The company’s Mountain Pass mine in California was touted as the answer to global dependence on China’s rare earth metals mining industry. In an attempt to clean up the country’s illegal rare earth mining operations (and to keep global prices high in the face of the threat from Molycorp), China imposed export restrictions on certain rare earth metals. Then the unexpected happened.
Major users of rare earth metals began to explore for substitutes for the expensive minerals — and users found them. Add to that the lifting of China’s export restrictions, and it was just a matter of time before new rare earth mining companies like Molycorp folded.
The company’s European and Asian operations are not affected by the bankruptcy filing, and all of Molycorp’s U.S. operations will continue running under debtor-in-possession financing while the company negotiates with its creditors. The financing package totals $225 million and the total debt being negotiated is $1.7 billion. Molycorp said that it had executed a restructuring support agreement with creditors holding more than 70% of the principal on its 10% senior secured notes.
Molycorp’s Mountain Pass mine was the world’s leading producer of rare earth elements until it was shut down in 2002 when prices for the minerals fell. The mine was owned by Unocal in 2005, and was nearly sold to China’s CNOOC Ltd. (NYSE: CEO) when the Chinese company bid for Unocal’s assets. Molycorp purchased the mine from Chevron Corp. (NYSE: CVX) following Chevron’s acquisition of Unocal.