Making magnets might not sound like an interesting business, but making ultra-powerful magnets from rare minerals found in small quantities around the world, now that sounds like something that could get my attention.
Daido Steel Co. and Mitsubishi Corp. will own 35.5% and 34.5% of the magnet venture, leaving 30% for Molycorp. Financing will come from the three owners and a subsidy from Japan's Ministry of Economy, Trade, and Industry. The facility will make 500 metric tons per year of magnets and will be based in Nakatsugawa, Japan.
What's this magnet all about?
According to Molycorp's press release, these magnets will be the most powerful in the world and should be attractive to a variety of industries. The more powerful magnets "can help reduce electric power consumption by 20%" and will be attractive particularly for high value products like electric vehicles, wind turbine generators, and industrial applications.
Wind turbines made by Siemens
Foolish bottom line
I haven't been a fan of Molycorp's stock price, but I do appreciate the company's efforts to use its current position in the market to expand into new ventures. The company has made a string of acquisitions into rare-earth alloys, wind turbines, and now magnets that put it well in front of competitors like Avalon Rare Metals
The company serves a dual role of supplier and partner in these businesses and this could help insulate the company somewhat as rare-earth mineral prices fall. I'm not about to jump into the stock, mostly because it's hard to value the ventures, but I like management's understanding of Molycorp's tenuous position in the rare-earth market.
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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