Neo Material Technologies Inc, a maker of magnetic powders and materials, said it signed a letter of intent with a unit of Molycorp Inc to manufacture, supply and distribute rare earth products.

Under the deal, Neo Materials will purchase mixed rare earth carbonates as well as neodymium and praseodymium oxides or metals from Molycorp Minerals LLC, Neo said.

Molycorp is developing one of the biggest rare earth deposits in the world at its mine in California's Mojave Desert and is also looking to raise about $350 million in an initial public offering.

The deal includes a potential marketing and distribution arrangement under which Neo will market various Molycorp products and provide Molycorp with technical assistance and know-how with respect to production of rare earth metals, alloys and magnets.

Shares of Neo Materials, which have lost about six percent over last three months, closed at C$3,86 Monday on the Toronto Stock Exchange.

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