Molycorp begins exploratory drilling for rare earths metals in Mojave Desert Andrew Edwards, Staff Writer Created: 12/20/2011 11:48:37 AM PST
Molycorp, which resumed rare earths metals mining operations in the Mojave Desert one year ago, is now looking for more near its mine at Mountain Pass. "We're drilling now," company spokesman Jim Sims said Tuesday.
Molycorp announced it received permission from the U.S. Bureau of Land Management to conduct exploratory drilling operations near its Mountain Pass mine.
Mountain Pass is on San Bernardino County's side of the Nevada state line, not too far from the 15 Freeway. Molycorp's corporate offices are in Greenwood Village, Colo.
The prospect of expanded mining at Mountain Pass is the latest news in what has been an active year for Molycorp and the Mountain Pass mine, although analyst Jack Lifton of Technology Metals Research said the company still has a lot to prove.
"I think Molycorp is very P.R. savvy," Lifton said. "I don't know much about their technical skills."
Before December 2010, the Mountain Pass mine had been shut down for eight years due to environmental reasons.
In the months since, Molycorp has not only reached profitability, but it has also acquired processing facilities in Arizona and Estonia, while also building expanded milling and ore separation facilities at its Mountain Pass mining site.
Molycorp also announced a joint venture with two Japanese companies, Mitsubishi and Daido Steel, in which the three companies would work together to produce high-tech magnets.
Amid the hoopla, Molycorp's stock rose and then fell to a value little changed from where it was before mining resumed. On Dec. 1, 2010, Molycorp's stock traded at $30.
The company's stock price rose to a peak of $77.54 on May 3 - shortly after a "groundbreaking" event at its Mountain Pass facility - and his since trended downward, selling for $29 in after-hours trading Tuesday.
About 1,400 people work at Mountain Pass, 275 of whom are full-time Molycorp employees, Sims said.
The company plans to invest nearly $900 million on its "Project Phoenix" effort to increase mining operations at Mountain Pass, and Sims said the mine and associated facilities will be in full production before the end of next year.
In October, Molycorp announced the expansion was going so well that the company was able to increase its projections for 2012 by about 3,500 metric tons of material to 8,000-10,000 metric tons.
Lifton said he will wait to see if Molycorp actually meets those projections and is able to manufacture goods with newly mined materials before judging Molycorp's prospects for success in what he sees as an increasingly competitive marketplace for rare earth metals.
The rare earths metals are 17 natural materials that include the lanthanide series of elements.
Neodymium, one of the rare earths metals, is employed in the production of powerful neodymium-iron-boron magnets. Those and other magnets produced from rare earths metals are used in myriad high-tech applications including hybrid cars, wind turbine generators and missiles.
Scientists and engineers call the elements "rare" not because they are particularly scarce relative to other materials, but because they are rarely found in sufficient concentrations for mining to be economically viable.
Mountain Pass is the only place in the United States where rare earths metals are mined. Most of the world's supply comes from China, but Sims said Molycorp executives are counting on Beijing to keep export restrictions in place for Chinese materials.
Several media outlets have reported the Chinese government will block the state-owned Baotao Steel from exporting rare earth metals in 2012. Nasdaq's news service reported that Baotao Steel's production accounts for half of the world's rare earth metals' production.
In Lifton's view, Molycorp is not the only producer that stands to benefit from stricter Chinese export quotas.
In a recent analysis for Technology Metals Research, Lifton predicted "there is absolutely no chance that the future rare-earth-demand market will simply replace one monopoly with another" and named four other companies that he expects to be competitive.
Those firms are Lynas Corporation Ltd. and Arafura Resources Ltd., both of which are in Australia; Frontier Rare Earths Ltd., a Luxembourg firm focused on African supplies, and Rare Element Resources Ltd., which is exploring northeast Wyoming.
Molycorp has not disclosed exactly where its new exploratory drilling is taking place, but Sims said concentrations of heavy rare earths elements have been observed about four miles from Molycorp's mine at Mountain Pass.
Molycorp executives will not know until the second quarter of 2012 if the rare earths, which include the elements terbium, dysprosium and europium, will be found in concentrations to make expanded mining operations economically viable.
Contact Andrew via email, by phone at 909-386-3872 or 909-483-8550, or follow him on Twitter @InlandBizz.
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