Q&A: Rare Earth Technology Developments
With Mark Smith, CEO • Molycorp Minerals LLC

Molycorp Minerals, headquartered in Greenwood Village, Colo., is a US mining and technology company that produces and markets rare earth products and technologies. As the only western supplier, Molycorp Minerals markets rare earth materials from their mining operation in Mountain Pass, Calif. In addition, Molycorp Minerals maintains a joint venture with Sumitomo Metal Industries, Ltd., called Sumikin Molycorp, which markets Molycorp’s rare earth products and produces permanent magnet materials in Japan. In the following interview for Magnetics Business & Technology, Mark Smith, elaborates on Molycorp’s plans related to the permanent magnet industry.

MB&T: The industry is long familiar with Molycorp, Inc. Can you explain how Molycorp Minerals LLC has come to be?
In the early 1950s Molybdenum Corp. of America (later to become Molycorp, Inc.) acquired the substantial rare earth reserves located at Mountain Pass, Calif. as a diversification from its traditional molybdenum business. Union Oil Company of California (Unocal) purchased Molycorp, Inc. in the late 1970s and had the company operate as a wholly owned subsidiary of the integrated oil and gas company. When Chevron Corp. acquired Unocal in 2005, Molycorp, Inc. was merged with Chevron’s coal business to become a new operating company within Chevron called Chevron Mining, Inc.

In September of last year Chevron sold the Mountain Pass rare earth assets to an investor group comprised of Resource Capital Funds, Pegasus Capital Advisors, Goldman Sachs, Traxys North America, and various other investors, including me.

Molycorp Minerals, LLC is the company that was formed by the new investors after the purchase of the rare earth assets from Chevron. The new entity owns the Mountain Pass assets, associated permits, water rights, trade marks and other related intellectual property.

MB&T: I understand Molycorp is working on an aggressive new initiative called “Mine to Magnets.” Can you explain the initiative and what is driving this effort?
We are all familiar with growth projections for permanent magnets being in the 10 to 15 percent range annually. Representing the enabling technology for applications from electric traction drives for hybrid and electric vehicles to iPods, it's no wonder global demand for rare earth permanent magnets will remain high for years to come.

Since the 1990s, China has dominated the global supply chain to make rare earth permanent magnets, from mine to magnets. China’s own consumption of rare earth magnets and magnet materials continues to grow to the point where industry experts are predicting that China will not be able to meet demand requirements to supply magnet materials outside of China, putting high tech businesses in the rest of the world at risk. (Sidebar 1)

Molycorp’s plan is to create a domestic rare earth magnet supply chain from Mine to Magnets to take advantage of this growth and mitigate risk of supply issues in the future for the rest of the world.

MB&T: Can you describe the rare earth magnet supply chain and where the magnet industry’s vulnerabilities lie?
Molycorp’s capabilities to manufacture rare earth raw materials at Mountain Pass, Calif. is the first link in a domestic magnet supply chain. We are currently producing neodymium and praseodymium oxides at Mountain Pass for ultimate conversion to magnet metals.

Subsequent links in the supply chain do not even exist today in the US and will have to be created. The US has no commercial capabilities to make rare earth metals, magnet alloy powders or fully dense neodymium iron boron magnets. A lot of work and significant investment will need to be made to fill the capability gap that currently exists in the domestic magnet supply chain. (Sidebar 2)

MB&T: With Molycorp’s Mountain Pass, Calif. facility producing the rare earth magnet material feedstocks as that first link in the supply chain, how and where will Molycorp establish the balance of the supply chain?
Molycorp intends to acquire metal production technology and build pilot and commercial plants to make rare earth metals as part of the initial phase of our Mine to Magnets strategy.

Molycorp has a joint venture with Sumitomo Metals in Japan called Sumikin Molycorp. Sumikin Molycorp is a magnet alloy powder manufacturer supplying the Japanese magnet industry today. This alloying capability could easily be replicated in the US using our long standing partnership and expertise.

With respect to creating a fully dense rare earth magnet manufacturing capability in the US, Molycorp’s preferred route would be to partner with an established magnet manufacturer who has both production and marketing expertise. We are in discussions with several potential partners at this time.

The physical location of the assets needed to connect the links in the supply chain will be addressed as our plans are finalized.

MB&T: Making magnet metals and alloys seems well fitted to Molycorp’s business plans. Can you elaborate on your plans for making magnets?
Making magnets will be a new endeavor for Molycorp, however there are companies in Japan and Europe, in particular, with significant skills and experience in this area. I believe the fundamental drivers I have mentioned combined with the capabilities and core competencies that Molycorp would bring to such an alliance would offer a compelling value proposition for any potential partner. Again we are in discussions with several potential partners.

MB&T: How soon will this all happen?
I am looking at two timelines for our Mine to Magnets strategy, one if Molycorp does this alone and the other if Molycorp can secure significant financial support from the US Department of Energy, other government agencies or other sources.

If Molycorp is left to create the Mine to Magnets Supply Chain on our own the timeline will be quite long as we plan and fund the initiatives sequentially. With government support many of the tasks and initiatives that make up Mine to Magnets can be done in parallel saving more than two-thirds the time of going it alone.

MB&T: What are the odds on Molycorp securing significant government funding for its Mine to Magnet strategy?
We believe the odds of success are outstanding at this point in time, Moreover, there are a number of funded government programs for which our Mine to Magnets strategy would clearly qualify and we are pursuing these programs with a sense of urgency and determination.

One such program is the DOE’s Advanced Technology Vehicles Manufacturing Loan Program designed to spur the development of advanced technology vehicles and associated components. Through a continuing resolution the program was funded by Congress late last year to address the nation’s goal of energy independence.

The DOE is beginning to understand that without rare earth permanent magnet motors, advanced vehicles such as hybrids and all electric cars and light trucks cannot be produced in significant numbers if at all. Unlike energy storage applications in advanced technology vehicles (where nickel metal hydride batteries could be substituted for lithium ion batteries) there is no substitute for fully dense neo magnets for the electric traction drives and other fuel savings applications in these vehicles. Another such program is the DOD’s Industrial Base Innovation Fund which seeks to support strengthening domestic manufacturing capability and eliminating dependence on foreign sources for defense related technologies.

MB&T: How much will all this cost?
Preliminary estimates are in the $200 to $500 million range.

MB&T: What will it take for your Mine to Magnets strategy to be successful?
I have no doubt Molycorp will be successful with its Mine to Magnets strategy whether we have government or other significant funding support or not. Government or other significant funding support will allow us to meet our goals much sooner resulting in enormous quantifiable benefits for the nation's economy and the environment including the creation of an estimated 900 new direct jobs.

Finding and executing wide-ranging agreements with the best business alliance candidates will also be crucial to our success as will be gaining the support of OEMs and the manufacturers of permanent magnet motors and assemblies.

MB&T: Any last words for our readers?
Molycorp is committed to filling the capability gap that currently exists in the Mine to Magnets supply chain and looks forward to playing
a vital roll to help the magnet industry meet the 10 to 15 percent longterm growth projections for the rare earth permanent magnet industry.

I wish to thank Magnetics Business and Technology for the opportunity to share our Mine to Magnets strategy with your readers.

Mark A. Smith is CEO, member of the Board of Directors and a shareholder of Molycorp Minerals, LLC. Prior to Molycorp Minerals, Mark was
the president and chief executive officer of Chevron Mining, Inc. a whollyowned subsidiary of Chevron Corp. Mark can be reached at
mark.smith@molycorp.com.

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