Bankrupt Molycorp (OTCMKTS:MCPIQ) has been offered a vital loan to keep its Mountain Pass mine under care and maintenance.
On Wednesday the former rare earths producer morphed into Neo Performance Materials, but its rare earths mine and processing facility – the only mine and processor of REEs in the United States – is still under a separate Chapter 11 bankruptcy after Molycorp failed to find a buyer for the mine and release it from Chapter 11. The bankruptcy trustee tried to get a court to shut down the bankruptcy due to lack of funds, but on Tuesday, he revealed that Lexon Insurance Co. “has offered to lend the estate $4.2 million to maintain the mine and continue the search for a buyer,” the Wall Street Journal reported.
That means the mine will continue to be maintained safely, including keeping pumps running to contain groundwater contaminated by the rare earths separation process.
Once considered the vehicle to challenge China’s domination of the rare earths market (the Asian superpower mines about 90 percent of the materials used in everything from cell phones to defense systems) through Mountain Pass – Molycorp’s fall from grace began in 2014. That summer the rare earths producer was forced into bankruptcy, a victim of low rare earth oxide prices. Shareholders sued the company’s officers and directors, hoping to collect on their liability insurance. According to court filings, Molycorp spent $1.7 billion to outfit Mountain Pass with specialized equipment.
A restructure plan made Molycorp 92.5 percent the property of Oaktree Capital Management LP, from which Molycorp received $130 million in debt financing. Unsecured creditors, including Molycorp bondholders, got the rest.
The Greenwood, Colorado- based company moved Mountain Pass into care and maintenance, while continuing to serve customers through its production facilities in Estonia and China.
Mountain Pass was expected to be America’s flagship source of rare earths. In 2010 Molycorp sensed an opportunity to capitalize on reduced rare earth oxide exports from China, which had caused the prices of REOs to spike. When China subsequently relaxed export rules, however, prices fell, leaving Molycorp to pay the close to $2 billion bill for expanding Mountain Pass.
Hit by lower rare earth prices, Molycorp warned it might not have enough money to remain in business. Three months later, it filed for chapter 11 bankruptcy protection.
Comments
george dawes
After bankruptcy what happened to salaries, pensions and other benefits for the former Molycorp employees at Mt Pass? What liability will the new company Neo Performance Materials retain for the long term remediation of Mt Pass? As a former Molycorp employee it became obvious that if Unocal (former owner) or Chevron spun off Molycorp its day would be numbered as far back as the early 90″s. Unocal bought Molycorp in 1977 to hide “windfall” profits and Molycorp ate up all those profits every year and never showed a profit on it own. The only profit center Molycorp ever had was its stake in CBMM, a Brazilian Niobium Mine which Chevron sold. Anyone who invested in this company after spinoff only made money if the sold in the first 6 months – just like the board members did. The board members made more money that the company ever did.