Mark Smith is explaining why, when he wakes up every morning, he just can’t wait to get on with his work as chief executive of Molycorp Minerals LLC. He says: “I’m not doing it for the money. It’s for my children. And for other people’s children.” This would probably seem pretentious coming from someone else, but it sounds absolutely sincere from Mr Smith. And the sentiment fits the almost evangelical enthusiasm he brings to his work. For Molycorp is bringing back into full production its Mountain Pass mine in California, which it says is the only substantial, developed, commercial, rare-earths resource outside China. Mr Smith is not alone in thinking that, without Mountain Pass’s future output, many well-meant, international governments’ plans to combat global warming will not come to fruition – because there won’t be enough rare-earth magnets for such things as hybrid vehicles and wind farms.

Even humble, energy-saving, compact fluorescent light bulbs won’t work without europium, terbium and yttrium. These are just three of the rare earths that in total account for 15 entries on the periodic table of elements. They have unique properties and are essential in most products that require small motors and permanent batteries – including iPods, cell phones and solar panels. At present, computer hard drives are the biggest user of rare-earth permanent magnets, followed by the electric bicycles sold in China and other parts of Asia.

Mr Smith reckons that within two years, demand from wind turbines will reach second place. “In certain applications, two [short] tons (1.8t) of rare-earth magnets are required in the permanent magnet generator that goes on top of the turbine. And if the permanent magnet is two tons, then 28% of that, or 560lbs, is neodymium.”As for hybrid cars, such as Toyota’s Prius, they need about 20lbs of rare earths – twice the amount used in an ordinary car. If Toyota achieves its objective of eventually producing one million hybrids a year, starting in 2010, “that’s an extra 10Mlbs of rare earths – a 125,000 [short] ton/y market”.He insists that within three years Molycorp will be helping to fill the growing gap between supply and demand and be a fully integrated “mine-to-magnet” business – this will take in mining, producing oxide concentrate, processing it into metal, producing metal alloys, then turning the alloys into a powdery material that can be bonded or sintered to shape the magnets.

China now accounts for more than 97% of rare-earths supply, mainly because its low-priced exports forced other producers to quit. But the Chinese government has been cutting back export quotas because it fears China soon won’t be able to supply enough for its domestic needs. Mr Smith says: “The Chinese have done a terrific job in developing the rare-earths business. But their internal demand is growing so fast that by 2012 China will be consuming all the rare earths it produces. What does the rest of the world do then?” He is confident Mountain Pass will eventually be able to keep American users happy. With this in mind, he has been spending much of his time in Washington, where so far he has made 80 presentations to politicians and government officials. He hopes this will help Molycorp obtain government grants or loan guarantees or loans – all forms of very low-cost capital - for the development of its mine.

While emphasising the need for rare earths for clean energy and clean cars, Mr Smith also mentions that rare-earth permanent magnets are used in many advanced defence systems, such as ‘smart’ bombs, Patriot missiles and other missile guidance systems. Mr Smith, now 50-years-old, spent his childhood in Fort Collins, Colorado, and today he lives in Denver. He graduated from Colorado State University with a BSc in agricultural engineering, then joined the State of Wyoming’s land-quality division. This gave him mining-industry experience – he worked for the state’s regulatory body, carrying out mine inspections and reviewing permit applications. After three years he moved to Union Oil of California, later renamed Unocal, and stayed there for 22 years. From the start he was involved in work associated with environmental and health and safety matters. He recalls: “It was frustrating at times when we knew what we had to do to clean up a site and had the ability to do the clean-up but were held back by lawyers getting in the way with legal issues.” After he gave one group of lawyers a dressing-down in forthright terms, they said, in effect, “If you think you can do any better, join us.” Taking up the challenge, Mr Smith spent three and a half years studying at night and in 1990 emerged with his Juris Doctor, cum laude, from the College of Law at Western State University. He remains an active member of the State Bar of Colorado and California. For ten years with Unocal he practised law, primarily dealing with environmental matters, then became the Unocal vice president responsible for managing the real estate, remediation, carbon and mining divisions – “it was everything but the oil and gas business”.

