By Ruth Musser-Lopez and Mark Gutglueck
For more than five years, a key American resource crucial to the advancement of science and top-flight industry and key to the United States maintaining its edge as a military power lay dormant.
Lying within the vast outreaches of San Bernardino County, the Mountain Pass Mine, which contains the richest known deposits of rare earth metals in the world, had been felled by the fluctuations of the marketplace and a skewed international competitive field that favors companies operating in places without regard to environmental considerations.
The mine has now been acquired by a new set of investors and is on the verge of a comeback. Still, despite the vast treasure that lies within the mine near the extreme east end of California’s Mojave Desert and the untold riches it represents if it can again be successfully tapped, tremendous risk is involved. In the seven years between 2008 and 2015, the mine’s previous ownership, known as the Molybdenum Corporation, or Molycorp Minerals LLC, made an investment approaching $2 billion to facilitate the retrieval and refinement of the precious commodities the mine has to offer. That effort, gallant, intensive and sophisticated, was one laced with chance, hard work, boldness, unfortuitous events, governmental red tape and environmental regulations, irony and poor timing which led to abject failure and the bankruptcy of Molycorp Minerals LLC in 2015.
Two years later, seeing an opportunity in Molycorp Minerals LLC’s misfortune, JHL Capital Group LLC, an alternative investment management firm founded by James H. Litinsky in 2006, formed MP Materials, which acquired the totality of the Molybdenum Corporation’s assets.
Lanthanides, also known as rare earth minerals or rare earth metals, are a set of seventeen chemical elements, specifically scandium, yttrium, lanthanum, cerium, praseodymium, neodymium, promethium, samarium, gadolinium, europium, terbium, dysprosium, holmium, erbium, thulium, lutetium and ytterbium. They have a number of critical industrial and technical uses and applications, including serving as components in mercury-vapor lamps, high-temperature superconductors, lasers, microwave filters, high refractive index glass, hybrid electrical vehicles, flint products, battery-electrodes, camera lenses, carbon arc lighting, didymium glass used in welding goggles, polishing powder, ceramic capacitors, nuclear batteries, rare-earth magnets, memory chips, red and blue phosphors, green phosphors, fluorescent lamps, vanadium steel, x-ray machines and infrared lasers. Rare earth elements also facilitate hydrogen storage, fluid catalytic cracking, creating violet and yellow colors in glass or ceramics, catalyzing the refining of petroleum, oxidizing chemicals, neutron capture, and contrasting magnetic resonance images.
Because of their geochemical properties, rare earth elements are typically dispersed and not often found in concentrated and economically exploitable forms.
Until 1948, most of the world’s rare earths were mined in India and Brazil. In the 1950s, South Africa became the leading supplier of rare earth metals.
In 1949, the Mountain Pass Mine, which lies in the extreme northeast portion of San Bernardino County roughly 15 miles from the California-Nevada state line, was discovered by a uranium prospector. The Molybdenum Corporation of America bought the mining claims, and small-scale production began in 1952. Production expanded greatly in the 1960s, with the Mountain Pass facility becoming the world’s dominant producer of rare earth elements. From 1965 until 1995 it was an almost exclusive supplier of europium, which is used in color television screens. The Molybdenum Corporation of America changed its name to Molycorp in 1974 and was acquired by Union Oil in 1977.
In the 1980s, the company began piping wastewater from the mining operation 14 miles to evaporation ponds at Ivanpah Dry Lake. Ruptures in the pipeline resulted in radioactive thorium and radium leaking into the desert floor at least 60 times between 1984 and 1998, according to federal investigators, at which point the pipeline was shut down and chemical processing at the mine ceased. Unocal was served with a cleanup order and sued by San Bernardino County’s district attorney’s office in a civil lawsuit. The company paid more than $1.4 million in fines and settlements. The mine was shut down in 2002, by which time China eclipsed the United States as the leading supplier of rare earth metals. Unocal in 2004 obtained a new operating permit for the mine, and it was acquired the following year by the Chevron Corporation.
