Molycorp has begun a sequential start-up of its $895 million rare earth manufacturing facility -- a milestone in a long, capital-intensive plan to restart the Mountain Pass mine in California and wrest market control away from China.

Why does this matter? Rare earth metals are used in just about every modern-day and cleantech device including hybrid cars, cell phones, laptops and numerous defense technologies. In other words, these 17 elements are critically important for the high-tech industry -- and the consumers who enjoy their anti-lock brakes and smartphones. And while rare earths can be found all over the world, China produces 97 percent of them.

Molycorp's aptly named Project Phoenix rare earth mine and manufacturing facility is not running at full capacity. The company is producing 2,800 short tons of fresh rare earth ore per day and expects to reach full production by April 1. Molycorp says it's still on track to hit an annual rate of 19,050 metric tons of rare earth oxide --all of which already has a buyer -- by the end of the third quarter. A Molycorp exec told me their next goal will be to double annual production by the end 2013 of the year. (Note: I previously noted end of 2013, a figure provided and since corrected by the company.)

The company has a mine-to-magnets end goal. Which means it wants to mine rare earths; process them into oxides; and then convert them into metals, alloys and high-powered neodymium-based magnets and samarium cobalt magnets, which are used in wind turbines, hybrid and electric vehicles, among other products. The photo to the right is an ore crusher.

Check out the video below for a closer look at the operation.

To be clear, the U.S. didn't run out of rare earth minerals. Companies stopped mining rare earths by 2003, opting instead to buy them on the cheap from China -- and a monopoly was born. Ever the opportunist, China has taken full advantage of its control of the rare earth market. China curbed exports of rare earths several years ago and has maintained quotas ever since.

False starts and the power of panic

Molycorp's plan to restart the Mountain Pass mine in California and end China's monopoly got off to a discouraging start. Molycorp purchased the mine -- once the world's largest producer of rare earths -- from Chevron in 2008 and was able to generate $7.1 million in sales the following year by processing rare earths from existing stocks. Still, that was far short of the estimated hundreds of millions it would take to restart the mine. Its prospects dimmed after the Department of Energy denied it a loan guarantee and its July 2010 IPO failed to raise the $500 million it had hoped for.

However, the company's fortunes would change as China instituted even stricter quotas and blocked shipments of rare earths to Japan altogether over a diplomatic dispute. The aggression sparked worldwide panic of a supply shortage and companies began scrambling to find new sources of the elements. Soon after, Japan's Hitachi Metals agreed to a joint venture with Molycorp Minerals to make the coveted alloys and magnets. Its share price rebounded, nearly tripling in that time.

Molycorp has continued to expand its business with its $17 million purchase of Santoku America and an $89 million acquisition of Estonia's AS Silmet, a company that also converts raw materials into rare earth minerals for finished products. And in November, Molycorp formed a joint venture with Daido Steel and Mitsubishi Corp. to make neodymium magnets.

Photo: Molycorp photos via Lance Atchinson and Jeff Wilson; Wikicommons

Related:

This post was originally published on Smartplanet.com