Rare Metals Producer Molycorp Files for Protection against Bankruptcy

Published By : 26 Jun 2015 | Published By : QYRESEARCH

Decline in the prices of rare metals used in advanced electronics has led Molycorp, the biggest non-Chinese producer of obscure metals to file protection against bankruptcy. The company, based in Colorado, had registered a peak in its shares in 2011 with price at US$79, which provided it a market capitalization of over US$6 billion. However, with the Chinese government’s failed efforts to maintain the exclusivity of the market, the rare metals got easily sourced than before and this resulted to the company’s decline. The average selling price of the rare earth metals such as Ytterbium, Lanthanum, and Praseodymium produced at the company’s manufacturing site in Mountain Pass, California, has dropped to US$9.64 per kilogram in the first quarter of this year. This is in stark comparison to the price of the rare metals in the second quarter of 2011 at US$72.80 per kilogram.

According to Geoff Bedford, the chief executive of Molycorp, the filing for protection against bankruptcy and an agreement on financing during the phase are important to restructure the company’s debt worth US$1.7 billion. The good news is that the company has received the support of the creditors in form of financing worth US$225 million which has let the company to continue its operations. Bedford is hopeful that Molycorp would exit bankruptcy before the end of 2015.

This is the latest development in the rare earth metals industry. Rare metals such as dysprosium are used in advanced technologies in various sectors such as car exhaust catalysers, wind turbines, mobile phones, and guidance systems for cruise missiles. China accounted for 97 percent production of the rare metals till 2010. However, in an attempt to boost the domestic electronics producers, the Chinese government imposed export controls which led the price levels increase by 20 to 30 times.  This resulted to the investment in the sector in countries such as the U.S., and Australia. The affidavit filed by Molycorp blames illegal mining of the rare metals in China as well as the ruling of WTO which compelled China to drop its export controls.
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