Thinking about MP/Lynas? Think about Studebaker-Packard

The last great shaking out of the American car-making industry occurred between 1950 and 1960. Nineteen nameplates were extant in 1950 and just 11 in 1959. Among the nameplates that bit the dust were Packard, Hudson, Cord, Nash, Kaiser-Fraser, and Studebaker. You probably don’t remember any of them, but I do. My uncle Sam had a 1947 Hudson and my father bought a wrecked 1956 Packard and restored it as a wedding present for my sister. Did I mention that the first car I remember was my dad’s 1937 LaSalle sedan, which we (he) drove from Detroit to Winnipeg in 1946,? (General Motors (GM) absorbed the LaSalle brand name into Cadillac just before the war)

Just after Pearl Harbor, President Roosevelt called William S Knudsen, an outstanding manufacturing engineer who was then the CEO of General Motors, to Washington and asked him if he could build trucks, tanks, artillery, and machine guns for the U.S. Army. Knudsen gave the same answer to the President that businessmen had given to their political masters for thousands of years: “What specifications, how many, when do you need them, and how do we get paid? Roosevelt answered, the Army will work with you on the specs, we need as many as you can make, we need them as soon as possible, and we will work out a cost-plus arrangement. Knudsen said, “O.K.,” and as he was leaving he said, “Oh, and we’ll need priority on critical raw materials.”

U.S. Steel, Alcoa, and Kennecot were soon in the picture. Those were simpler times, at least for critical war materials, indeed.

Roosevelt shortly after saw Henry J. Kaiser (merchant ships), and Edsel Ford (bomber aircraft) and set in motion the greatest volume of war materiel construction in history.

The statesmen and engineer-managers, who understood the importance and the dynamics of material supply chains of that day, are long gone, and the pathetic wannabes of today in business, finance, and government are not even remotely capable of such deeds, but they talk as if they are. Do you honestly think that Joe Biden, Bill Gates, or Jamie Dimon understand the details and choke-points of the supply chains for cars, much less for computer “chips.”

So, what’s this got to do with the American need for secure supplies of rare earths for magnet manufacturing?

Just this analogy: When the going got tough for the car makers in the 1950s, who had built vast overcapacity in the belief/hope that the postwar demand for cars would just continue indefinitely, they soon discovered that merging companies with overcapacity and inability to create new product (innovate) or understand the markets didn’t work.

The paradigm example of this was the Studebaker-Packard merger, which resulted in the death of both companies primarily due to management incompetence as well as market rejection for lack of value in their product when compared to the competition.

So, with that in mind, let me be brief in my opinion:

I don’t think that it is a good idea for MP Materials Corp. (NYSE: MP) and Lynas Rare Earths Ltd. (ASX: LYC) to merge.

Both companies are run by CEOs who came from the finance sector with no education or experience in mining or processing.

Both companies have too much capacity for the market(s) in which they compete

One of the companies doesn’t have downstream operational experience and is putting the magnet cart before the necessary feedstock horse.

The ore bodies mined by the separate companies are distinct and of different types of ore and mineral composition – i.e., the operations of one could not process the ore of the other without very expensive and extensive engineering changes.

The idea, put forward in the latest earnings call of one of them, of third party tolling is just nuts (aka, not practical), or are they admitting that their own operations cannot supply enough material, economically, for their own capacity. At least their CEO is honest when she says that there are issues with radioactive components and byproducts when processing the monazite ore that feeds Lynas, but not MP.

The combined company, Lynas/MP or MP/Lynas would have excess capacity (If MP can get Project Phoenix revived) or only capacity for monazite (Lynas). Third party bastnaesite (MP) feed is very unlikely to develop, other than ultimately from scrap magnets and processing that will require substantial volumes of scrap – that are not available economically today – and substantial front end chemical engineering in a separate expensive recycling circuit, it does not make sense to dedicate capacity to recycling at Lynas or MP.

The subject matter illiterates who populate the rare earth analytical space confuse announcements with deeds. This is of course always how juniors raise capital, but we are talking here about producing miners confusing the “expert” analysts.

Of course, if a third party merged the two companies then the CEOs of both Lynas and MP would get enormous payouts.

But, for financializers the goal is to help their respective countries, right?

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7 responses

  1. rob dubeck Avatar
    rob dubeck

    Great article, reposted it on Twitter. Hey Jack, I’ve been following the rare earth space for about 4 years and you about 3 years. Fortress Value Acquisition Corporation via MP Matl’s was the 1st company I had invested in. Did well but no longer hold.

    I would like your opinion on these 4 company’s prospects as early rare earth buys and potential timelines to fruition.