By 2005, 96 percent of the world’s rare earth elements were mined in China. In 2007, China restricted exports of rare earth elements and imposed export tariffs. In 2008, Chevron sold the Mountain Pass Mine to privately-held Molycorp Minerals LLC, based in Greenwood Village, Colorado, a company formed to revive the Mountain Pass mine. On July 29, 2010, Molycorp, Inc. became a publicly-traded firm by selling 28,125,000 shares at $14 in its initial public offering. On September 22, 2010 China quietly enacted a ban on exports of rare earths to Japan. Later that fall, Congress passed legislation to subsidize the revival of the American rare earths industry, including the reopening of the Mountain Pass Mine.
Initially, Molycorp lost money. But by the second quarter of 2011, the company was showing a profit. Molycorp acquired processing facilities in Arizona and Estonia. In March 2012, Molycorp Inc. acquired Neo Material Technologies Inc., a Canadian rare earth processing company, for $1.3 billion. With the cost of rare earth metals skyrocketing because of the Chinese restrictions on rare earth exports, on August 27, 2012, Molycorp initiated Project Phoenix at the Mountain Pass Mine, which involved making a $1.7 billion investment to design and build a processing plant within a processing plant that would allow for the mining of 20,000 tons of ore per year in an environmentally advanced manner where the primary waste stream out of the process was salt water. This involved Molycorp’s creation of a chemical plant that used alkali and salt water at the front end of the process to convert the ore to a semi-processed product, facilitated by the addition of an on-site combined heat and power plant to provide low-cost, high-efficiency electrical power and steam for the company’s extraction processes. There proved to be some technical difficulties but by the fall of 2014 an onsite chlor-alkali facility, which uses processed waste water to produce hydrochloric acid and other chemical reagents used in rare earth production, was operational. Shortly thereafter, the company had ramped up the production process and completed the fourth quarter of 2014 with 1,328 metric tons of rare earth oxide equivalent production. That compared to 1,034 metric tons in the fourth quarter of 2013 and 691 metric tons in the third quarter of 2014. Full year 2014 production totaled 4,785 metric tons, compared to 3,473 metric tons in 2013. The company was expanding production well into the spring of 2015.
At that point, however, as the company was on the brink of having the United States emerge once again as a major competitor in rare earth mineral production, it was undercut by action the U.S. Government had previously taken in league with the European Union and Japan and some other nations, which had lodged a complaint against China with the World Trade Organization for limiting rare earth exports, which was alleged to be a violation of international law. A decision favoring the complainants was made shortly after the Mountain Pass Mine was fully retooled, forcing China to export more rare earth metals, precipitating a substantial price drop. Thus, Molycorp, on the hook for approaching two billion dollars made in mine and plant upgrades and in need of servicing its now due debt, could not compete let alone profit or service its debt. In June 2015, the company filed for Chapter 11 bankruptcy protection.
On August 26, 2015, the company announced that as of October 20, 2015, it would transition its Mountain Pass rare earth facility to a “care and maintenance” mode, putting the site, including machinery and equipment into suspension, such that it was maintained in a safe and stable condition, meeting government regulatory commitments, but available for relatively quick reinitiation of production. The rare earth pricing decline was cited as a key factor in the decision to suspend rare earth production at Mountain Pass, company officials said.
On November 3, 2015, acknowledging that its plan to reassert American primacy in the provision of materials crucial to high tech development and production had flamed out, Molycorp filed a joint plan of reorganization with its affiliated debtors at the U.S. Bankruptcy Court for the District of Delaware. That plan proposed an emergence from Chapter 11 through either a stand-alone reorganization that would substantially de-lever its balance sheet or a sale of substantially all of its assets.
In March 2016, Judge Christopher Sontchi confirmed Molycorp’s Chapter 11 exit plan that left production at the mine entirely in limbo and turned the company over to senior lender Oaktree Capital Management, giving unsecured creditors a minority stake in the company, which consisted thereafter as the Canadian, Arizona and Estonia processing facilities.
