handsdo
4 years ago
A Rare-Earth Minerals Miner Is About to Go Public. It's a Play on Auto Electrification. -- Barrons.com
11/10/20, 11:16 AM
Another electric-vehicle-related SPAC merger is moving closer to fruition. The special purpose acquisition company Fortress Value Acquisition has scheduled a shareholder meeting for Friday to vote on its pending merger with MP Materials.
The vote has a couple of implications for investors. One shouldn't matter. But one definitely does.
After the merger, Fortress Value's stock symbol will change from "FVAC" to "MP" -- probably Tuesday or Wednesday of the coming week. That shouldn't be a big event for investors, but a few EV-related SPACs have gotten a bump from a stock-symbol change. Fisker (FSR) stock, for instance, jumped 13% around the closing of its SPAC merger and stock-symbol change. Lordstown Motors (RIDE) rose about 4% around the time of its change.
Stock symbols might not matter. Or, at least, they shouldn't. Shareholder votes do, but investors should expect the merger to close without much drama. Fortress Value shares are trading at roughly $11.75 -- versus the SPAC's cash in trust of about $10 per share. The market is clearly ascribing value to the deal.
At the time of the merger, SPAC shareholders also have the option of redeeming their stock for a proportionate share of the cash in Fortress Value's trust. But with the stock trading for about $1.75 more than the cash value, redemptions are likely to be close to zero. On closing and after expenses, MP Materials will get roughly $500 million to execute its business plan. That includes $345 million from Fortress Value, in addition to a $200 million private investment in public equity, or PIPE, from a collection of individual and institutional investors.
MP is partly an EV investment, but it isn't an auto maker like Tesla (TSLA). From a site in the southeastern California desert, it mines rare-earth minerals that go into magnets used in electric motors. About 9% of the magnets derived from MP-type materials go into EV motors. That share, however, is set to rise as EV penetration of the car market increases. Roughly two million EVs were sold around the world in 2019. That number could hit as much as 30 million by 2030, if some of the more optimistic projections are met.
"We don't need to take over the industry," MP Materials Chairman James Litinsky said. "We just need to build a nice business based on the output we have to have a tremendous opportunity."
Right now, MP mines a rare-earth concentrate that is processed and refined by others downstream, mostly in China. Some of the cash from the SPAC merger will be used to build competing refineries in North America so MP can sell more finished rare-earth products to magnet makers.
MP expects a big step up in product prices and projected profitability from its vertical integration. Today, MP can ship about 37,000 metric tons of rare- earth oxide concentrate. After refining, it plans to ship about 6,075 metric tons of Neodymium Praseodymium, or NdPr, rare-earth metals for magnets. MP says 6,000 metric tons of NdPr can make magnets for six or seven million EVs.
"Tesla is moving upstream into materials, we're moving downstream into magnetics," Litinsky said. He will also become CEO once the deal closes next week. "Hopefully valuations will meet somewhere in the middle. I say that in jest, but what Elon Musk is saying -- and I think the rest of the auto industry will follow -- is that the materials supply chain matters, it's a source of edge. We've got that asset."
The company expects its profit to go from about $30 million to $250 million between 2020 and 2023. There will be about 147 million shares of MP outstanding after the transaction, valuing the company's stock at roughly $1.7 billion. Fortress Value and MP sellers have an additional 21.5 million shares that vest if the stock hits certain levels in the coming years.
EVs have been a good space for investors in 2020. The stocks Barron's tracks are up about 400% year to date on average, crushing comparable returns of the Dow Jones Industrial Average and S&P 500.
Write to Al Root at allen.root@dowjones.com and Nicholas Jasinski atnicholas.jasinski@barrons.com
(END) Dow Jones Newswires
11-10-20 1216ET
handsdo
4 years ago
Fortress Value Acquisition Corp. and MP Materials Announce Effectiveness of Registration Statement for Proposed Business Combination
Special Stockholder Meeting Scheduled for Friday, November 13th, 2020
October 27, 2020 11:02 AM Eastern Daylight Time
NEW YORK--(BUSINESS WIRE)--Fortress Value Acquisition Corp. (“FVAC”) (NYSE: FVAC), a special purpose acquisition company sponsored by an affiliate of Fortress Investment Group LLC (“Fortress”), today announced that the U.S. Securities and Exchange Commission (“SEC”) has declared effective the registration statement on Form S-4 (File No. 333-248433) (as amended to the date hereof, the ”Registration Statement”), which includes a proxy statement/consent solicitation/prospectus in connection with its special meeting of stockholders to consider the previously announced business combination (the “Business Combination”) with MP Materials (“MP Materials”). MP Materials is the owner and operator of Mountain Pass, the only rare earth mining and processing site of scale in North America. FVAC has commenced mailing the definitive proxy statement/consent solicitation/prospectus relating to the special meeting, which will be held on Friday, November 13, 2020. The proxy statement/consent solicitation/prospectus is being mailed to FVAC’s stockholders of record as of the close of business on October 12, 2020 (the “Record Date”). Should the Business Combination be approved by stockholders, FVAC and MP Materials anticipate closing the Business Combination the week of November 16, 2020, subject to satisfaction or waiver of customary closing conditions.
