In our ongoing efforts to provide you with broader communications and industry information, we are pleased to issue another Industry Bulletin discussing recent trends in the markets of various rare and strategic metals. This edition reports on the recently announced acquisition of Chevron Mining´s Mountain Pass rare earth mining operations by Rare Earth Acquisitions LLC, ("REA"), a special purpose company owned by a consortium of investors notably Resource Capital Funds, Pegasus Partners IV, LP, The Goldman Sachs Group, Traxys North America LLC, and Carint Group LLC. This transaction clearly demonstrates the growing interest in the rare earth elements amongst North American institutional investors.
The Mountain Pass mine, formerly operated under the Molycorp banner, was once the largest producer of rare earths in the world, until the Chinese assumed the production and pricing leadership in the 1990´s. This circumstance, combined with environmental issues, led to the shutdown of operations in 1998. Today, the Chinese produce upwards of 95% of the world´s supply of rare earths, however demand is outgrowing supply due to new and rapidly growing applications in electronics and innovative technology related to energy efficiency.
REA will acquire the Mountain Pass mine and ore deposit, related infrastructure including a flotation mill and specialty plant that refines the milled concentrate as well as a team of technical specialists. The Mountain Pass operation has significant stockpiles of bastnaesite concentrates primarily enriched in the Light Rare Earth Elements (LREE - lanthanum through praseodymium and neodymium). In 2007, Mountain Pass recommenced its rare earth separation operations from stockpiles of partially processed material. Included in the acquisition was the Molycorp name and upon closing, REA will be renamed ´Molycorp Minerals LLC´. The purchase price was not disclosed.
Among the REA partners is Resource Capital Funds, a private equity firm specializing in the mining and minerals sectors with $900 million in assets under management, Pegasus Partners, a private equity firm with $1.8 billion under management with an emphasis on investments contributing to the environment, sustainability and healthy living, Traxys North America, an international physical metals and minerals marketing, distribution and trading company with over $4 billion in sales. The Goldman Sachs Group are experienced investors in rare earths having participated in the financing of Lynas Corp., an emerging Australian producer, in 2006.
Of particular interest to Avalon´s readership is that knowledgeable and experienced professionals and sophisticated private equity clearly see the future potential of the rare earth markets and the need for non-Chinese based production capability and capacity.
For additional interesting commentary on the significance of this transaction, and the role and value of rare earths in the world economy going forward, the reader is encouraged to read the latest article from respected rare metals industry analyst Jack Lifton, entitled "Is there a Rare Earths renaissance?" at
Avalon is also well positioned to benefit from this growing new demand for rare earths, from the development of its large rare metals resources at the Thor Lake deposit in the Northwest Territories. This deposit is exceptional in its enrichment in the more scarce Heavy Rare Earth Elements (HREE – including europium, terbium and dysprosium) that are now vital to a growing number of electronics and automotive applications.
If you have any comments or questions, please do not hesitate to post them on Avalon´s official investor relations hub at http://www.agoracom.com/ir/Avalon.
AGORACOM Investor Relations