By Peg Brickley
Coal-mining and nursing home magnate Tom Clarke is readying a
bid for the purchase of the Mountain Pass mine in California, and
has plans to work with Russian-born billionaire Vladimir Iorich's
firm to restart operations at the facility, the U.S.'s sole source
of materials vital to electronics.
Mr. Clarke said Tuesday his company, ERP Strategic Minerals LLC,
and Mr. Iorich's Pala Investments Ltd. had been interested
separately in the Mountain Pass mine, an open-pit operation where
rare earths -- elements used in electronics -- are harvested.
Earlier this year, an investment group involving Mr. Iorich's
Pala made a $40 million offer for the Mountain Pass mine, then
withdrew the offer without explanation. A spokesman for Pala, an
investment firm that focuses on metals and mining, said Tuesday
that Mr. Iorich doesn't run Pala and there are other investors in
the firm.
Mountain Pass is the only substantial rare earths mining
operation in the U.S. It has been idled for some time, and looking
for a buyer able cut a deal that has serious national security
implications.
Now ERP plans to buy the mine for $1.2 million, and Mr. Clarke
plans to work with Pala and with Australia's Peak Resources Ltd.
when it comes time to restart operations.
"Tom doesn't need our money," said John Nagulendran, portfolio
manager and general counsel to Pala Investments. "If Tom is
successful in acquiring this asset out of bankruptcy," Pala will
sit down with Mr. Clarke to "try to bring together a broken asset
and try to get this mine going again," Mr. Nagulendran said.
"The bid is our bid with our capital and our money." Mr. Clarke
said. "In the future when we restart operations we are certainly
talking about a significant investment."
That is where Pala and Peak come in.
Getting Mountain Pass up and operating, Mr. Clarke said, will
take the approval of multiple regulators, including the Committee
on Foreign Investment in the United States, or CFIUS.
Mr. Clarke said he is aware that Pala, a Swiss investment
company, is linked to Mr. Iorich, a German citizen, and that CFIUS
will likely have a say in the future of Mountain Pass.
Used in small amounts in electronics from cellphones to missile
defense systems, rare earths are a commercially volatile commodity,
with price swings dictated by trade policy in China, the world's
largest supplier.
Rare earths are "elements we need," Mr. Clarke said. A
disruption in the supply chain to the U.S. would reverberate across
multiple sectors, he said.
Pala managing director Anthony Milewski said Mountain Pass's
fortunes may hang in large part on growing demand for electric
vehicles, which need some of the elements produced at the mine.
Mountain Pass is "at the front end of a new industrial
revolution," feeding into environmentally friendly applications,
Mr. Milewski said.
An environmentalist who made a fortune operating nursing homes
in Virginia, Mr. Clarke has become a familiar figure in U.S.
bankruptcy courts, where he has bought up coal mines and promised
to clean up the environment. His Chippewa Capital will lead the
bidding for a former Essar Group iron ore facility in Minnesota, a
$250 million deal that may be tested in bankruptcy court
Wednesday.
The future, he believes, is in renewable energy. In the
meantime, however, addressing the toxic legacy of fossil fuel
mining is both an opportunity and a calling.
He's offering to pay $1.2 million and shoulder up to $100
million worth of Mountain Pass liabilities in a deal that will be
subject to a bankruptcy-court auction. Court papers say Mr. Clarke
is looking to close the acquisition of Mountain Pass by the end of
June.
Mr. Iorich's Pala and Australia's Peak will get involved when it
comes time to restart the mine, a proposition that will require
significant investment.
Pala and Peak "have a comprehensive business plan and commercial
plan," for operating the Mountain Pass mine with "all necessary
regulatory approvals," Mr. Clarke said. Peak is involved in a
rare-earths development in Tanzania, according to a release from
Mr. Clarke's company. Rocky Smith, who ran the Mountain Pass mine
for years, now works at Peak.
"I don't want to pretend my Wikipedia knowledge qualifies me to
mine rare earth," Mr. Clarke said.
Pala has been involved in discussions with California
environmental authorities, who are concerned about Mountain Pass's
future.
Abandonment of the "very complicated" rare earths mine would
leave California with "tremendous environmental liabilities," Mr.
Nagulendran said. In bankruptcy, the valuable mineral rights were
separated from the mine property, creating a "nightmare for
regulators," he said.
Restarting Mountain Pass as a rare-earths-mining operation will
also involve JHL Capital Group LLC, a Chicago investment firm that
controls the mineral rights at the site. The package that Mr.
Clarke is buying includes real estate and surface rights.
The Mountain Pass mine has been languishing in bankruptcy, left
behind when former owner Molycorp exited chapter 11 last year to
start life anew as a processor of rare earths. Pala, some years
back, was a major shareholder of Neo, the rare-earths-processing
business that Molycorp acquired, which forms the core of its
post-bankruptcy operation.
--Jacqueline Palank contributed to this article
Write to Peg Brickley at peg.brickley@wsj.com
(END) Dow Jones Newswires
April 25, 2017 13:10 ET (17:10 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.