Digging Deeper?

By Tommy A. Purvis

Posted June 27, 2013 in News
(WEB)news“False” statements and radioactivity plague a rural San Bernardino County mine

Molycorp’s got some ’splainin‘ to do.

The delayed production of rare-earth elements under Project Phoenix at the Molycorp Mountain Pass Mine in the northern tip of rural San Bernardino County has led to a stock meltdown and several class-action lawsuits in U.S. District Court for the District of Colorado.

The legal flurry can be found in the “false and misleading statements” regarding production and company earnings from former Molycorp Chief Executive Officer Mark A. Smith, who sough to raise capital in order to revive the long troubled mine found 15 miles from the Nevada border on the well traveled I-15. A complaint filed by San Diego-based law firm Robbins Geller Rudman & Dowd alleges that Smith “misrepresented and/or failed to disclose” that “development and the expansion of the Mountain Pass mine was not progressing on schedule and would not allow the company to reach rare-earth oxide production rates at the end of calendar 2012 and 2013.”

Trig Smith, a spokesperson for the law firm, told the Weekly that it would be unable to comment regarding the ongoing litigation. Officials from Molycorp did not respond to requests for comments and interviews.

The earth under the 2,222-acre mine with a 500-foot-deep pit holds the largest deposit of rare-earth elements outside of China. The minerals are essential for use in “green” energy and military technology. The property was previously mined for five decades for use in color television sets and later by fossil fuel interests for the mineral lanthanum. The element is used in the petroleum refining process as a catalyst that increases the yield of gasoline from heavy crude oils.

Smith was also responsible for mine operations under Chevron prior to Molycorp buying the land.

“Molycorp is back. We’re going to be a meaningful rare-earth metals supplier in the United States,” Smith told the San Bernardino County Sun during a midweek press junket on the mine property in April 2010. “We’re being contacted by Fortune 100 companies who are worried about where they are going to get the next pound of lanthanum, next pound of cerium.”

An initial public offering (IPO) of Molycorp stock (MCP) in July of the same year on the New York Stock Exchange from Colorado-based investment firm Greenwood Village was based on the success of mining and processing the elements that are known among industry insiders as being labor-intensive and difficult to process. The package drew intense interest from green energy investors despite the fact the Mountain Pass Mine had been closed for seven years prior for dumping radioactive wastewater on the Ivanpah Dry Lake Bed.

An inflated nine-month stock run based on a overly optimistic public narrative from Smith and insider trading led to 76 million shares of the Molycorp stock being sold by executives and members of the board for $800 million in gross profit. Smith—who was forced to resign from his position last December—made $8.5 million.

A Forbes columnist wrote that Resource Capital Funds could sell its shares for the second-largest private equity return in Wall Street history. The stocks’ value was pumped by China reducing its own exports of rare-earth elements and primed with the promise of future legislation lined with over a billion dollars in subsidies for alternative energy suppliers.

JP Morgan burst the rare earth bubble in September 2011 when it cut the Molycorp stock from neutral to overweight and slashed the 2012 year-end price target to $66 from $105, citing a decline in rare-earth prices in a sign to investors the stock was overvalued. Molycorp shares fell 22 percent and lost $650 million.

But a dated geological resource evaluation scoping summary from the nearby Mojave National Preserve is proof that more than lost investments needs to be remediated. It found that past and future operations at Mountain Pass is a significant source of windblown dust in the preserve with airborne toxins and radioactivity.

The summary suggests the need to monitor and document impacts from past mining and notes that “tailings, especially uranium, may be a health hazard” in the future.

Correction: In a previous version of this post, the incorrect first name of Molycorp spokesman Trig Smith  was used. The Weekly regrets the error.

One Comment


    What a great summary, on yet another extraction and polluting industry we subsidize. Look around, see how this is happening with shale gas extraction fracking in the east, with drilling and offshore drilling for oil in the south, with coal mines throughout the midwest, and with the tar sands pits now turning western mountain ranges black. I never even thought of all these other miners turning America into a third world raw resource extraction nation. The investors pay for lobbyists and media pros, steal taxpayer dollars in the name of “cleaner” energy and independence, then taxpayers get nothing. Either it’s mismanaged, or if it finally succeeds, what the investors underpay the workers to extract gets exported. Good luck to everyone from point A to point Z as they transport it as cheaply as possible, too. We end up paying for the scams, the subsidies, the lost land, the cleanup, the health impacts to workers and surrounding communities – if not to the entire earth’s climate. And to add insult to injury, prices go up anyway. Only the insider investors get rich. Ya basta, enough already!

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