Colorado-based Molycorp Inc. has had nothing but trouble since it reopened the only U.S. rare earth mine a year ago.

Sinking prices have shafted its market value, its CEO Mark Smith departed last month, it’s the subject of an investigation by the U.S. Securities and Exchange Commission, and it faces a lawsuit alleging citing engineering deficiencies at its Mountain Pass, Calif. mine, which Molycorp opened, after years of dormancy, to patriotic cheers last February.

With the plunge in its stock, various industrial companies may now be trying to acquire it at a bargain price to assure themselves a source of the vital metals currently controlled by China, which has a grip on 95 percent of the world’s supply. Manufacturers build rare earths into smartphones, computers, cars, hybrid and electric vehicles, wind turbines, missiles, light bulbs and many other products.

Suitors include German industrial giant Siemens as well as Japanese and South Korean car makers Nissan and Hyundai, according to a Bloomberg story early this month that cited several industry analysts.

“At this point, Molycorp is definitely in play,” Toronto-based Luisa Moreno of Euro Pacific Capital Inc. told Bloomberg. “It would be a very good target for companies that are interested in being in this space if they recognize the rare earth space is important and they have the cash to take Molycorp and make it a real producing company.”

GOIN’ DOWN DOWN DOWN
Molycorp’s difficulties socked investors with a 61 percent loss in 2012, Bloomberg noted. A stock that had traded as high as $77.54 in May 2011 had tanked to $9.44 on Dec. 31, 2012. Shares have been rising recently on takeover rumors.

One rare earth expert doesn’t believe that Siemens, Nissan and Hyundai stand a chance. Rather, China would be the most likely acquirer, further cementing its hold on the market.

“Molycorp has no value outside of Chinese control,” says Jim Kennedy, president of St. Louis-based rare earth and thorium consulting firm ThREEM3, which also owns right to rare-earth byproducts from Missouri’s Pea Ridge iron ore mine. China’s ability to influence supply and prices means that any other acquirer would struggle to survive, he said. “Why would any corporation buy Molycorp when 83 percent of its production will sell at a loss?” Kennedy wondered in an email exchange with me.

MEET ME IN THE MOJAVE

Adding legs to his assertion: According to one source, Chinese government officials recently toured Molycorp’s Mountain Pass facilities in Mojave Desert, near Nevada. They are not interested in the deposit so much as the company’s refining techniques, the source said.

The Chinese government owns many rare earth companies including giant Baotou Steel Rare-Earth. China has recently imposed production and export cuts in an effort to drive up the price of rare earths. It has also undertaken a massive industry consolidation.

One reason that rare earth prices - and thus Molycorp’s share value - tumbled is that manufacturers have been finding ways around their reliance on rare earths.

They have also been scrambling to circumvent China’s control. (Molycorp faced heavy domestic criticism earlier this year when it became obvious that it was selling much of its U.S.-mined rare earths to China.)

An acquisition of Molycorp would echo a similar move from earlier this year, when an affiliate of Toyota bought half a Canadian rare earth deposit.

Rare earth users have also been casting about for sources of rare earths outside of China. As I noted yesterday, Japan thinks it might have landed a gold mine, so to speak, in Jamaica.

Also as I said yesterday, there’s another country that holds great promise as a future source. It’s a country that you might say is the opposite of Jamaica.

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Pele Mountain Resources Inc. announced initial drill results from recent drilling at the Eco Ridge Mine Rare Earths and Uranium Project at Elliot Lake.

Highlights from the first five holes drilled in the Northwest Extension (northwest of the Resource Wireframe) include: All five holes intersected the MCB along a strike length exceeding three kilometres; four of the five holes significantly exceeded the average U3O8 and average Total REO grade of the Resource Wireframe; Hole PM214 returned 0.063-percent U3O8 and 2,125 ppm Total REO over a true thickness of 2.99 metres, including 313 ppm neodymium oxide, 102 ppm yttrium oxide,and 22 ppm dysprosium oxide.

Pele’s President and CEO, Al Shefsky, said:

    "These results conclusively demonstrate that the Main Conglomerate Bed continues to the north and west of the current Resource Wireframe, which can potentially add significant resources and years of mine-life to the project. We are particularly pleased to see higher-than-average grades of U3O8 and Heavy REO in the Northwest Extension".

