Chinese bidder snaps up only commercial rare earths mine in US

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Published: Friday, 07 July 2017

A Chinese consortium including rare earth producer Shenghe Resources puts in the winning bid at Mountain Pass auction, but the deal will now face regulatory scrutiny.

Chinese-led consortium MP Mine Operations (MPMO) put in the winning bid for the only commercial rare earths mine in the US, but the deal will now have to face scrutiny from regulators, as political opposition to the overseas ownership of rare earth assets grows.

Mountain Pass, a rare earth mine in Southern California, was up on the auction block on 14 June, following the bankruptcy of its owner and former operator Molycorp.

The auction was won by MPMO with a $20.5m bid, beating out the stalking-horse bidder ERP, a venture led by US coal billionaire Tom Clarke.

MPMO is a joint venture of QTT Financial and JHL Capital, two US-based noteholders from the Molycorp bankruptcy, and the Chinese rare earths company Shenghe Resources.

Shenghe, which is participating in the joint venture through the holding company Resources International Trading Singapore, is part-owned by the Chinese government, as well as regional state institutions in its home region of Szechuan.

"If the acquisition is approved by the US government, the future development of Mountain Pass will be made through Resources International Trading Singapore," Shenghe said in a statement on 16 June.

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The Mountain Pass mine in Southern California.
AlanM1 

Regulatory scrutiny

The deal is bound to face scrutiny in the US, both by the courts and then by the Committee on Foreign Investment in the United States (CFIUS).

MPMO announced a plan to sign the asset purchase agreement for Mountain Pass in the near-term, before submit it to the US court for review.

The US court will be holding a hearing on 23 June to announce the final decision for the acquisition, according to Shenghe.

This is prior to any investigation the deal may face by CFIUS, which is mandated to look at the national security implications of overseas investment.

CFIUS has the power to block the purchase of "critical infrastructure" by overseas interests.

In March, the Southern Californian Republican congressman Duncan Hunter introduced the Materials Essential to American Leadership and Security Act, which would expressly instruct CFIUS to reject any bids for rare earths resources by Chinese companies. 

Key mineral deposit

The USGS estimates the Mountain Pass reserves at 20m tonnes bastnasite ore, with an average grade of around 9% rare earths oxides, particularly rich in cerium, lanthanum and europium when compared to Chinese reserves.

Mountain Pass was once the world’s main producer of rare earths, but production fell off sharply in the '90s with competition from burgeoning Chinese supply.

Production was revived by Molycorp after it took over the site in 2008, investing some $1.5bn in ramping up production, but stalled again when Molycorp declared bankruptcy in 2015.

Rare earths constitute the 15 lanthanide elements in the Periodic Table, plus yytrium, a naturally occurring mineral. They are often used in a myriad of end markets, including glass polishing (cerium’s main end market use), and in high strength magnets, used in complex electronics, including smartphones and military technology.

Despite their name, rare earths are relatively common, but concentrated deposits which are commercially exploitable at current price levels are unusual, and Mountain Pass represents the only known deposit of this type in the US.

China dominates the rare earth market, producing far more of the minerals than the rest of the world combined, leading to concerns about the ability of other countries to source such supplies at short notice.

Baotou to tackle rare earth waste problem at Bayan Obo

Albert Li

At a seminar organised by the Baotou municipal government to discuss green development of Bayan Obo, held in Beijing on 10 June, delegates heard that the rare earth reserve in this mine accounts for 80% of China’s resource but the recovery rate is low.

As Xiulian Wang, vice-mayor of Baotou, told delegates, the figures do not match the title of the biggest rare earth mine in the world, and Bayan Obo’s output levels and recycling rate are long-term strategic problems.

Baogen Shen, academician at the Chinese Academy of Sciences, suggested that state-level research was required on the environmental impact of rare earth tailings, with a view to developing effective plans for ecological protection and treatment, as well as work on recycling technology. 

The tailings pond from this rare earth mine consists of 200m tonnes of waste, he said, including 10m tonnes of rare earths and waste acids, representing a huge amount of waste and risking significant damage to the environment.

Solid wastes from the Bayan Obo mine come from tailings mostly, both in the east and west iron ore mining areas. 

The east mine produces 7m tpa tailings, which are stored in the rare earth reserve warehouse, with a rare earth recovery rate of about 10%. The west mine produces 5-6m tpa tailings as normal solid wastes, but output is iron ore only and no rare earth is mined. Associated minerals such as fluorspar, thorium and niobium are mostly wasted.