LYC Lynas Rare Earths Limited

Glencore International AG and U.S.-based mining company Wings Enterprises Inc. will jointly develop an abandoned magnetite mine in Missouri to produce rare earths and iron ore, the companies said Monday.

The deal brings the first major player to the development of rare earths mines outside of China, which controls more than 90% of production for the metals used in applications from wind turbines and energy-efficient light bulbs to hybrid car engines.

A recent diplomatic spat between China and Japan, one of the world's biggest rare earths consumers, raised fears that Beijing may use its control of production to manipulate the global market.

Export quotas imposed by Beijing earlier this year have sent shares soaring in Australia's Lynas Corp. Ltd. (LYC.AU) and California-based Molycorp Inc. (MCP) the only companies outside China to promise production of the minerals before 2013.

Glencore, based in Switzerland, is one of the world's biggest commodities traders. Privately held by its partners, its market value is estimated around US$35 billion-US$60 billion.

In a statement, the companies said underground production from the former Pea Ridge Iron Ore mine could begin from 2012 with the underground mine hitting full capacity in mid to late 2013. Rare earths would be produced concurrently with the less-valued magnetite, the companies said.

Jim Kennedy, owner of the mine, told Dow Jones Newswires that he couldn't provide further details of the project until after another joint announcement with Glencore during the U.S. later Monday.

However, he said the companies were examining whether to process their own rare earths or sell concentrates to another party for refining.

"We have to make a decision about whether to go to a highly refined product," he said.

Refining of rare earths is expensive and potentially hazardous, and represents one of the major hurdles to production.

Resources of lower-value apatite ore will be removed from the magnetite iron ore concentrates during processing, the companies said, adding that it would become the lowest-cost producer of the metals in the U.S.

More-valuable heavy rare earths could also be recovered from the site, making Pea Ridge the only permitted heavy rare earths mine in the U.S.

Hitherto, Glencore and Wings said that work would only be able to start after the completion of financial and feasibility studies in up to eight months and the raising of finance.

-By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com

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