Critical Metals

Rare Earth Investing

Michael Silver of American Elements met with White House officials earlier this week to discuss nationalizing the Mountain Pass rare earths mine.

Mountain Pass was the only producing rare earths mine in the US before it closed in mid-2015, and one CEO is arguing that it should be nationalized.
Michael Silver, CEO of advanced materials manufacturer American Elements, met with White House officials earlier this week to make his case. “The staff understood the urgency of the matter,” he told Bloomberg after the meeting, which included Steve Bannon, Sebastian Gorka and Reince Priebus.
There are 17 rare earths, and they have diverse high-tech applications, from magnets to ceramics. Silver, however, is most concerned about their military applications and the fact that China is currently the world’s top rare earths producer by far. The country also holds the largest reserves of the metal.

Mountain Pass should be turned into a national laboratory “dedicated to rebuilding America’s rare-earth mining industry so the world knows it is safe to build high-tech manufacturing plants in the U.S.,” said Silver, who has been invited to brief US President Donald Trump on the issue.
He added, “[t]he perception is the only place in the world you can go for reasonably priced rare earth materials for your product is in China. You have to change that perception.”
Once owned by Molycorp, Mountain Pass closed due to low rare earths prices and an inability to perfect its experimental ore-processing system. Molycorp itself went bankrupt, though it later emerged as Neo Performance Materials and was paid $4.2 million to maintain Mountain Pass until a buyer was found.
The mine went up for auction last month, and ultimately MP Mine Operations was the winner. However, the purchase was not without resistance from rival bidder ERP Strategic Minerals.
MP is majority owned by JHL Capital Group and QVT Financial, while ERP is allied with Oaktree Capital Management; JHL, QVT and Oaktree all held debt with Molycorp until they traded their claims for different parts of the company. JHL and QVT received most of the mineral rights at the mine, while Oaktree got most of the ore-processing equipment.
Both MP and ERP were hoping to buy up enough of Mountain Pass’ remaining assets to restart production, and prior to the auction ERP filed a lawsuit over the mineral rights at Mountain Pass against JHL and QVT.
After MP won the auction, ERP argued that because MP will receive financial and technical help from an affiliate of China’s Shenghe Resources Holding (SHA:600392), the sale could be blocked by the Committee on Foreign Investment in the US. The affiliate, called Leshan Shenghe Rare Earth, has a 10-percent stake in MP.
MP has said it will be able to operate Mountain Pass without ERP, and ERP has said the same. However, as yet there have been no updates from the committee.
The Trump administration has also not commented on the situation. Silver said he has proposed that Mountain Pass be nationalized by eminent domain via the Takings Clause of the Fifth Amendment. His company did business with Molycorp before it went bankrupt.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.


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