    Canada Rare Earth Corp, (Brazilian tailings & DRC) – Auxico Resources (UltraSound technology, Columbia, Bolivia & DRC) – Defense Metals (Wicheeda Deposit) & Ucore’s Rapid SX technology


  2. Bruce Graham Barker Avatar
    Bruce Graham Barker

    Hello Jack …Yes , another great article . Seems LYC and MP Materials is a classic case of “mixing apples and oranges ” ….and brings into question , the logic of Australia’s one of Australia’s largest individual mining investors in Gina Rhinehart taking a +/- 5% position in both companies ??!!
    I guess because she sees the urgent needs and rare earth re-ratings that the Western world needs ex China ..and because she can afford it !
    One question that continues to vex me ( and I can’t get my head around a straight forward logical answer ) …and that is the number and names of companies world wide ( ex China of course ) …that can turn specific rare earth “purified separated oxides ” ..into rare earth magnets in the finished metal form . There is E-Vac ( Vacuumschmelze ) in Germany , and now setting up in the USA ..and Aust. Strategic Materials ( ASM ) with their South Korean Plant operational for circa two years , and now ramping up ….but I struggle to get a handle of others in Europe , Japan etc . Info on rare earth material suppliers available ..but not the actual oxide to magnets manufacturers ….and as you have said before , this is also what Governments seem to fail to come to grips with ie the knowledge to do it , and the manfucturers who actually can accomplish it ??!! Hope you can provide guidance , and /or devote a separate article to the subject . Keep up your great work on this site and thanks in anticipation

    1. Jack Lifton Avatar
      Jack Lifton


      First, see my answer to Rob below, and then, you’re right. We’ll need a separate article about non-Chinese RE magnet makers-there aren’t very many, and their existing capacities at this moment without considering China or SE Asia is a total of less than 1000 tpa, and most of that is Vak’s capacity in Germany. NOTE: Vak actually gets its RE alloy magnet “blanks” in China and manufactures both there and in Germany using those blanks. It does not manufacture either rare earth metals or alloys. The USA currently has NO rare earth metal/alloy making facilities. Washington’s and Brussell’s bureaucrats seem to think that just showering money on their friends will solve this problem. They are wrong.


      1. Jerry Andrews Avatar
        Jerry Andrews

        Studebaker was still going strong in 1959. They didn’t cease production until 1966.

  3. Jack Lifton Avatar
    Jack Lifton


    It’s easy to value a rare earth junior. Just ask them, what are (and/or will ultimately be) the cost of the goods sold? Don’t let any of them tell you that there is such a thing as a “basket value.” That’s pure bulls**t. The value of any product is the profit between the selling price and the cost of the goods being offered for sale at that point in their processing or construction.

    Most junior PEAs use the price of high purity separated rare earth salts as the basket value. This is nonsense. Ore concentrates of rare earth minerals have a low value, perhaps 35% of the so-called basket price, at most. The next parts of the supply chain are the crack and leach, chemical and physical removal of the interfering elements and gangue and then the separation of the payable rare earths from each other and from those of little or no value by solvent extraction.

    Once you have, for example, the separated high purity chloride or nitrate of the neodymium-praseodymium fraction you then need to convert it to an anhydrous oxyfluoride, which is then, in the case of neodymium-praseodymium and dysprosium (if you have it from a different route-not from the ores of the light rare earths!) electrochemically reduced to a metallic or alloy form in a molten eutectic of lithium fluoride and rare earth fluorides. In the case of terbium, if you want the metal, you must use metallothermic reduction requiring tantalum vessels and a vacuum induction furnace for purifying.

    Now, you take these items and manufacture an alloy which must be cooled at several hundred thousand degrees per second (in what is known as a strip caster) and then hydrogen decrepitated and/or jet milled to a uniform size powder. That powder is then sintered into blocks under an inert atmosphere and either the starting alloy may contain a variety of metals, particularly the rare earths dysprosium and terbium, or the blocks may be treated with dysprosium and/or terbium salts and then further sintered and then coated, still under atmosphere, with nickel and then put in place and magnetized.

    All of these above steps are necessary, but no one of them is sufficient, on its own, to form a rare earth permanent magnet of the sintered type used today in automotive motor manufacturing.

    All of the costs of the above processing steps must be added together to get the final cost of the magnet.

    Do you really think that the majority of rare earth juniors know anything about this? I don’t.


    1. rob dubeck Avatar
      rob dubeck

      Sounds daunting for so many pieces of the pie to come together. Hopefully at least Ucore can get a slice of of it

  4. Bruce Graham Barker Avatar
    Bruce Graham Barker

    Many thanks Jack , your input to both questions highly important and informative ,
    If you could pursue the question of the “very scare manufucturer numbers ex China as another topic , it would throw the appropriate spotlight on how scarce they presently are !!!
    Regarding ASM —I know they have initial “small ” (???) offtake agreements in place with NS World ( in Sth Korea _ and with Noveon and US Rare Earths llc in the USA for NdPr boron alloy strips into magnets manufacture …but I only gkean that from their Reporting , but otherwise I have no idea who else and where they are located , that specialises in this space . So your sources , experience and knowledge would make a great read . Thanks

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