Yesterday’s (May 31’s) Wall Street Journal had a really poor article about the impending fate of Molycorp, bankruptcy from failure to meet payment on debts, as it reflects, in the WSJ’s opinion, the rare earth market(s).
The rare earth share market “mania” that began in the USA in 2007 when a group of funds and an entrepreneur bought the defunct, moribund, and on “care and maintenance” Molycorp from Chevron with the stated purpose of bringing it back into production was an attempt to “get ahead” of the “market” as then perceived by this group.
This original core group of Molycorp investors had noted that a rapidly growing demand for the rare earths in high tech consumer goods was going to have to depend on the tumultuous but unpredictable (with regard to the impact of governance by the state as well as private interests) Chinese domestic economy, because at that time (as it remains today) China was the overwhelmingly largest producer of the rare earths.
Today Molycorp has failed as a business even though it has raised and spent between 2 and 3 billion dollars to re-start its California mine and base-level separation facility.
The fundamental reason for the failure of Molycorp has been its business model’s lack of recognition of the fact that China’s success in monopolizing the rare earth space is due entirely to its constructing a total domestic rare earth supply chain feeding into the huge Chinese domestic end user manufacturing industry, which was growing yearly and demanding more and more rare earth enabled components for consumer products and thus driving not only the mining, but also the extraction and separation of the individual rare earths; their transformation into alloys and fine chemicals; and the transformation of these materials into magnets, lasers, catalysts, and medicinal chemicals in turn to be utilized mainly in the mass produced consumer devices, but also to be used in the global petroleum refining industry and to a small but important extent in the manufacture of military equipment and munitions.
t was apparently only this last use of the rare earths that was picked up upon by Molycorp’s re-founders and then advertised way out of proportion to its sector’s actual revenues as the driver for the re-starting of a domestic American mining industry for rare earths.
How the transformation of the crudely separated rare earths in California into high tech “smart” weapons was to be actualized did not seem to be of much interest to Molycorp’s re-founders.
For the rest of this article, click here: http://investorintel.com/technology-metals-intel/lifton-says-forget-the-wall-street-journal-on-rare-earths/