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Molycorp buys into a Rare Chinese mine for the “nuclear option” | Deal insight

Rare Earths, though tainted by radioactivity and nuclear fission ramifications, are as much a part of WTO as any other trade. For years, the problem for the industry has been the virtual dominance of Chinese producers and exporters in the rare earths business as 90% of the World’s accounted rare earth production is originated in China and China would prefer to control the trade of these rare earths thru export quotas but has to bow to WTO actions every now and then,. Molycorp, being the one listed US producer along with another small producer in Australia therefore cannot be faulted for trying to get a foothold of their own into the Chinese “mines” . Molycorp has succeeded with a $1.6 bln bid ( Loonies $1.3 bln) Neo imports Chinese rare earthsa grade above the current MolyCorP mix

Rare earths produce many other non radio active materials that actively interest Commodities traders too, like all things China have been on a One Way , that’s Up! strategy for a decade, accentuated by a multifold rise in the last three years, and have a Chinese IPO trading in the USA which will also likely become a staple reason once the accounting fracas blows over with many China IPOs like China Rail also doubling for state divestment and share swaps being inherently cheaper and easier for a deal in China.

The deal gives Molycorp, which has a mine-to-magnet strategy, the ability to produce both the large magnets that power the main motor in a hybrid car and also the smaller magnets that move that car’s side mirrors and seat.(Reuters.com)

Neo Materials is Toronto based and though Molycorp has notified China it would use its Chinese mines to step up exports from China, the Chinese

Molycorp

Image via Wikipedia

policy makers may still take time to mull their options. Rare earths are used in Cars, smartphones and other Electronic equipment. Reuters insider highlighted a feature on the Industry last year at the peak of the Commodities Cycle as Chinese could come under increasing pressure this year to keep peeling off export controls and producers still look for options to drive up the price of this pocketful of Gold dust

English: Global rare earth element production ...

Image via Wikipedia

China in return is also an important export market for rare earths and thus Molycorp.

Molycorp has plans to develop the entire rare earth chain, from raw material to high-value rare earth magnets. The bid for Neo will give it cutting-edge processing technology, expand its product portfolio and provide valuable magnetic alloy patents.

The move could also silence some of the criticism the U.S. company faces for being overly reliant on lower-value light rare earths like cerium and lanthanum.

The deal is strategic for Neo too, which, faced with dropping margins on feedstock costs in China, will gain a secure supply of raw materials, said Hykawy.

Other companies in the sector like Rare Earth, Wy. or Quest Rare Minerals, QC are under the scanner right now by investors as the deal makers get sold on the news.

 

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