Rare Earths MMI Hits A New All-Time Low as Molycorp Agrees to Bankruptcy Auction

Our Rare Earths MMI fell 6% to 17 this month, yet another all-time low.

Free Sample Report: Our January Metal Buying Outlook

Rare earths prices have been in free fall ever since China removed export quotas on the minor metals that are key components for defense, high-tech gadgets and data storage products.

US rare earths producer Molycorp, Inc. is spiraling closer to a bankruptcy sale as this story went to press. Embroiled in a bankruptcy court fight between its main lender and junior creditors, Molycorp reached agreements with the latter group on Friday. That clears the way for the bankrupt company to accept bids for the company and to ask creditors to vote on a plan to exit the bankruptcy.

Molycorp, the only US producer and processor of rare earths, has been battling its bondholders who have alleged it is doing the bidding of its main lender, Oaktree Capital Management.

Unsecured Creditors

Lawyers for Greenwood Village, Colorado-based Molycorp told a US Bankruptcy judge it would allow advisers for the official committee of unsecured creditors and a group of bondholders to join calls and meetings about potential bids.

On Tuesday, Bloomberg reported that potential buyers from China and Australia submitted nonbinding bids of more than $700 million for Molycorp’s assets, including processing operations in Mountain Pass, Calif. The company has estimated the operations were worth less than $450 million.

Bids for the company’s bonds have jumped this week from less than 5 cents on the dollar to more than 12 cents as the prospects for repayment have improved for bondholders. The asset auction is scheduled for March 4. If bids fall short of a certain threshold, Molycorp has proposed exiting bankruptcy through a reorganization plan, excluding the Mountain Pass mine, under the control of Oaktree.

Molycorp and Oaktree still face more legal battles with the junior creditors, who convinced the bankruptcy judge on Friday to strike a provision in the reorganization plan that would deny payments to objecting creditors.

What Went Wrong With Molycorp

Molycorp’s long fall is not news anyone who has followed rare earths for the last few years. David Abraham, author of the rare earths book “Elements of Power” recently told MetalMiner that “they faced real challenges: the amount debt they had to cover, the competition they were up against, and the processing facility they developed, which wasn’t efficient and took longer to set up than expected, indicated that profitability would be an obstacle.”

Compare Price Trends With the December MMI Report

With its main competitors, rare earths producers in China, having export duties removed the market was flooded, prices fell and it became that much harder for Molycorp to compete. The situation is the same for Lynas Corp. and anyone else competing with China’s state subsidized rare earth producers. Lynas, however, has the benefit of better backers from Japan, a nation eager to insulate itself from another Chinese rare earths shipment boycott like the one that happened in 2010.

Rare earths prices are as compromised by the bearish commodities environment as any metals. Buyers need not fear a significant. rise in prices anytime soon.

Actual Rare Earths Prices

Chinese neodymium fell from $49,237.98 per mt to $40,234.03, a precipitous of drop of 18.3%. Chinese lanthanum oxide fell from $1,828.84 per mt in December to $1,796.71 per mt this month, a fall of 1.8%. Chinese dysprosium oxide fell 3.9% from $218.84 per kilogram in December to $210.38 a kilogram this month.