Molycorp to mothball Mountain Pass

By Laura Syrett, Myles McCormick
Published: Saturday, 26 September 2015

Sole US rare earths mine to close, with mothballing to commence in October as part of DIP funding requirements.

US rare earths miner Molycorp Inc. announced in late August that its Mountain Pass mine in California will be "transitioned into care and maintenance mode" from October.

"Rare earths production at the Mountain Pass facility will be suspended no later than 20 October," the company said in a statement.

It added that "the site, including idled machinery and equipment, will be maintained to ensure that it remains in a safe and stable condition".

"Moving Mountain Pass to 'limited operations’ was required by the terms of our debtor-in-possession (DIP) financing, which was approved by the US Bankruptcy Court in July," a spokesperson for Molycorp told IM

"The specifics of limited operations, which have now been defined as 'care and maintenance’ mode, were recently determined through a collaborative process by the company and our DIP lender over the past several weeks."

The spokesperson added that the company was not yet certain how long the facility would remain closed.

"That depends largely on market conditions and other factors that are difficult to forecast," they said, highlighting the issue of illegal rare earths production in China as a major factor undermining the wider market.

Molycorp said that the continuing poor prices in rare earths were a key influence in the decision to suspend operations at the plant, but stressed that it plans to continue serving its rare earth oxide customers via its production facilities in Estonia and China.

"It is fair to say that the speed with which Mountain Pass can be restarted will depend in part on whether the US government decides to lend any active support to a restart effort," the spokesperson said. "Can production be restarted there? Absolutely. Mountain Pass is a strategic, national asset to the US and the West."

Greenwood, Colorado-based Moly-corp filed for Chapter 11 bankruptcy protection in Delaware in June in an effort to restructure its $1.7bn debts.

The company’s rare earths business has been loss-making for some time, thanks to a combination of declining rare earths prices and costly operational glitches at Mountain Pass. 

Oaktree Capital Management LLC, Molycorp’s most senior lender, suggested in the course of bankruptcy proceedings that these losses might be offset by squeezing funds from Neo Material Technologies Inc., a profitable business acquired by the firm in 2012, something it wishes to avoid.

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China Northern profits edge up

China’s largest rare earths producer, China Northern Rare Earth High-Tech Group Co. Ltd, recorded a net profit of Chinese renminbi (Rmb) 261m ($41m*) for the first half of 2015, up 1.75% year-on-year (y-o-y).

Turnover rose more substantially, by 35.2% y-o-y to Rmb 3.23bn ($507.2m) for H1 2015. The company said that though turnover had risen, its entire rare earth division gross profit rate had fallen by 4.7% y-o-y and its rare earth source material gross profit rate had declined by 8.3%.

China Northern said it had worked to upgrade its techniques and environmental practices for its source material production arm. Meanwhile, in its functional material and applications division, the company said it had intensified its focus on cost controls, market expansion and R&D in an attempt to maximise the benefit of its upstream to downstream industry presence.

For now, however, China Northern said that downstream demand remains insufficient, held down by the slowing wider Chinese economy, and that the industry’s overcapacity problem has not yet been solved.

On consolidation, the company announced an increase in its investment in Gansu Provincial Rare Earth New Material Co. by purchasing 5% of its shares. Inner Mongolia Shengyilun Material Co., meanwhile, will see 10% of its shares purchased by the group.

Public data indicate that in July 2015, Gansu’s total assets stood at Rmb 3.1bn ($486.8m) and its net assets stood at Rmb 2.5bn ($392.6m). Shengyilun Material, meanwhile, has a capacity of 6,500 tpa rare earth oxides (REO).

Looking forward, the general manager of China North, Zhong Zhang, said that while the current market conditions are poor, he expects the second half to see an improvement in the industry and in prices.

Xiamen Tungsten income declines

Xiamen Tungsten’s H1 results, released in early September, revealed that net profit stood at Rmb 34m ($5.3m) for the January-June period, down 75.7% y-o-y.

While its tungsten products also performed poorly, the company’s rare earths business realised a loss of Rmb 9.6m ($1.5m) in the first half of the year on a 15.8% lower rare earth product turnover of Rmb 317m ($49.9m).

Xiamen Tungsten entered the rare earth industry in 2006, first making a profit, of 0.24%, on incomes in 2013. This expanded slightly in 2014, though net profit as a proportion of the group only stood at 3.25%.

The company said that it expects its full year net profit figure to drop by 50% y-o-y.

Chinese export boom

A weak domestic market, combined with export tax reforms, appears to have led to a record volume of rare earth exports from China in July, up 103.4% y-o-y to 3,658 tonnes, according to China Customs.

While rare earth export volumes are typically highly erratic and non-averaged comparisons are usually unhelpful, this is the highest volume of rare earths exported in the last four years. For H1 2015, exports increased by 10.3% y-o-y to 17,500 tonnes.

Inner Mongolia, one of the most important provinces for rare earths production in China, exported 2,664 tonnes rare earths in July, up 36.5% y-o-y. Average export prices were down by 34.7% y-o-y, standing at Rmb 32,000/tonne ($5,024/tonne), however.

China exported 40% and 130% more rare earths to its key markets, the US and Japan, respectively.

*Conversions made September 2015