Additional Information About the Business Combination and Where to Find It
The Registration Statement includes a proxy statement in connection with FVAC’s solicitation of proxies for the vote by FVAC’s stockholders in connection with the Business Combination and other matters as described in the Registration Statement, and a consent solicitation statement in connection with MP Materials’ and SNR’s solicitation of consent by their respective unitholders in connection with the Business Combination, as well as the prospectus relating to the offer of the securities to be issued to MP Materials’ and SNR’s unitholders in connection with the completion of the Business Combination. FVAC is mailing a definitive proxy statement and other relevant documents to its stockholders as of the Record Date. FVAC’s stockholders and other interested persons are advised to read the definitive proxy statement/consent solicitation/prospectus, in connection with FVAC’s solicitation of proxies for its Special Stockholder Meeting to be held to approve, among other things, the Business Combination, because these documents contain important information about FVAC, MP Materials and the Business Combination. Stockholders may also obtain a copy of the definitive proxy statement/consent solicitation/prospectus, as well as other documents filed with the SEC regarding the Business Combination and other documents filed with the SEC by FVAC, without charge, at the SEC’s website located at www.sec.gov or by directing a request to 1345 Avenue of the Americas, 46th Floor, New York, New York 10105, Attention: R. Edward Albert III, President (ealbert@fortress.com), CC: Alexander Gillette (agillette@fortress.com).
Participants in the Solicitation
FVAC, MP Materials and certain of their respective directors, executive officers and other members of management and employees may, under SEC rules, be deemed to be participants in the solicitations of proxies from FVAC’s stockholders in connection with the Business Combination. Information regarding the persons who may, under SEC rules, be deemed participants in the solicitation of FVAC’s stockholders in connection with the Business Combination is set forth in proxy statement/consent solicitiation/prospectus as filed with the SEC. You can find more information about FVAC’s directors and executive officers in the Registration Statement. Stockholders, potential investors and other interested persons should read the proxy statement/consent solicitation/prospectus carefully before making any voting or investment decisions. These documents can be obtained free of charge from the sources indicated above.
About MP Materials
MP Materials is the owner and operator of the Mountain Pass Rare Earth Mining and Processing facility, the only integrated site of its kind in the Western Hemisphere. With over 270 employees, MP Materials produces approximately 15% of global rare earth materials, essential for the development of technologies such as defense systems, smartphones, drones, and electric vehicles. It operates a green mining and processing facility and is currently one of the lowest-cost producers of rare earth concentrate. MP plays a leadership role in advocating for a more robust and competitive rare earths industry in the U.S. More information is available at https://mpmaterials.com/.
About Fortress Value Acquisition Corp.
Fortress Value Acquisition Corp. is a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses, and is sponsored by an affiliate of Fortress Investment Group LLC.
Forward-Looking Statements
Certain statements included in this press release that are not historical facts are forward-looking statements for purposes of the safe harbor provisions under the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of the words such as “ estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” or similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity and expectations related to the timing of the transaction, including the anticipated closing date for the Business Combination. These statements are based on various assumptions, whether or not identified in this press release, and on the current expectations of MP Materials’ and FVAC’s management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of MP Materials and FVAC. These forward-looking statements are subject to a number of risks and uncertainties, including changes in domestic and foreign business, market, financial, political and legal conditions; the inability of the parties to successfully or timely consummate the Business Combination; the risk that any required regulatory approvals are not obtained, are delayed or are subject to unanticipated conditions that could adversely affect the combined company or the expected benefits of the Business Combination; the risk that the approval of the stockholders of MP Materials or stockholders of FVAC is not obtained; the risk that any of the conditions to closing are not satisfied in the anticipated manner or on the anticipated timeline; failure to realize the anticipated benefits of the Business Combination; risks relating to the uncertainty of the projected financial information with respect to MP Materials; risks related to the rollout of MP Materials’ business strategy and the timing of expected business milestones; risks related to MP Materials’ arrangements with Shenghe; the effects of competition on MP Materials’ future business; risks related to political and macroeconomic uncertainty; the amount of redemption requests made by FVAC’s public stockholders; the ability of FVAC or the combined company to issue equity or equity-linked securities in connection with the Business Combination or in the future; the impact of the global COVID-19 pandemic on any of the foregoing risks; and those factors discussed in the Registration Statement under the heading “Risk Factors,” and other documents of FVAC filed, or to be filed, with the SEC. If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that neither FVAC nor MP Materials presently know or that FVAC and MP Materials currently believe are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect FVAC’s and MP Materials’ expectations, plans or forecasts of future events and views as of the date of this press release. FVAC and MP Materials anticipate that subsequent events and developments will cause FVAC’s and MP Materials’ assessments to change. However, while FVAC and MP Materials may elect to update these forward-looking statements at some point in the future, FVAC and MP Materials specifically disclaim any obligation to do so, unless required by applicable law. These forward-looking statements should not be relied upon as representing FVAC’s and MP Materials’ assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.
