Molycorp completes takeover of Neo-Material

June 12, 2012

Molycorp completed its takeover of Canadian rare earth processor Neo Material Technologies Inc. on June 11, creating an integrated, one-stop mine to magnets producer.

With the completion of the US$1.3 billion cash-and-share deal Molycorp is now able to mine rare earths at its Mountain Pass Mine in California, process the material into oxides and alloys at facilities around the world and make bonded rare earth magnets through its Magnequench subsidiary acquired as part of the Neo deal. Because of the deal Molycorp will have greater exposure to the Chinese rare earth market, estimated at 70 percent of worldwide rare earths consumption.

In a recent interview with the Wall Street Journal, Ed Richardson, president of the U.S. Magnetic Materials Association said Molycorp's export of U.S. rare earth assets into China will exacerbate the problem of this country's dependence on China for rare-earth magnet materials.
However, Molycorp CEO Mark Smith said sending rare-earth oxides to China will only reduce U.S. production costs and help boost supply of REEs for industrial users. "It does not in any way deplete our ability to serve the market outside of China whatsoever."

Analysts have said the Neo Material acquisition gives Molycorp significant new technology capability in powders used in high-performance bonded markets.

In addition to making bonded rare earth magnets, Molycorp plans to start producing sintered rare earth magnets in 2012.
Meanwhile, Neo Material Technologies shareholders will receive in the aggregate $972.2 million in cash, 13,545,426 shares of Molycorp and 507,203 shares of MCP Exchangeco.

Mark Smith, John Ashburn, John Burba, Geoffrey Bedford, Michael Doolan, Molycorp Chairman Ross Bhappu and Mark Kristoff have been appointed to the board of directors of Neo Material Technologies.

Combined, the companies offer 26 locations in 11 countries with more than 2,600 employees worldwide.

“We now have the broadest global coverage in the industry, and we can immediately access highly specialized niche markets that were not available to us prior to the Neo acquisition,” Smith said. "Our expanded product line in rare earths, particularly in the ‘heavies' category, and rare metals, along with our patented technology platform, and our ability to consistently meet demand customer specifications, will make us a formidable player in these global markets for years to come.

"I believe we are better positioned today to increase the diversity of the global rare earth supply, which benefits all consumers of these materials, as well as to capture an increased share of the global rare earths and rare metals markets," he stressed.

Smith will continue to serve as President and CEO of Molycorp. Neo Material Technologies CEO Constantine Karayannopoulos will join Molycorp's board as vice chairman. Neo CFO Michael Dolan will become executive vice president and CFO of Molycorp. James S. Allen will service as senior vice president of finance and treasurer of Molycorp.



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