Molycorp fails to secure bidders

By James Sean Dickson
Published: Monday, 21 December 2015

Company attempts to exit bankruptcy proceedings, but no bidders keen to buy entire business.

US-based former rare earths producer Molycorp Inc., which is currently attempting to exit bankruptcy proceedings, has seen no bidders come forward for the business as an entire company, meaning that the firm will likely see its assets sold off in chunks, according to reports.

Quoting sources familiar with the matter, Bloomberg said that offers are only being made by potential buyers for the company’s overseas businesses, and not its Mountain Pass mine and processing facility in California.

Molycorp, which has total debts of around $1.9bn, applied for Chapter 11 bankruptcy protection in Delaware in July and put its Mountain Pass site into care and maintenance later in October.

As part of the bankruptcy process, Molycorp and its creditors have put forward plans to potential buyers for either an entire company sale, in which the purchaser would acquire all arms of the company, or, alternatively, an asset strip model, in which business divisions are sold off to the highest bidders.

Secret bankruptcy plans

At the start of December, Molycorp requested that elements of its Chapter 11 bankruptcy plan be temporarily sealed, according to a report by the Wall Street Journal.

The company wants to keep secret a number of facets of its plan, including financial projections and valuation analyses prepared by its advisors, in an effort to protect the information from various bodies invited to submit bids

The request would cover voting materials prepared for creditors entitled to cast ballots on Molycorp’s plan to emerge from bankruptcy, the paper said.

Molycorp filed for Chapter 11 bankruptcy protection in June 2015 as Chinese oversupply continued to put negative pressure on rare earth prices.

The company sought approval for voting materials on its Chapter 11 restructuring plans on 8 December, with preliminary bids due after a hearing on its disclosure statement, which will outline information necessary for creditors to vote on the plans.

The sealing motion will be heard on the same day as the disclosure statement. If approved, creditors will not be able to test the plan’s financial data until after voting materials are approved, though the information will be released before the vote is held.

There has been a degree of tension between Molycorp bondholders and unsecured lenders in recent months, with many protesting that the company had capitulated to demands by its senior lender, Oaktree Capital LLC, and abandoned its duty to steer the best course out of bankruptcy.

Although Molycorp and Oaktree deny the claim, Judge Christopher Sontchi has since ordered them into mediation with the other creditors.

Molycorp’s proposed dual-track method of bankruptcy exit means it will either be split up and sold in segments or undergo a debt "haircut", before being re-launched.

Rare Earths News Review

Ossen sees margins rise

In Shanghai, China, Ossen Innovation Co. Ltd posted a 7.6% rise in margins to $30m for Q3 2015, compared to the equivalent period in 2014.

The coatings company, which uses zinc and rare earths to surface pre-stressed steel materials for bridges and other infrastructure projects, also recorded net income growth of 601% year-on-year (y-o-y), to $3.3m.

"While our revenues grew by 7.6% y-o-y, gross margin, operating margin and net earnings all reached the highest levels in four years as a result of low material costs and strong sales volume across all major product categories that more than offset decline in average selling prices," Liang Tang, Ossen Innovations’ chairman said.

Positive results from  Medallion Resources samples

TSX-V-listed Medallion Resources Ltd has received positive feedback from processing companies regarding its mixed rare earth concentrate product samples.

"Based on those responses, it is clear that this concentrate product, once capable of being produced in commercial quantities, is suitable for input into standard commercial rare earth refineries or separation plants," Medallion said.

"This is a welcome and expected response as well as validation of our approach. Rare earth processing can be technically challenging, so we have taken a straightforward approach to get to production. Our strategy is to purchase by product monazite sand. This will serve as a high-grade feedstock for our planned commercial extraction plant," Don Lay, Medallion’s CEO, added.

Tasman Metals completes  pilot plant tests

TSX-V-listed Tasman Metals Ltd has completed a beneficiation pilot plant test on mineralised rock from the company’s Norra Karr heavy rare earths project in Sweden.

Run at the Geological Survey of Finland in Outokumpu, tests used a 6.5 tonne sample of rock, from which 5.6 tonnes was crushed, ground and magnetically separated according to Tasman’s PFS flow sheet. 

Scavenging magnetic testing was also carried out to ascertain enhanced recovery; 79% yttrium recovery was achieved in a mass of 34.8%.

The pilot plant produced around 1.9 tonnes eudialyte/REE enriched mineral concentrate, in addition to 3.7 tonnes of nepheline and feldspar byproduct. 

Mkango Resources published PFS

Mkango Resources Ltd has published an updated prefeasibility study (PFS) for its Songwe Hill rare earths project in Malawi, which outlined an after tax net present value (NPV) of $345m and an after tax internal rate of return (IRR) of 37%, based on a value of $59.8/kg rare earth oxide (REO).

The company said that initial capex for the project is among the lowest in the rare earth sector at $216m, including a contingency of $20m.

Production from the mine is expected at 2,841 tpa REO in mixed chemical concentrate over an 18-year mine life. Cash operating costs have meanwhile been estimated at $13/kg for the first 5 years of production and $16.4/kg REO for the life of the mine.

"The market review, completed in conjunction with the updated PFS, validates our strategy and focus on the 'big four’ magnet rare earths, which have a strong market outlook, geared to China’s emerging green economy and growing consumer demand, and make up over 80% of our potential future revenue," the company’s CEO, William Dawes, said.