ERP Strategic Minerals makes bid to re-open Mountain Pass

Consortium of companies including ERP, Pala Investments and Peak Resources aims to take shuttered rare earths mine out of bankruptcy

The United States' only rare earths mine could be back in business if a bid to purchase the shuttered operation through bankruptcy proceedings is successful.

Last week ERP Strategic Minerals, LLC announced that it has been selected as the "stalking horse bidder" by the Chapter 11 trustee for Molycorp Minerals LLC, a unit of Molycorp, which operated the mine in San Bernadino County, California, before closing it in 2015 due to low rare earths prices.

A stalking horse bidder is the first bidder to make a bid out of a bankruptcy.

"This is a complex venture which requires the skills of a reputable, high-quality team with best-in-class technical expertise in the mining sector": ERP Strategic Minerals CEO Tom Clarke

In a press release, ERP, which is part of the Virginia-based ERP Group of Companies, said it is working with Pala Investments Limited, a Swiss-based company focused on mining and metals, and Peak Resources Ltd., (ASX:PEK) an Australian firm, which is developing a rare earths mine in Tanzania, to bring the mine back into operation. "The consortium would provide financial, technical and operational support, to ERP for the restart and operation of the Mountain Pass mine, subject to applicable regulatory approvals and finalization and closing of mutually acceptable arrangements," states the release.

Russian-born billionaire Vladimir Iorich established Pala Investments in 2007, which was part of a buyout group bidding for the mine's assets, the Wall Street Journal reported in February.

ERP says it will work with the County of San Bernardino, California state agencies and other regulatory bodies to complete any technical studies needed for a re-start. The company has also offered to buy mineral rights and additional equipment.

"Our goal is to return the Mountain Pass mine and mineral processing operation into a viable, sustainable and environmentally responsible business in the County of San Bernardino. We have a strong track record of restarting mines acquired out of US bankruptcy and Canadian CCAA situations," said ERP CEO Tom Clarke, adding: "This is a complex venture which requires the skills of a reputable, high-quality team with best-in-class technical expertise in the mining sector."

Restarting the facility will require remediating mildly radioactive wastewater and dust from the site, according to court records quoted by Law360.

The opening bid by ERP does not mean that it will be the winner. The stalking horse bid still has to be approved by a Delaware bankruptcy court, with a hearing set for June 23. Other bids can be entertained up to June 2 and an auction is expected to occur on June 6.

Mountain Pass was the only rare earths mine operating in the United States, before it went bankrupt in 2015 – a victim of low rare earth oxide prices. At the time Molycorp listed $1.7 billion in debt. Through bankruptcy proceedings Molycorp was restructured, allowing it to receive $130 million in debt financing.

The Greenwood, Colorado- based company then moved Mountain Pass into care and maintenance, while continuing to serve customers through its production facilities in Estonia and China.

Mountain Pass was expected to be America’s flagship source of rare earths. In 2010 Molycorp sensed an opportunity to capitalize on reduced rare earth oxide exports from China – which supplies about 90 percent of the world's rare earth minerals – which had caused the prices of REOs to spike. When China subsequently relaxed export rules, however, prices fell, leaving Molycorp to pay the bill for a $1.25 billion state-of-the-art processing facility.

Hit by lower rare earth prices, Molycorp warned it might not have enough money to remain in business. Three months later, it filed for chapter 11 bankruptcy protection.