Molycorp Gets Charged Up
Making magnets might not sound like an interesting business, but making ultra-powerful magnets from rare minerals found in small quantities around the world, now that sounds like something that could get my attention.
Molycorp (NYS: MCP) made just that move yesterday, further diversifying its business beyond mining for rare-earth minerals.
Daido Steel Co. and Mitsubishi Corp. will own 35.5% and 34.5% of the magnet venture, leaving 30% for Molycorp. Financing will come from the three owners and a subsidy from Japan's Ministry of Economy, Trade, and Industry. The facility will make 500 metric tons per year of magnets and will be based in Nakatsugawa, Japan.
What's this magnet all about?
According to Molycorp's press release, these magnets will be the most powerful in the world and should be attractive to a variety of industries. The more powerful magnets "can help reduce electric power consumption by 20%" and will be attractive particularly for high value products like electric vehicles, wind turbine generators, and industrial applications.
Wind turbines made by Siemens (NYS: SI) and GE (NYS: GE) have always been pointed to as a major consumer of rare-earth minerals, so Molycorp is trying to capture as much value in this market as possible.
Foolish bottom line
I haven't been a fan of Molycorp's stock price, but I do appreciate the company's efforts to use its current position in the market to expand into new ventures. The company has made a string of acquisitions into rare-earth alloys, wind turbines, and now magnets that put it well in front of competitors like Avalon Rare Metals (ASE: AVL) and Rare Element Resources (ASE: REE) .
The company serves a dual role of supplier and partner in these businesses and this could help insulate the company somewhat as rare-earth mineral prices fall. I'm not about to jump into the stock, mostly because it's hard to value the ventures, but I like management's understanding of Molycorp's tenuous position in the rare-earth market.
At the time this article was published Fool contributorTravis Hoiumdoes not have a position in any company mentioned. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdingsor follow his CAPS picks atTMFFlushDraw.Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.