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TUC Resources shares soar following intersections of very high grades of over 90% heavy rare earth at its Stromberg Heavy Rare Earth prospect in the Northern Territory. Shares were up $0.141 a share, up over 113% before trending down to 96.72% at $0.12 a share.

Diamond drilling at the prospect returned 4.2 metres at 0.93% total rare earth oxide with 92% heavy rare earth oxide and included 3 metres at 1.19% TREO.Other intersections included 3 metres at 0.59% TREO including 1 metre at 1.10% TREO with 94% heavy rare earth oxide.

The clay host rock allows the conclusion that the geological processes that have formed at the Stromberg Prospect are similar to those that produced the renowned Southern China Clay rare earth deposits.

The Chinese rare earth deposits are at the forefront of rare earth production because the majority have very low production costs.

TUC hopes to find mineralisation with similar mineral processing characteristics to these Southern China Clay deposits and theorises its chances of doing so are increased due to the large number of prospects on its ground. It recently made breakthroughs in land access that allows it to target nearby Skyfall and Largo prospects.

TUC intends to focus 2013 exploration efforts on this large district potential with work planned to commence next month. Separately, it has entered into a memorandum of understanding with China's Shandong Provincial Bureau of Geology and Mineral Resources to form an alliance for the exploration of eight heavy rare earth tenements in the Stromberg region.

As part of the MoU, TUC will place 22.5 million shares to Shandong at an issue price of $0.10 a share together with 9 million free attaching options to raise a total of $A2.25 million. The options can be exercised at $0.20 a share before 14 August, 2014.

This new partner would fully fund the feasibility , design and importantly construction in return for a 50% share of that project and certain off-take rights.

Stromberg REE tenements

TUC Resources Ltd holds approximately 15,000 square kilometres of prospective land package across 47 (28 under application) tenements making it one of the biggest ground holders in the Northern Territory of Australia.

Last year, TUC focused on developing its Stromberg heavy rare earth elements project towards resource status with additional metallurgical testing. It also undertook geochemical sampling on the nearby Scaramanga and Knightfall prospects.

The Scaramanga prospect was drilled and yielded promising results with first pass drilling  delineating more near surface mineralisation with a high HREE distribution. Dysprosium, Yttrium and Erbium at a high of 7.5%, 64% and 5% of TREO distribution respectively were found.

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Japan confirmed that it will launch a survey of its Pacific seabed in the hope of finding rare earth deposits large enough to supply its high-tech industries and reduce its dependence on China, according to a report from The Japan Times.

Researchers from the Japan Agency for Marine-Earth Science and Technology are scheduled to begin the probe later this month near Minamitorishima Island, which is located approximately 2,000 kilometres southeast of Tokyo.

The survey follows earlier findings by Tokyo University professor Yasuhiro Kato, who took mud samples from the area in July last year. Kato has told media sources that he estimates that the deposit, located 5,600 meters beneath the seabed, could host enough dysprosium — used in lasers and commercial lighting — to satisfy Japanese domestic demand for the next 400 years.

Finding large-scale proven reserves inside Japan’s exclusive economic zone would be a significant boost to Japanese industry, which currently relies primarily on REE imports from China.

Toyota issues fourth payment for stake in Canadian rare earth project

Toyotsu Rare Earth Canada, a subsidiary of Toyota Tsusho, paid Matamec Explorations C$1.595 million — the fourth in a series of payments for its committed equity of a 49-percent undivided interest in the Kipawa heavy rare earth element (HREE) deposit. Matamec confirmed the payment last week.

As per the terms of the agreement, the Japanese-owned subsidiary paid C$8.5 million for a 25-percent undivided interest in July. In order to secure the remaining 24 percent, Matamec agreed to receive successive payments to reach the agreed upon total. The third payment was issued last month.

The company’s press release notes that to date, Matamec has received C$12,155,019 of the maximum C$16 million for the completion of a definitive feasibility study on the deposit, which is expected in the second quarter of 2013.

Matamec’s president and CEO, Andre Gauthier, said, “[t]he partnership with Toyotsu provides Matamec with the financial resources to continue in the execution of its long-term strategic plan to become a leading global rare earth company.”

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