Lithium miner Galaxy Resources has emerged as one of a series of bidders for assets of the failed US rare earths producer Molycorp, which collapsed in mid-2015 with debts of an estimated $US1.7 billion.
Aluminum Corp. of China, which is a U.S.-traded mining company based in Beijing and known commonly as Chalco, offered to pay more than $US700 million Molycorp’s non-U.S. assets, sources close to the negotiations said.
Other bidders include Shenghe Resources, a rare-earths miner and processor based in central China, and lithium miner Galaxy Resources. Both also made offers that exceeded the company’s appraised value range, which tops out at $US443 million, the people said. U.S. private-equity firm Carlyle Group LP also has held talks about a possible bid.
The overseas bidders are willing to offer higher prices because they expect to gain value from the cost savings of combining two similar businesses, the sources said. Molycorp said in a December 24 court filing that its assets are worth between $US391 million and $US443 million based on projected future cash flow.
The U.S. has been closely monitoring China’s global monopoly on mining the most valuable rare-earths, which are used in military technology such as unmanned drones, missiles and fighter jets.
The Chinese dominance has driven down the prices of most rare earths, pushing Molycorp into an reorganisation while pressuring Lynas Corp.
Molycorp’s $US650 million of 10 percent senior secured notes maturing June 2020 traded at 12.25 cents on the dollar at 3:26 p.m. in New York, up 7.4 cents from Dec. 17 when they last sold.
The bids may provide fuel for a group of creditors that are fighting the company’s reorganization plan, saying that it favours the company’s senior lender, Oaktree Capital Group LLC.
The creditors have asked a judge to let them sue Oaktree and the company’s advisers for what they say is a sham sale process designed to hand the company over to the lender, according to a court filing. The creditors have said in court papers that the offers the company has received are non-binding and that potential buyers haven’t yet fully evaluated the company’s finances.
Molycorp filed a reorganisation plan in November under which it would sell either the entire company or pieces of it, or reorganise under new owners. In the proposal, Molycorp agreed that Oaktree, a Los Angeles-based investment firm, must be paid $US514 million for any plan to go forward.
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