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MEI Online: Commodities: Metallic Ores: Rare Earths & Thorium: Latest News: March 15th 2012


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:: Molycorp to Acquire Leading Rare Earth Processor Neo Material Technologies in $1.3 Billion Deal

The transaction will combine Molycorp's world-class rare earth resource and low-cost production from its Project Phoenix with Neo's proven leadership in the development, processing, and distribution of technically advanced rare earth products.

The transaction will give Molycorp greater exposure to the world's largest and fastest-growing rare earth consuming nation - China - which now comprises about 70% of global rare earth consumption.

The transaction leverages Neo Materials' existing infrastructure to allow Molycorp to ramp up its overall production once Project Phoenix Phase 2 production begins in 2013.

The transaction expands Molycorp's production capabilities to include Neo Materials' Magnequench patented magnet powder portfolio used to produce neodymium-iron-boron (NdFeB) bonded rare earth magnets.

The transaction expands Molycorp's strategic rare metals portfolio to include gallium, rhenium, and indium, which are used in advanced electronics, photovoltaic, aerospace, catalytic converters, and lighting industries.

The combination is expected to be accretive to Molycorp's 2012 earnings and cash flow. Significant identified synergies are expected to further strengthen Molycorp's financial performance beyond 2012.

"This transaction will link two unique companies - one with a world-class, high-quality resource, and the other with world-class rare earth product design and processing capabilities," said Mark A. Smith, Molycorp's President and Chief Executive Officer. "Neo Materials is recognized throughout the industry for its exceptionally high-quality production and processing capabilities, its patented technology platform, and its ability to consistently meet demanding customer specifications. With this combination, Molycorp will be in a unique position to enhance our time to market and provide new global customer segments with rare earth metals, oxides, and alloy powders that are unmatched today. We see significant opportunities for growth as well as powerful synergies through this transaction."

Under the agreement, which was unanimously approved by the two companies' boards of directors, Neo Materials shareholders will receive consideration equal to CDN$11.30 per share, comprising of CDN$8.05 per share in cash and 0.122 Molycorp shares based on Molycorp's 20-day volume weighted average price of US$26.66. Neo Materials shareholders will have the right to elect their preferred consideration mix of cash and newly issued Molycorp common stock, with the total consideration being approximately 71.2 percent cash and approximately 28.8 percent Molycorp common stock. The CDN$11.30 per share represents a premium of approximately 42 percent to Neo Materials' closing share price of CDN$7.97 on March 8, 2012.

The transaction will be implemented through a court-approved Plan of Arrangement under Canadian law and is subject to the approval of Neo Materials shareholders, relevant regulatory approvals, and other customary closing conditions. The transaction is expected to close in the second or third quarter of 2012.

Molycorp intends to finance the majority of the cash portion of the consideration and has obtained a committed financing facility from Morgan Stanley and Credit Suisse. Permanent financing is expected to include long-term debt, existing cash on hand of the combined company, and the proceeds from any equity issuances. Funds allocated to Project Phoenix Phase 1 and Phase 2 will not be used for this transaction.

The combination of Molycorp and Neo Materials will expand Molycorp's geographic footprint across 11 countries and provide leading product development, research, and sales capabilities. Additionally, Molycorp will gain cutting-edge technologies and will leverage Neo Materials' years of processing experience and knowledge, to better service the Company's customer base as well as new customer segments. This transaction brings to Molycorp Neo's direct operating and sales channels in China, the world's largest and fastest growing rare earth consuming nation. In 2010 and 2011, Neo Materials' sales to China and Japan, collectively, accounted for approximately 68 percent and 64 percent of sales, respectively.

The combination will expand Molycorp's technology portfolio to include production of magnetic powders, and rare metals including gallium, indium and rhenium, as well as zirconium oxide. This will enable Molycorp to produce and market materials that are integral to a wide variety of strategic technologies, including advanced electronics, thin film photovoltaics, LEDs, flat screens, super alloys, catalytic converters, mobile and smart phones, magnets, batteries. The addition of Neo Materials' expertise also will provide entry for Molycorp into customer segments requiring value added, rare earth and rare metal production capabilities - up to 99.99999% purity for some elements.

"The industrial logic of this combination is highly compelling," said Constantine Karayannopoulos, President and Chief Executive Officer, Neo Materials. "We will be vertically integrating the world's best rare earth resource outside of China with the world's best rare earth processing technology company. The new enterprise will have the broadest global coverage in the industry, as well as a strategic position in high-value magnetic materials and rare and other strategic metals. We look forward to this transaction and believe our employees, partners, shareholders, and customers around the world will benefit greatly as a result."

Smith added, "The combination of our businesses enhances our Mine-to-Magnets vision and places Molycorp in all steps of the vertical rare earth supply chain, reaching many new consumer segments across the globe. It also allows us to reach new and highly specialized niche segments that require value added, specialty products, given Neo Materials' downstream high value added materials for rare earth applications - a key differentiator and rationale behind this transaction. We continue to place a high value on the expertise, dedication, and commitment to excellence that Neo Materials' people will bring to our company, and I look forward to a rapid and seamless integration of our organizations."

"The Board of Directors and I believe the growth and profit potential of this combination will be immediately accretive to Molycorp's earnings and will position the Company for strong returns for the future," Smith concluded.




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