines, and lighting as well as for consumer electronics, IT and communications systems, and defense systems.
Molycorp reportedly wanted the partnership to include rare-earth magnets for consumer electronics applications, while Hitachi Metals wanted to focus primarily on hybrid vehicles and electric cars.
Hitachi Metals said that it will now study the possibility of manufacturing neodymium magnets on its own in the United States to meet increasing demand for neodymium magnets in North America and Europe, mainly for use in hybrid and electric vehicle applications.
REO supply volume under the new agreement begins at a level comparable to the companies’ current agreement and grows substantially when Molycorp reaches its Phase 1 production level in 2012 at its flagship rare earth production facility at Mountain Pass, California.
Molycorp says that the new supply relationship demonstrates the progress the company has made in developing its downstream manufacturing capabilities over the past year—a “mine to magnets” vertical integration strategy.
The oxide and metal production at the Molycorp Silmet facility in Estonia and the alloy production at the Molycorp Metals and Alloys facility in Tolleson, Arizona, will enable the company to produce the upgraded magnetic materials necessary to meet a significant portion of Hitachi Metals’ global requirements when Molycorp reaches its full, Phase 1 production levels at Mountain Pass, the company said.
In June, Molycorp announced that it had secured the final funds necessary for the capital build out of its estimated $781 million expansion and modernization project at the Mountain Pass facility with the completion of an offering of $230 million aggregate principal amount of 3.25% Convertible Senior Notes due 2016.
When Phase 1 of the project is completed (“Project Phoenix”) Molycorp’s manufacturing assets will comprise the first fully integrated rare earth manufacturing supply chain, producing high-purity rare earth oxides, metals, alloys, and neodymium-iron-boron (NdFeB) permanent magnets, widely used in transportation, high tech, clean energy, defense, and other industries.