Disclaimer
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended. This press release relates to a proposed business combination between FVAC and MP Materials.
INVESTMENT IN ANY SECURITIES DESCRIBED HEREIN HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY OTHER REGULATORY AUTHORITY NOR HAS ANY AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Contacts
For MP Materials:
Investors:
Ellipsis
Jeff Majtyka / Taylor Krafchik
IR@mpmaterials.com
Media:
Edelman
Julia Sahin
Julia.Sahin@edelman.com
For FVAC:
Gordon E. Runté
Managing Director
Fortress Investment Group LLC
212-798-6082
https://www.fortressvalueac.com/news/2020-10-27-fortress-value-acquisition-corp-and-mp-materials-announce-effectiveness-of-registration-statement-for-proposed-business-combination
Wrinkles
4 years ago
To revive rare-earth industry..U.S. looks to the Mojave
By JAMIE SMYTHFINANCIAL TIMES
SEP. 25, 20202:40 PM
It is five years since the giant trucks hauling ore around the Mountain Pass mine in California’s Mojave desert fell silent.
Molycorp, the only major producer of rare-earth metals in the U.S., had just collapsed under the weight of a $1.7-billion debt. The bankruptcy burned investors and left the nation almost entirely reliant on China for the supply of 17 metallic elements that are embedded in most high-tech products, from wind turbines to electric vehicles and F-35 fighter jets.
Now, as relations between Washington and Beijing deteriorate further, the U.S. government is supporting the resurrection of Mountain Pass, which until the 1980s was the world’s biggest producer of rare earths. Disruption to supply chains during the COVID-19 pandemic has underscored the need for the U.S. and other nations to ensure they are not reliant on a single country or company for vital supplies of raw materials and goods.
The Pentagon has agreed to fund MP Materials — a private-equity-backed company, which bought the mine for $20.5 million in 2017 and restarted excavations — to design the first heavy rare-earth processing facility in the U.S. at the site. It is also backing a similar project in Texas proposed by Australian company Lynas, amid concerns that China could disrupt U.S. defense and other industries by withholding supplies of rare earths. In July, it handed $29 million to Urban Mining Co. in Texas, which manufactures rare-earth magnets by recycling electronic waste.
Beijing’s threat of sanctions on Lockheed Martin in July has added urgency to efforts to break China’s stranglehold on the industry. It controls four-fifths of the global mined supply of rare earths, and an even larger share of the manufacture of powerful rare-earth magnets — industries worth $13 billion a year combined. The Trump administration earmarked $209 million in public funds for the sector — thought to include the funding for MP Materials — this year.
“We’ve certainly learnt that a single point of failure in the global supply chain for anything critical is a significant challenge,” says James Litinsky, MP Materials’ chief executive, who adds that rare earths are essential to millions of future jobs in high-tech sectors.
“That is trillions of dollars of gross domestic product that, if we don’t build a supply chain in the Western Hemisphere, is going to be solely reliant on that single point of failure in China,” he adds.
Washington is not alone in being concerned over Beijing’s control of rare earths. The European Commission is working on a raw materials strategy that aims to wean domestic industries off their dependence on China by boosting industry collaboration and providing sustainable finance for new producers. Australia, which holds one-sixth of the world’s rare-earth deposits, has teamed up with the U.S. to source new deposits and support market entrants. And Russia has unveiled a $1.5-billion rare-earth plan to tempt investors with tax breaks and cheap loans.
