Molibdenos y Metales S.A. (Molymet) of Chile, the world's largest processor of the strategic metals molybdenum and rhenium, on Thursday signed an agreement to invest $390 million in Molycorp Inc.

The arrangement represents an exchange for 12.5 million shares of Molycorp Inc. common stock, or 13 per cent holding stake in the U.S. rare-earth miner.

In a statement, Molycorp Inc. said that the funds to be incurred will be used for general corporate purposes as well as strengthen Molycorp's strategic flexibility.

"The funds are expected to finance Molycorp Inc.'s future growth and will help the company continue to pursue its vertical supply chain integration business model," the U.S. rare-earth miner said in a statement.

The investment is based on a $31.20 per share, slightly above Molycorp Inc.'s Tuesday closing share price of $30.98.

The arrangement effectively gives Molymet a seat on Molycorp's board.

"We are making this investment in Molycorp because we are very bullish on the upside potential of the company, as well as the highly synergistic technologies and market positioning of our respective companies," John Graell, Molymet chairperson and CEO, said in a statement.

With a $1.8 billion market capitalization, Molymet is the world's leading processor of molybdenum and rhenium. Molybdenum is used to strengthen steel, while rhenium is added into materials that create the super-alloys for jet engines.

Based in Santiago, Chile, Molymet has plants in Chile, Mexico, Belgium, Germany and China, along with commercial offices in England, China, the U.S., Brazil and Chile.

Molycorp, Inc. is the only rare earth oxide producer in the Western hemisphere that owns and operates the world's largest, most fully developed rare earth mine and oxide manufacturing facility outside of China, the Mountain Pass mine in California.

It is currently conducting modernisation and expansion works on the rare earth mine, mill, and rare earth oxide manufacturing facility at Mountain Pass, under two phases.

The first phase, scheduled to be completed in mid-2012, is forecast to produce at an annual rate of 19,050 metric tonnes of high-purity rare earth oxides.

While the second phase, scheduled to be completed in 2013, will provide Molycorp, Inc. with the capacity to manufacture up to 40,000 metric tonnes per year of high-purity rare earth oxides.

The rare earths and rare metals that Molycorp, Inc. produces are critical inputs in existing and emerging applications including: clean energy technologies, such as hybrid and electric vehicles and wind power turbines; multiple high-tech uses, including fiber optics, lasers and hard disk drives; numerous defense applications, such as guidance and control systems and global positioning systems; advanced water treatment technology for use in industrial, military and outdoor recreation applications; and other technologies.

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