Sector News

Oaktree's Molycorp legacy firm is said to weigh IPO, sale

September 28, 2017
Energy & Chemical Value Chain

Advanced materials producer Neo Performance Materials, carved from the remains of bankrupt Molycorp, is weighing an initial public offering (IPO) or an outright sale, according to people familiar with the matter.

Neo Performance, backed by investment firm Oaktree Capital Group, has not determined which avenue it will pursue but is expected to file for an IPO next month, said the people, who asked not to be identified because the matter is private.

Representatives of Neo Performance and Oaktree declined to comment.

Neo Performance’s assets do not include Molycorp’s former rare earths mine in the California desert, which is the only such mine in the US and was sold separately.

Molycorp spent hundreds of millions of dollars on an experimental ore-processing system for rare-earth metals, which are used in hybrid electric cars, iPhones and military hardware such as night-vision goggles and guided weapons, among other applications. When prices plummeted in the mining segment dominated by low-cost Chinese producers, Molycorp couldn’t compete and filed for bankruptcy in June 2015.

Oaktree, as Molycorp’s biggest secured creditor, took over a collection of the mining company’s most valuable assets and brought them out of bankruptcy under the name Neo Performance last year. In June, Los Angeles-based Oaktree and bondholders  JHL Capital Group and QVT Financial split up Molycorp’s remaining assets, including the California mine and the advanced ore-processing equipment, that had been left behind in bankruptcy under the care of a trustee.

Now based in Toronto, Neo Performance processes advanced rare-earth metals used in a variety of technology applications, including auto parts, clean energy, crude oil refining, advanced and consumer electronics, and waste water treatment, according to its website. It operates in ten countries: Canada, the US., China, Japan, Thailand, Singapore, South Korea, Germany, the UK and Estonia.

Molycorp’s rare-earth mine, located between the Mojave Desert and Death Valley in Mountain Pass, California, was the last of the bankrupt company’s assets and was bought in June by a group that drew objections from rival bidders, who said the winner had ties to the Chinese government.

MP Mine Operations, whose backers included an affiliate of  Shenghe Resources Holding, agreed to pay $20.5-million in cash and assume about $100-million in environmental liabilities at the mine. MP Mine is majority owned by JHL Capital and QVT Financial, which traded Molycorp bonds for control over the most important mineral rights at the mine. That put them at odds with Oaktree, which owns the most advanced processing equipment at the mine and had allied itself with the losing bidder ERP Strategic Minerals.

Michael Silver, chief executive officer of closely held American Elements, has urged President Donald Trump to nationalise the mine. Any attempt to make the mine commercially viable would fail because no one can compete with China, which accounts for almost all the world’s rare-earth production, Silver said then.

Source: Bloomberg via Mining Weekly

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