Investors, previously chastened by Molycorp’s collapse, are again interested. MP Materials plans to list later this year on the New York Stock Exchange via Fortress Value Acquisition Corp, a special purpose acquisition vehicle, to raise $500 million to fund expansion. FVAC is sponsored by affiliates of Fortress Investment Group, owned by Japan’s SoftBank. Separately, a swath of smaller rare-earth miners and processors in the U.S., Australia and elsewhere are seeking to raise billions of dollars for projects to produce neodymium, praseodymium (NDPR) and other rare-earth oxides and metals.
Experts warn that the growing hype surrounding the sector masks the huge challenges new entrants face. China’s dominance of the supply chain stretches from mining to the manufacture of magnets and the assembly of electric vehicles.
“The investment risk on any one of these projects is monstrous,” says Jeffrey Wilson, director of the Perth-USAsia Centre at the University of Western Australia. “If you’re an investor wanting to put capital into that, then it’s got red flags all over it.”
The sector — a notoriously dirty, environmentally unfriendly business — is also plagued with technical complexity, a skills shortage in the West and a monopolistic market that hands pricing power to Chinese state-owned incumbents. When Beijing unexpectedly cut export quotas for rare earths in 2010, prices quadrupled — a surge that alerted Western nations to their reliance on China.
Establishing a viable non-Chinese supply chain, says Wilson, will take years and require major government support, international cooperation and collaboration from industrial giants in the U.S., Europe and Japan.
“The Chinese state-owned producers can do the Saudi [oil] trick,” he says, adding: “They turn on the taps, flood the market, the price of dysprosium crashes, the new entrant is washed out, and then they’ve reestablished their monopoly.”
Not that rare
Rare earths — the 15 lanthanide elements on the periodic table plus two other related elements, scandium and yttrium — have become an integral part of modern life. More than 90% of hybrid and electric vehicles use rare-earth-based magnets in their motors, while each F-35 fighter jet requires 420 pounds of rare-earth materials.
Despite their name, rare earths are relatively abundant. But they tend to be widely dispersed, making them difficult to mine profitably. The process of separating them into commercially viable products also poses technical and environmental challenges, which have caused many new entrants to struggle.
“Outside of China there’s very little expertise. We’re the only company in the past two decades, that have successfully ramped up, not just preliminary processing of rare earths, but right through to separated oxides,” says Amanda Lacaze, Lynas chief executive. “It is not something that you can easily do from a textbook. Our in-house IP [intellectual property] is one of the most valuable things we have.”
Lynas currently ships ore from its Mt. Weld mine in western Australia — said to be one of the richest rare-earth deposits in the world — to a $730-million plant in Malaysia for processing into neodymium and praseodymium, key ingredients in the most widely used rare-earth magnets. In July it won seed funding from the Pentagon to design a plant in Texas alongside its U.S. joint venture partner, Blue Line, to process dysprosium and terbium — heavy rare earths — that can, at the moment, be processed only in China.
“The U.S. has a strong and successful history of using the defense industry to create capable industries or supply chains,” says Lacaze, who is hopeful further government funding will become available to actually build, and not just design, a plant in Texas.
A growing number of experts — both inside and outside of the companies — suggest that public funding is the only way to build a supply chain outside of China. Lynas has struggled to compete with Chinese rivals, reporting a profit in just two of the last six years. In 2016 it required a bailout led by Japan Oil, Gas & Metals National Corp, a state-owned Japanese company, and it continues to burn through cash — raising $312 million from shareholders in August to bankroll a new facility to help meet environmental rules in Malaysia.
“There is no free market solution to this problem [of a non-Chinese supply chain] without significant initial government backing,” says Dylan Kelly, analyst at Ord Minnett, a Sydney-based brokerage. “Barriers to entry are extremely high, a project needs 10 years and over $1 billion to get up and running and there is no guarantee of success. Capital markets have been burnt in the past through misadventures.”
Beijing’s strategic vision
Beijing declared rare earths a “strategic” mineral as far back as 1990. A decade later during a visit to a mine in Baotou, Inner Mongolia, then-Chinese President Jiang Zemin declared that China’s task was to “improve the development and application of rare earths, and change the resource advantage into economic superiority.” When the trade war between Washington and Beijing intensified last year, President Xi Jinping visited a rare-earth magnet maker in Jiangxi province, almost as if to highlight his nation’s dominance in such a crucial element.
Chinese producers now hold about 80% of the global rare-earth market — up from 27% in 1990. Beijing initially used production and export quotas to build its rare-earth sector into a global leader, helping the nation establish itself as the “world’s factory” and win a greater share of global manufacturing. Under the Made in China 2025 strategy, Beijing is pushing to create an integrated supply chain in mining, magnets and high-tech manufacturing.
