The Mountain Pass rare earths mine in California which has been parked in Chapter 11 bankruptcy was given a lifeline when Lexon Insurance Co. offered to lend the estate $4.2 million to keep the mine in care-and-maintenance while its owners search for a buyer of the property.
The mine’s owner, Molycorp is morphing into Neo Performance Materials and failed to find a buyer for the mine. It is exiting bankruptcy and leaving Mountain Pass behind.
The Wall Street Journal reported that Paul Harner, the chapter 11 trustee in charge of the mine, warned recently there was no point in continuing the Mountain Pass bankruptcy as there was no money to do anything with the property.
He asked a judge to shut down the bankruptcy owing to lack of funding.
However, the funding from Lexon Insurance breaths new life into the search for a buyer.
Long idle, Mountain Pass still costs money to keep in a safe condition and California environmental authorities are watching.
“At the minimum, we want to make sure they keep the lights on, the gates locked and the pump running,” said Patty Kouyoumdjian, executive officer at the Lahontan Regional Water Quality Control Board, part of California’s network of water safety overseers.
Pumps at Mountain Pass confine ground water contaminated with barium, nitrate, radium and uranium, Kouyoumdjian said. While Mountain Pass is in a remote area, drought-stricken California is protective of all its water, she said.
The openpit mine is the sole U.S. source of rare earths. When rare earths prices were high, Molycorp plowed $1.5 billion into the Mountain Pass facility.
When prices fell, the mine was mothballed and Molycorp filed for chapter 11 protection. It is reorganizing around its rare earths processing business, Neo, which didn’t suffer as badly from the plunging prices.
Oaktree Capital Management, which will control the new business, had argued against tossing Mountain Pass out of bankruptcy to fend for itself without the protective legal shield.
An Oaktree representative couldn’t immediately be reached to comment Wednesday. However, in a recent court filing, Oaktree urged Harner to seek financing from insurers that are already bound to shield Mountain Pass against environmental damage claims.
Oaktree and Molycorp’s former bondholders own the mineral rights to the mine, but shook off the land, facility and environmental issues.