Rare earth mineral miner Molycorp (NYSE: MCP) is slowly turning itself into a vertically integrated supplier of rare earth metals. This week's move was the purchase of Santoku America, a producer of high-purity rare earth alloys, for $17.5 million in cash.

Molycorp will now be able to produce neodymium iron boron magnets and samarium cobalt magnets, which are used in products such as electric cars, wind turbines, and defense applications.

This follows another deal this month to purchase 90.023% of rare earth processor AS Silmet in Europe. AS Silmet produces rare earth oxides and metals like didymium metal, and it can now rely on Molycorp, instead of China, for rare earth materials.

The two moves show Molycorp's desire to play a larger role than just providing rare earth minerals from its Mountain Pass mine in California. And the company's borrowing power has allowed it to make the purchases necessary to make that happen.

With rare earth miners like Lynas (OTC BB: LYSCF.PK) coming on line this year, the competition will start to heat up in the rare earth mineral space. Other competitors such as Rare Element Resources (AMEX: REE) and Avalon Rare Metals (AMEX: AVL) may be years from possible production, but if higher prices stick around, more investment will be put into these companies.

Molycorp is doing a nice job of integrating vertically to provide a more valuable service to customers, but supply and demand will still be key to this equation. Keep an eye on where rare earth prices go and Molycorp will be right behind.

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Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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