A group led by Tom Clarke, a former care home operator, and Switzerland-based private equity fund Pala Investments Ltd. will compete with U.S. hedge funds and a Chinese rare earths company in a June 14 auction for bankrupt Molycorp Inc.'s shuttered Mountain Pass mine in California, the Financial Times reported May 30.
The Swiss fund, along with Australia's Peak Resources Ltd. and Clarke, will offer US$1.2 million for the only rare earths mine in the U.S.
The winner is expected to be scrutinized by the Committee on Foreign Investment in the U.S. and take on an estimated US$80 million in environmental liabilities.
The consortium is up against Molycorp's creditor hedge funds, including Chicago-based JHL Capital Group, and QVT Financial, which have teamed up with Shanghai-listed Shenghe Resources, a rare earths processor.
Molycorp invested over US$1.5 billion into the mine, but a downturn in prices of rare earths led the miner to file for bankruptcy in June 2015, with around US$1.7 billion in debt.
Clarke, who has been purchasing bankrupt U.S. coal mines, said that increasing demand from electric vehicle batteries provide a reliable market for rare earths materials in the country, adding that "even in the current markets certain of these elements will be profitable."
Meanwhile, a company owned by JHL, QVT and New York-based asset manager Oaktree Capital own the mineral rights to the mine, which added to the complexity of the situation.
Clarke, however, noted that his consortium could still use the mine site to process material from elsewhere if they are unable to secure the mineral rights. He hoped to negotiate for the rights if his bid wins.
In a testimony to the U.S. Senate Select Committee on Intelligence in May, Mike Pompeo, the head of the Central Intelligence Agency, said the country's dependence on China for rare earth metals represents a "very real concern."
The testimony came as rare earth-related legislation was set to go before Congress while Pompeo's comments highlighted the long-standing issue of domestic U.S. rare earth production — or lack thereof in recent decades.