TORONTO (miningweekly.com) – Sumitomo Corp has signed a memorandum of understanding to buy $100-million of Molycorp shares and provide the US firm with $30-million of low-interest-rate debt financing, in exchange for supplies of rare-earth metals.

Molycorp will supply Sumitomo with “substantial quantities” of rare earth products over the next seven years, the NYSE-listed firm said in a statement.

Sumitomo is seeking financial support from the Japan Oil, Gas and Metals National Corporation.

The transactions contemplated by the MOU are subject to finalisation of definitive agreements and the financing transactions are expected to close in February 2011, Molycorp said.

“This financing will help to ensure that Molycorp will deploy its entire mine-to-magnets manufacturing supply chain on time and on budget,” CEO Mark Smith said.

The company will initially supply about 2 500 t/y of cerium- and lanthanum-based products and 250 t/y of didymium oxide from its existing production facility at Mountain Pass, California.

After Molycorp completes construction of a new rare earth processing facility at Mountain Pass, the firm will supply Sumitomo with about 3 000 t/y of cerium- and lanthanum-based products and 250 t/y of didymium oxide for another five years.

Rare-earth metals are used in a range of high-tech applications, including in hybrid cars, wind turbines and electric bicycles.

China is the biggest producer, at more than 90% of global supply, but has been putting curbs on export volumes, to feed domestic demand.

Shares in Molycorp rose 3,3% on Friday morning, to $31,81 apiece by 9:50 in New York.

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