Molycorp restructure plan includes asset sales

Molycorp (OTC:MCPIQ), the beleaguered rare earths producer that was forced into bankruptcy in June, has announced a plan to restructure that may include the sale of its Mountain Pass mine in California.

The plan filed with a U.S. bankruptcy court in Delaware would allow Molycorp, the only rare earths miner and processor in the United States, to emerge from Chapter 11 bankruptcy protection “either a stand-alone reorganization that would substantially de-lever its balance sheet or a sale of substantially all of its assets,” according to a press release. If approved, the plan could reduce Molycorp’s debt by $1.9 billion as well as cut interest payments, “putting us on a more solid financial and operational footing going forward,” stated Geoff Bedford, president and CEO.

In July Molycorp received $130 million in debt financing from Oaktree Capital Management LP. In August the Greenwood, Colorado- based company moved its Mountain Pass facility 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 caused the prices of REOs to spike. When China subsequently relaxed export rules, however, prices fell, leaving Molycorp holding the bag on a $1.25 billion expansion of Mountain Pass.

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

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