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Mountain Pass Mine will be sold at auction on June 14
May 30, 2017

The Mountain Pass rare earths mine in California will have a new owner soon as two groups battle it out to assume control of the mine that will be put on the auction block.

A group led by a former nursing home operator and Switzerland-based private equity fund will vie with a team of U.S. hedge funds and a Chinese rare earths company in an auction set to decide the fate the mine that was once the shining star of the U.S. mining industry.

The mine was owned and operated by Molycorp which invested $1.5 billion into the project but which ended up declaring bankruptcy in 2015.

The mine remains the lone domestic source for rare earth minerals including neodymium, praseodymium and dysprosium that go into magnets used in batteries and wind turbines.

Mike Pompeo, director of the CIA, said this month that the U.S. dependence on foreign sources of rare earths was “a very real concern.” Last year the US imported $120 million of rare earth metals, according to the US Geographical Survey, more than 70 percent from China.

The Financial Times reported that the winner of the auction is likely to have to pass scrutiny by the Committee on Foreign Investment in the US, and take on an estimated $80 million in environmental liabilities.

Tom Clarke, a former care home operator who has been buying bankrupt U.S. coal mines, has teamed up with Switzerland-based Pala Investments and Australian rare earths explorer Peak Resources to offer $1.2 million for the mine.

“There’s a broad support that we need to have these elements here in the U.S.,” Clarke said, adding that there was a reliable market for the materials given growing demand from electric vehicle batteries. “We really do believe that even in the current markets certain of these elements will be profitable,” he said. Set against Clarke in the auction is a group of Molycorp creditor hedge funds. They include Chicago-based JHL Capital Group, run by James Litinsky, and QVT Financial, which have teamed up with Shanghai-listed Shenghe Resources, a rare earths processor. 

Adding to the complexity of the process, a company owned by JHL, QVT and New York-based asset manager Oaktree Capital own the mineral rights to the mine. Clarke said his group could still use the mine site to process material from elsewhere if they did not get the mineral rights — but he hoped to negotiate for them if he wins.
 

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