Rare Fortune
toward saving the mine, but he still needed cash to buy and restart the mine itself.
Enter the Chinese. Litinsky convinced rare earths giant Shenghe Resources, based in Chengdu, to help finance his bid for the rest of the Mountain Pass operations, which Litinsky and JHL won in a June 2017 bankruptcy auction for just $20.5 million. He presold output to Shenghe for $50 million, enough to restart operations. In some quarters, the ploy raised eyebrows. Shenghe is partially owned by the Chinese government, and wasn't part of the point here to bolster America's position in rare earths minerals? Litinsky shrugs off such criticism.
“If there's some issue where we need to put the country first, of course we will, but right now, in a global economy we will sell to the customers that pay the highest price.” He's still selling some of his mine output to Shenghe, which currently owns 8% of MP.
The financing was arguably the easiest part of restarting Mountain Pass. The mine was a wreck, little more than a half-mile-wide flooded mud hole. One of JHL's investors, retired Valero Energy CEO Bill Klesse, says he scoped out the site with some fellow engineers and warned Litinsky, “This is going to be very difficult.” Flooding be damned, Litinsky was excited about how cheaply he was getting the property: Molycorp had invested $2 billion into the mine after acquiring it in 2008. “If you can buy a worldclass asset at a discount to replacement cost at the bottom of a cycle, luck finds you,” he says.
It took 18 months, and technical help from the Chinese, but the MP team restarted the mine and overhauled the site's process of milling, concentrating and refining rare earths. Among the updates: Where human eyes used to watch over bubbling cauldrons, cameras connected to AI systems now continually measure the size of surface bubbles to optimize the chemical processes. Since restarting the mine in 2018, MP has trip-led output. The mine's headcount, just eight when Litinsky took over, is up to 740 now. In 2022, with high rare metal prices on its side, MP netted $290 million. Last year, with prices down, net income was just $24 million.
Litinsky plans to boost output by 50% over the next four years and figures the site has 30 years of production left—or more if MP can find additional rare earths hotspots on the 15,000 acres it controls nearby. This kind of deposit, pushed out of the earth by magma, often stretches dozens of miles, he says hopefully.
Plus, he has an out-of-the-money option on MP's “overburden hill”—that's 62 million tons of excavated hard rock with ore content under 2.5%, which is too low to be economically processed now, particularly with Mountain Pass rock averaging a rich 6% ore content. Someday, if the price is right and technology allows, MP could process the pile, Litinsky says. How soon? That will depend, he says, on the trajectory of demand. Self-assembling artificially intelligent robots might need a lot of supermagnets.
FINAL THOUGHT “ROCKS AND MINERALS: THE OLDEST STORYTELLERS.” —A.D. Posey