Molycorp to supply rare earths to Grace

Molycorp Inc, owner of the world’s largest non-Chinese deposit of rare-earth metals, agreed to supply US chemical producer WR Grace & Co for as long as eight years with an element used in petroleum processing.

Grace will receive “a significant amount” of rare-earth production from the Mountain Pass mine in California through 2012, Greenwood Village, Colorado-based Molycorp said in a statement. Grace subsequently will get more than 75% of lanthanum output from a new facility at the site through 2015, Molycorp said. Grace can extend the agreement through 2018. Financial terms weren’t disclosed.

Lanthanum is used in catalysts for breaking down petroleum into gasoline and other products in a process called fluid catalytic cracking, the largest application for rare earths. The minerals are also used to make computer disk drives, military radar, missile-guidance systems and electric-vehicle batteries.

Prices of rare earths have climbed as much as sevenfold in the past six months as China in July reduced its second-half export quota for the minerals by 72%. China accounts for 97% of global rare-earths supply.

Molycorp rose 50 cents, or 1.4%, to US$37.01/share at 9:33 am in New York Stock Exchange composite trading. The shares have more than doubled since the company’s initial public offering in July.

Grace gets most of its lanthanum from companies in China, and hasn’t yet had any supply problems, Hudson La Force, chief financial officer of Columbia, Maryland-based Grace, said in an Oct 21 telephone interview.

The US Government Accountability Office, the investigative arm of Congress, warned in April of “vulnerabilities” for the military because of the lack of domestic suppliers of rare-earth materials used in weapons systems.

The US Defense Department concluded that China’s monopoly on rare earths poses no threat to national security, a person familiar with a year-long study by the Pentagon said Oct 31. The report notes that rising prices and supply uncertainties are spurring private investment in new mining operations outside of China.

Molycorp said Nov 1 it has begun processing rare-earth materials from its stockpile of previously mined ores and will produce about 3,000t this year. Its capacity will go up to 20,000t/y by the end of 2012.

Nov 5 (Bloomberg)