After merger, Molycorp becomes a global rare earths player

It may not exactly be a match made in heaven, but the merger between Molycorp and Neo Material Technologies must surely reside in the rarefied strata of rare earth elements. With the bonds of the $1.3 billion matrimony with Neo Material now complete, Molycorp gains access to Neo’s magnet powder products, used to produce neodymium-iron-boron (NdFeB) bonded rare earth magnets.

The world’s strongest magnets, Neo magnets are found in a number of items, including electronic motors and sensors, computer disk drives, and MRI (magnetic resonance imaging) machines.

The merger of Canadian rare earth processor Neo Material and US-based rare earth miner Molycorp now positions the combined North American company as a leading player on the global stage. In Monday’s press release, Molycorp CEO Mark Smith states his company is now a formidable global rare earths player: “We now have the broadest global coverage in the industry, and we can immediately access highly specialized niche markets that were not available to us prior to the acquisition.”

In addition to the use of new technologies, the merger offers Molycorp greater access to Chinese markets for its products. China not only produces up to 95% of the world’s supply of rare earths, it consumes about 70% of that supply. Because of their magnetic and conductive properties, rare earths are used to make high-tech products ranging from smartphones to complex weapon systems. Rare earth elements (REEs) consist of 17 chemical elements in the periodic table that include 15 lanthanides, scandium, and yttrium. When sold in their oxide form, REEs are generally called rare earth oxides (REOs).

Molycorp, the only REO producer in the Western hemisphere, owns the world’s largest rare earth project outside of China. Critics of the merger believe that Molycorp’s export of its own rare earth assets into China will cause further problems for the US and other countries that are now dependent on China for rare earth materials. Smith, however, believes that sending REOs to China will reduce US production costs and increase the supply of REEs for industrial markets.

China’s policy on exports of rare earth elements will also play on this global stage, and Molycorp – like other companies – will be subject to China’s export quotas. Molycorp, however, remains undaunted in the combination of the two companies, which its CEO believes “will open up new and exciting opportunities for growth in the coming years.”

 

Bobby Duncan

Bobby Duncan is a Hoover’s text editor. In addition to covering environmental, mining, and chemicals companies, she likes to monitor the role of people in business.

Read more articles by Bobby Duncan.

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