(Adds MP declines to comment on Shenghe) By Ernest Scheyder July 15 (Reuters) - U.S. rare earths miner MP Materials willgo public in a $1.47 billion deal by merging with aprivate-equity backed blank-check company, underscoring WallStreet's rising interest in efforts to boost production of thestrategic minerals. The listing on the New York Stock Exchange would be thefirst for a U.S. rare earths company since Molycorp went publica decade ago. Molycorp filed for bankruptcy in 2015 and MPMaterials bought California's Mountain Pass mine and otherMolycorp assets in 2017. The deal, announced on Wednesday, comes as President DonaldTrump pushes to resume domestic production and processing ofrare earths, a group of 17 minerals used to build weapons andelectronics. China is the world's largest producer of theseminerals and has threatened to stop their export to the UnitedStates. Reviving domestic rare earths production has become apriority in Washington as relations with China have becomeincreasingly frayed and U.S. lawmakers warn of the dangers ofrelying on a competitor for critical defense components.
Hedge funds JHL Capital Group and QVT Financial will foldtheir ownership of MP into the special-purpose acquisitioncompany (SPAC) Fortress Value Acquisition Corp ,shares of which gained 9.7% on Wednesday. Fortress is controlledby Japan's SoftBank Group Corp . SPACs have been behind some recent high-profile publiclistings, including electric car maker Fisker, which announcedits plans earlier this week. MP will net about $489 million from the deal and a separatestock offering for several private investors, including venturecapitalist Chamath Palihapitiya and the hedge fund Slate PathCapital, which is a major shareholder in Barrick Gold Corp , the world's second-largest gold producer.
MP plans to use the funds to upgrade outdated and mothballedMolycorp-era processing equipment in California. MP had planned to process 5,000 tonnes per year of the twomost common rare earth metals by the end of 2020, though thegoal is now by 2022, the company said on Wednesday.
MP is by far the most advanced player in the U.S. rareearths industry, given no rival project has even broken ground.But the company has to ship more than 50,000 tonnes ofconcentrated rare earths per year to China for final processingbecause its California equipment is not operational. Chinesecustomers account for all of MP's $100 million in annualrevenue. Jim Litinsky, MP's co-chairman, will become chief executiveof the new company, which will trade under the stock ticker"MP." Retired U.S. General Richard Myers, who chaired the JointChiefs of Staff during the George W. Bush presidency, will jointhe company's board. It was not immediately clear if China's Shenghe ResourcesHolding Co Ltd , which owns 9.9% of MP, wouldparticipate in the Fortress deal, though the conversion likelywill give Shenghe an equity holding in the newly formed publiccompany. Shenghe did not respond to a request for comment. MPdeclined to comment. Reuters reported earlier this year that Shenghe's stake inMP had prompted concern from scientists at the U.S. Departmentof Energy's Critical Materials Institute, the focal point of theU.S. government's rare earths research and a facility thattypically works closely with private industry. The U.S. Department of Defense awarded funding in late Aprilto MP for a facility to process heavy rare earths, a less-commontype of the specialized minerals.
But that decision was put on hold a few days later pending"further research," according to a Pentagon document seen byReuters. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^FACTBOX-Rare earths projects under development in U.S. EXCLUSIVE-U.S. Army will fund rare earths plant for weaponsdevelopment INSIGHT-American quandary: How to secure weapons-grade mineralswithout China ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Ernest Scheyder; Editing by Lisa Shumaker)
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