The Mountain Pass mine was the world’s major rare-earths supplier from the early 1970s to the end of the 1990s. However, during a routine flushing of the tailings pipeline, several thousand gallons of fresh water was accidentally dumped in the Mojave Preserve, managed by the National Park Service and Bureau of Land Management. Eventually the company paid more than US$1.4 million in fines and settlements. After preparing a clean-up plan and completing an extensive environmental study, in 2004 Unocal won approval of a county permit that allowed the mine to operate for another 30 years. The mine also passed a key county inspection in 2007. Since 2000 some US$20 million has been invested in lined evaporation ponds, reclamation of old ponds and other efforts to protect or clean up the environment.

So Mr Smith spent a great deal of his time with Unocal on Molycorp affairs, first as an engineer, then as a lawyer and finally as an executive of the company. He says: “I know Molycorp well and always thought that the rare-earth business was the crown jewel – if given the right attention. We can give it that attention now.” Unocal was taken over by Chevron Corporation in 2005. Mr Smith became chief executive of the joint mining operations – three coal mines, a molybdenum mine, and a petroleum coke calcining operation – as well as the Mountain Pass mine. In August 2007, Chevron Mining Inc received several approaches by companies wanting to acquire the rare-earths assets. There was a bidding process which, after 13 months of negotiations, was won by a vehicle set up for the purpose and owned by Resource Capital Fund IV LP, Pegasus Partners IV LP, the Goldman Sachs Group Inc, Traxys North American LLC and Carint Group LLC. Mr Smith says he intended to leave Chevron after that deal was completed, take a couple of months off and then consider what to do next. However, two days after the deal closed for the Mountain Pass mine and it became known he was leaving, the buyers approached him offering the chief executive’s role at the new Molycorp – plus an ownership interest. No details have been revealed about how much the buying group paid Chevron. Mr Smith says he is also obliged not to reveal how much of his own money is now invested in Molycorp. However, he has said Molycorp may spend up to US$400 million to expand output by more than nine times to meet rising demand.

At present Molycorp is doing no mining but using stockpiled concentrates from which rare-earth oxides are produced. Other work aims to maximise the recovery of rare earths from the concentrate. The industry usually achieves a 50% or 60% recovery. “We are absolutely committed to continuing to develop our process technology and our goal is to be up in the 90%-plus recovery rate,” he says. By the time this work is finished in 2011, “we will be using only half the ore to get the same output as Mountain Pass achieved in the 1980s, therefore doubling the life of the mine to more than 140 years”. While this technical work is going smoothly, Molycorp suffered a setback this year in its plans to move downstream when talks to take a controlling interest in Great Western Mineral Group were called off. Mr Smith says this was a disappointment but Molycorp was primarily interested in Great Western’s two rare-earths speciality alloys manufacturing operations, not the rest of the company, “and we just could not reach agreement”. However, to move further downstream, in July Molycorp signed a letter of intent with Arnold Magnetic Technologies Corp, a private company, to form a joint venture that will produce rare-earth magnets in the US. Mr Smith says that, with the right US government support, Mountain Pass could be at full production – 20,000 [short] ton/y of rare earths oxide – within three years. He adds: “Without government support it could take a little longer.”

The Chinese tried to buy Mountain Pass four years ago and today are keeping a watchful eye on all new rare-earths projects. They already have taken a big shareholding in Arafura Resources, in exchange for giving financial assistance, but were recently, in effect, blocked by Australian regulators from completing a similar arrangement with Lynas Corporation Ltd. Mr Smith says Molycorp would certainly look at any Chinese proposal – but only subject to full US government approval. He suggests the Chinese are probably intent on using a resource everybody needs – rare earths – to create jobs in China by guaranteeing supplies to companies willing to locate manufacturing facilities in that country – “an excellent strategic move on their part”.

The present US administration is, he points out, very keen to see alternative forms of energy, in conjunction with conservation, cut the country’s dependence on hydrocarbons. He says: “We must be careful we don’t unknowingly change our dependence on foreign oil to a new dependence on Chinese rare earths.”