June 11, 2012 / 10:26 PM / 5 years ago

Molycorp closes Neo Material takeover

(Reuters) - Molycorp Inc MCP.N said on Monday that it had completed its takeover of Canadian rare earth processor Neo Material Technologies Inc NEM.TO, creating an integrated mine-to-magnet rare earth company.

Colorado-based Molycorp now mines rare earths in California, processes them into oxides and alloys at facilities around the world, and makes bonded rare earth magnets through its Magnequench subsidiary acquired as part of the Neo deal.

The cash-and-stock deal, worth roughly C$1.2 billion ($1.17 billion), also gives Molycorp access to Neo's valuable rare earth patents as well as a toehold in China -- the world's top rare earth producer and consumer.

"We believe that this acquisition is a win-win situation," Byron Capital Markets analyst Jon Hykawy wrote in a note to clients last month. "Not only should it significantly improve Molycorp's earnings but it also de-risks the start-up of Molycorp's own (processing) facility."

The company said it expected the acquisition to add to its 2012 earnings and cash flow.

Molycorp shares closed down 3.7 percent at $20.22 on Monday on the New York Stock Exchange after CIBC cut its price target on the stock. It had risen sharply the day after the deal was announced in early March, but has since fallen more than 30 percent as light rare earth prices have declined.

The company is modernizing and reopening the Mountain Pass rare earth mine in California, which is expected to reach its commercial run rate of some 19,050 tons annually later this year. The project can be expanded to 40,000 tons a year, depending on market demand.

China produces more than 90 percent of the world's supply of rare earths, which are essential for smartphones, hybrid vehicles and defense applications. Prices skyrocketed last year after the Chinese government repeatedly clamped down on exports of the group of 17 metals.

Besides making bonded rare earth magnets, Molycorp expects to start manufacturing powerful sintered rare earth magnets in 2013 through a joint venture with Daido Steel Co Ltd (5471.T) and Mitsubishi Corp (8058.T).

($1 = 1.0289 Canadian dollars)

Reporting by Julie Gordon; Editing by Lisa Von Ahn

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