There ensued further developments in the U.S. Bankruptcy Court, with Molycorp, Inc. rechristening itself as Neo Performance Materials, with executive offices in Toronto, Canada and subsidiaries organized under a holding company based in the Cayman Islands. It continued to market and produce materials in ten countries, including Japan, China, Thailand, Estonia, Singapore, Germany, the United Kingdom, Canada, the United States, and South Korea. The dormant Mountain Pass Mine and processing facility were put under the care of trustee Paul E. Harner of Ballard Spahr LLC. Harner in conjunction with Batuta Capital Advisors LLP, sought to market the mine and solicit potential buyers. ERP Strategic Minerals LLC., a so-called stalking horse bidder, emerged, and three other entities, Virginia-based Natural Bridge; Pala Investment Ltd., a Swiss firm; and an Australian company, Peak Resources Ltd., expressed interest in taking over operations of the mine, though those did not pan out.
San Bernardino County in the meantime secured the services of the law firm of Harrison Temblador Hungerford & Johnson LLP on a $250,000 retainer for the provision of legal services in connection with the bankruptcy proceedings to ensure that whatever entity assumed ownership and operation of the mine, all requirements in the Surface Mining and Reclamation Act were met.
In 2017, JHL Capital Group LLC, in the form of MP Materials, swooped in to acquire the mine and its processing facilities.
According to MP Materials’ website, “Current ownership and management acquired the Mountain Pass assets in 2017, restarted operations from cold-idle status and embarked on a plan to recommission the facility and position MP Materials for growth and profitability.”
MP Materials recently announced that mining activity at Mountain Pass has resumed, with ore being transported off-site to be processed elsewhere. In the next stage of its revival of Mountain Pass, MP Materials is moving toward reviving the on-site processing plant and getting it fully permitted and licensed. Once the processing facility at Mountain Pass is reestablished, MP Materials will process all of the ore extracted from the mine and, conceivably, from other sites.
MP Materials is now involved in discussions with the Joseph Biden Administration’s Energy Department to have a concentrated coal product originating from mines in Kentucky transported to Mountain Pass, where it will be subjected to an extraction and refining process capable of yielding rare earth elements.
“With the first stage of our plan completed, MP Materials has re-emerged as a best-in-class, globally competitive rare earths producer,” the company stated. “Today, we produce approximately 15 percent of the global supply of rare earths, currently in the form of an intermediate product—rare earth concentrate—that requires further processing in Asia. Following completion of the second stage of our recommissioning, expected by 2022, MP Materials will relaunch its onsite processing facilities, setting the foundation for a renewed, self-sufficient U.S. rare earth industry.”
The company said it is committed to reestablishing U.S. independence in not only the mining but refining of rare earth minerals
“Today, China dominates the rare earth industry, producing over 80 percent of global supply,” according to MP Materials. “Having a single country as a potential point-of-failure in the industrial supply chain for trillions of dollars in gross domestic product is untenable, and MP Materials provides a straightforward solution. Mountain Pass is blessed with one of the world’s highest quality deposits of rare earths, which allows MP Materials to be a global low-cost producer while adhering to our rigorous environmental standards and fulfilling our commitments to employees and our community.”
Reliable sources have informed the Sentinel that efforts to geologically characterize the land upon which the mine is located have established that the soil contains lanthanide concentrations to support the mining of 20,000 tons of ore per year for thirty years and that indications are the deposits in the area far exceed that, though those concentrations have not been characterized.
“Mountain Pass’s bastnäsite is one of the world’s highest quality rare earth deposits with a greater than 8 percent average grade,” according to MP Materials. “The green technologies of the future—electric vehicles, wind turbines, drones, and more—depend on powerful rare earth magnets to turn energy into motion. Without the consistent and trusted supply provided by MP Materials, the entire supply chain for critical magnetic materials has shifted to Asia, primarily China. MP Materials serves as the beachhead for a renaissance in domestic manufacturing. It starts with us.”
By Ruth Musser-Lopez and Mark Gutglueck