GREENWOOD VILLAGE, Colo.--(BUSINESS WIRE)--Molycorp, Inc. (NYSE: MCP), the Western hemisphere's only producer of rare earth oxides (REO) and the largest REO producer outside of China, announced today that it has agreed with Japanese trading house Sumitomo Corporation to break off discussions over Sumitomo’s potential investment in Molycorp. Molycorp's capital investment needs have been filled, and since it is now producing significant revenue from sales to customers around the world, including Japan, Sumitomo’s investment is not necessary for implementation of Molycorp’s business plan.
"We are now fully funded for both Phase 1 and Phase 2 of our $781 million expansion and modernization of our flagship rare earth mine and manufacturing facility at Mountain Pass, and we are generating significant operating revenue from sales of product to customers around the world, including those in Japan. Thus, the original investment in Molycorp that Sumitomo offered is no longer a critical need," said Mark A. Smith, President and CEO of Molycorp. "The conditions under which the original deal was structured shifted substantially, and in a way that did not offer sufficient value to both Molycorp and Sumitomo’s shareholders. That is why we have mutually agreed to end our discussions."
Sumitomo's original offer was to make a one-time $100 million equity investment in Molycorp and provide Molycorp with a low-interest, $30 million loan, contingent on certain commitments being received from Sumitomo’s potential customers. A substantial part of the funding for the investment was to come from the Japanese Government. However, Sumitomo was later forced to split the investment package into two investments of $50 million, while also requesting discounted pricing for Molycorp's rare earth products in order to line up commitments from Sumitomo’s potential customers.
"We have very high regard for our friends and colleagues at Sumitomo, and we remain unshakably committed to serving the Japanese market, which is Molycorp's largest market," said Smith. "However, high market demand for our products requires that we focus on other customers at this time."
About Molycorp, Inc.
With offices in the U.S., Europe, and Japan, Molycorp, Inc. is the only rare earth oxide (REO) producer in the Western Hemisphere and the largest REO producer outside of China. In addition to its current production of rare earth oxides at its flagship rare earth mine and processing facility at Mountain Pass, California, the Company produces rare earth metals, rare earth alloys (such as neodymium-iron-boron and samarium-cobolt alloys) and rare metals such as niobium and tantalum. The rare earths and rare metals Molycorp produces are critical inputs in existing and emerging applications including: clean energy technologies, such as hybrid and electric vehicles and wind power turbines; multiple high-tech uses, including fiber optics, lasers and hard disk drives; numerous defense applications, such as guidance and control systems and global positioning systems; advanced water treatment technology for use in industrial, military and outdoor recreation applications; and other technologies. For more information please visit www.molycorp.com.