Tom Clarke Steps Up to Buy Mountain Pass Rare Earths Mine -- Update

By Peg Brickley Features Dow Jones Newswires

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.

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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.

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"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)