Molycorp Buys Up Another Rare Earth Firm

Rare earth mining company Molycorp (s MCP) has made another acquisition, and yes, its shares are even higher than when we last covered the company earlier this month. Monday morning, Molycorp announced its subsidiary, Molycorp Minerals, has acquired rare earth mining company Santoku America — based in Tolleson, Ariz. — from Japanese firm Santoku Corporation, for $17.5 million.
The deal is Molycorp’s second acquisition this month. In early April, Molycorp said it would spend $89 million for a 90-percent stake in European rare earth mining company AS Silmet. Molycorp now has two new avenues for rare earth manufacturing capabilities outside of China, a country which has traditionally owned 95 percent of the world’s rare earth metals. These metals are used for a variety of growing markets, including hybrid vehicle batteries, wind turbines, compact fluorescent light bulbs and magnets for electric vehicle motors.
Molycorp says its new mines in Arizona will immediately produce rare earth materials that can make “neodymium iron boron” magnets, which are used in hybrid and electric cars and wind turbines, and “samarium cobalt” magnets, which are used in defense applications. China announced back in December that it will significantly cut its exports of these types of rare earth metals, opening a market for western alternatives.
Molycorp’s deal with Santoku isn’t Molycorp’s only Japan partner; it has a joint venture with Japanese mining giant Hitachi Metals, and a $130 million financing deal with Sumitomo Corp. Japanese companies, like European and American firms, want a way to be less dependent on China for rare earth metals, too.
Back in December, Molycorp’s stock rose above $50 per share, up dramatically from its debut price of $13.25 in July 2010. Friday morning, Molycorp is trading at around $75 per share, around five times its initial price.
Molycorp’s most recent earnings (last month) were solid, with a narrowed loss for the fourth quarter, and a jump in revenues. Molycorp recorded a loss of $7.9 million, compared with a loss of $9.1 million for the year earlier. Revenue jumped to $21.7 million from $2.2 million for the prior year.
Molycorp previously mined its metals from a 50-year-old rare earth mine in Mountain Pass, Calif., but stopped removing ore in 2002 after it had problems with toxic waste spilling into a nearby lake. Molycorp plans to start mining again in the Mountain Pass mine this year after modernizing and expanding the project.