Molycorp to Supply Grace With Rare Earths Used to Make Petroleum Catalysts

Molycorp Inc., owner of the world’s largest non-Chinese deposit of rare-earth metals, agreed to supply U.S. chemical producer W. R. Grace & Co. for as long as eight years with an element used in petroleum processing.

Grace will receive “a significant amount” of rare-earth production from the Mountain Pass mine in California through 2012, Greenwood Village, Colorado-based Molycorp said today in a statement. Grace subsequently will get more than 75 percent of lanthanum output from a new facility at the site through 2015, Molycorp said. Grace can extend the agreement through 2018. Financial terms weren’t disclosed.

Lanthanum is used in catalysts for breaking down petroleum into gasoline and other products in a process called fluid catalytic cracking, the largest application for rare earths. The minerals are also used to make computer disk drives, military radar, missile-guidance systems and electric-vehicle batteries.

Prices of rare earths have climbed as much as sevenfold in the past six months as China in July reduced its second-half export quota for the minerals by 72 percent. China accounts for 97 percent of global rare-earths supply.

Molycorp fell $1, or 2.7 percent, to $35.51 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have more than doubled since the company’s initial public offering in July.

Photographer: Jacob Kepler/Bloomberg

Lanthanum from Molycorp Inc.'s Mountain Pass mine in California is used in catalysts for breaking down petroleum into gasoline. Close

Lanthanum from Molycorp Inc.'s Mountain Pass mine in California is used in catalysts... Read More

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Photographer: Jacob Kepler/Bloomberg

Lanthanum from Molycorp Inc.'s Mountain Pass mine in California is used in catalysts for breaking down petroleum into gasoline.

Grace gets most of its lanthanum from companies in China and hasn’t yet had any supply problems, Hudson La Force, chief financial officer of Columbia, Maryland-based Grace, said in an Oct. 21 telephone interview.

Pentagon Study

Rare earths comprise a group of 17 metals including neodymium, lanthanum, cerium and europium. While the elements aren’t as rare in nature as the name implies, they are difficult to find in profitable concentrations, expensive for Western producers to extract and are often laced with radioactive elements.

The U.S. Government Accountability Office, the investigative arm of Congress, warned in April of “vulnerabilities” for the military because of the lack of domestic suppliers of rare-earth materials used in weapons systems.

The U.S. Defense Department concluded that China’s monopoly on rare earths poses no threat to national security, a person familiar with a yearlong study by the Pentagon said Oct. 31. The report notes that rising prices and supply uncertainties are spurring private investment in new mining operations outside of China.

Molycorp said Nov. 1 it has begun processing rare-earth materials from its stockpile of previously mined ores and will produce about 3,000 tons this year. Its capacity will go up to 20,000 tons by the end of 2012.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net.

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