Mining and mineral processing company Molycorp Inc hopes to fill a growing need for scarce "rare earth" minerals and products, but its $450 million initial public offering, planned for next week, asks investors to take a big leap of faith. It will take about two years and more than half a billion dollars for the company to upgrade its equipment in the Mojave desert in Southern California and ramp up production.
Until then, the rare earth miner offers only a loss-making hole in the ground. Rare earth oxides get buzz because they are used in electric vehicles such as Toyota Motor Corp's Prius, wind power turbines and hard disk drives, and demand for the silvery metals is increasing.
China produces more than 95 percent of the world's rare earth oxides, but with fears of a supply shortfall due to rising export quotas and domestic use, Western companies such as Molycorp could find a market, even if their costs exceed China's.
It restarted some processing in 2007 and was later sold to private investors, but its sales figures are tiny and its loss is widening.