Lifton leaves Oaktree to Molycorp
I have never met anyone from Oaktree Capital nor have I ever spoken with anyone from that company. So either they read my rare earth industry analysis or, as it is said, “great minds think alike.”
In a classically Freudian outcome, the thing acquired (Neo Material Technologies Inc.) has consumed the acquirer (Molycorp Inc.).
Since I learned of the complete failure of Project Phoenix to meet any deadline at all for production, quality, or profitability I have been saying that the Mountain Pass Project Phoenix was a failure. The acquisition of Neo in early 2012 was, at the time, an expensive flailing for credibility. There certainly at that time was no plan for Neo to take over or supplant the original Molycorp, but time and the professionalism of Neo’s management simply overwhelmed the completely unprofessional and unqualified original Molycorp management.
The result is that an unprofitable and un-fixable Mountain Pass mine has again been put on “care and maintenance.” I doubt that it, or the feeble Project Phoenix will rise again from the ashes. The great bird is dead.
The skilled workers who tried to follow the antagonistic orders of company management and outside contractors will now go into the wind. I am sorry for them, because it is unlikely that employment at Project Phoenix will be a good thing to have on a resume. However it will be a better reference than saying you had been a manager at Molycorp, Mountain Pass.
Oaktree’s proposal to provide debtor in possession financing is contingent upon Mountain Pass’ operations being “mothballed” and Neo being offered for sale. This has got to be good news for Constantine Karyannoupoulis who will now get a chance to buy back his original company at what will most likely be a fair, if distressed, value. I will bet that Oaktree is already arranging the financing for that.
So, all that having been said, heres my advice to Constantine Karyannoupoulis:
- Form a strategic alliance with Rare Element Resources with Neo constructing a right-size solvent extraction separation facility using RER’s patented technology near the RER mining site in Wyoming,
- Give an off-take to RER for enough of the market critical rare earths they will produce to allow the company, RER, to finance the project,
- Commit to using the high purity rare earths produced by RER to support an American domestic supply chain wherever and when ever possible, and
- Give off-takes for heavy rare earths to both TRER and Ucore produced by whichever technology either company uses with the possibility of toll refining the rare earths from any or all of these off-take agreements with the best technology.
Completing line items 1-4 above would mean that the three American companies would have off-takes with a profitable existing Globally savvy rare earth company to supply not only an American domestic market but an Asian market where their particular raw materials are much in demand right now.
I believe that global capital would support such moves and it would be difficult for the US Federal Government to avoid involvement.
I suspect that Oaktree Capital in fact has this scenario in mind.
Jack Lifton is the CEO of Jack Lifton, LLC and is a consultant, author, and lecturer on the market fundamentals of technology metals. “Technology metals” ... <Read more about Jack Lifton>