“They want to produce 50% of the world’s electric vehicles and 50% of the world’s hybrid vehicles by 2025,” says Dudley Kingsnorth, a professor at Curtin University in Perth. “If that is successful then that will decimate the automotive industry in Europe and North America and Asia.”
He warns that Beijing could further undermine the rest of the world’s ability to produce EVs and other high-tech products by limiting exports of rare earths and magnets. This is potentially a much bigger threat than any sanctions imposed on Lockheed or other defense companies, which probably have stockpiles that could last a few years, he adds.
“If the jobs disappear to your kids and grandkids then that impacts GDP,” says Kingsnorth, who is an adviser to NATO on rare earths, “and then there is less money to spend on defense.”
Ahead of its time
From MP Materials’ headquarters in Las Vegas, Litinsky is plotting the rebirth of the U.S. rare-earth industry from Mountain Pass. The founder of Chicago-based hedge fund JHL Capital teamed up with U.S. investment group QVT Capital and Shanghai-listed Shenghe Resources for the 2017 deal to buy the mine.
They restarted mining a year later but have to ship ore to China for processing, generating annual revenue for MP Materials of about $70 million. Using the money raised from its upcoming listing, MP Materials plans to restart the mothballed processing plant at the Californian mine by 2022 and later build the capability to produce metals and magnets.
“Molycorp had a great vision but the execution was lacking,” says Litinsky, adding that MP Materials’ mission to restore the rare-earth supply chain in the U.S. will boost jobs, national security and green technologies.
He says Molycorp was ahead of its time but did not benefit from the boom in electric vehicles, which he forecasts will consume the world’s current entire supply of neodymium and praseodymium within a decade. Technical problems that dogged the company’s processing plant at Mountain Pass have now been resolved, adds Litinsky.
But critics remain skeptical about MP Materials’ prospects, warning that another rare-earth failure could poison the investment climate in the sector for a decade.
James Kennedy, president of Three Consulting, says the geochemistry of the Mountain Pass deposit does not enable MP Materials to produce on a commercial scale the heavy rare earths, such as terbium and dysprosium, required for military-grade magnets in the F35 or drones. And politically, Shenghe Resources’ 9.9% stake in MP Materials is not consistent with the U.S. government’s stated goal of building a non-Chinese supply chain, he adds.
The Pentagon briefly paused its initial decision in April to fund MP Materials and Lynas after a call by a group of U.S. senators led by Ted Cruz (R-Texas) to support only U.S. rare-earth projects.
MP Materials says these concerns are groundless, noting that Richard Myers, a retired U.S. general and former chairman of the Joint Chiefs of Staff, has agreed to join the board and that once it becomes a NYSE-listed company, any foreign company, including from China, is free to invest in its shares.
But the project could yet fall foul of geopolitical tensions. “The political wind blowing against MP is the minority Chinese position,” says Wilson. “The question would be: Is the U.S. Defense Department about to fund a big technical study on how to separate U.S. rare earths, of which every single piece of information is going to go straight back to a Chinese competitor?”
Greater collaboration
If the U.S. is to establish a non-Chinese supply chain of rare earths and the magnets that power modern machinery it will require international collaboration, experts say. Rare-earth industry executives complain Western industry prioritizes low-cost products rather than ensuring its supply chain is not dominated by a single company or nation.
“Most companies require relatively small volumes of rare earths for their operations, compared to other raw materials. And even though rare earths are vital to their operations the procurement decisions tend to be taken by lower-ranking executives with an eye on costs, rather than by chief executives who might take a more strategic view,” says Anthony Marchese, chairman of Texas Mineral Resources Corp., which is seeking to develop a rare-earth and lithium mine in Texas.
“There needs to be a change in mind-set at the top end of the supply chain to ensure a U.S. supply chain is viable,” he adds.
Lynas has benefited from this type of support from Japanese customers, which have prioritized security of supply over cheap pricing since China slashed export quotas in 2010. But U.S. and European companies have been less willing to take a strategic approach to procurement, according to rare-earth experts.
“China is steadily tightening its grip on the entire rare-earths vertical supply chain,” says Kingsnorth. “Until the automotive industry, high-tech manufacturers and Western governments collaborate and use their purchasing power to underwrite investments in rare-earths processing and other downstream activities, they will continue to be outflanked by Chinese competitors.”
https://www.latimes.com/business/story/2020-09-25/rare-earths-california-mojave
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