U.S. rare earth metals (REM) miner Molycorp Inc. announced on Monday it has entered a deal creating a joint venture with Japanese companies Daido Steel Co. Ltd. and Mitsubishi Corp. to manufacture and sell high-powered rare earth magnets that targets the automotive and home appliance markets.

The newly formed company will be 30 per cent owned by Molycorp Inc., 35.5 per cent by Daido Steel Co. Ltd., and 34.5 per cent by Mitsubishi Corp. Molycorp will produce the required sintered neodymium-iron-boron magnets.

The venture combines Molycorp Inc.'s rare earth resources, Mitsubishi Corp.'s domestic and international sales network and Daido Steel Co. Ltd.'s commercial-scale magnet manufacturing technologies.

The JV will construct an initial 500 metric-tonne-per-year magnet manufacturing facility in Nakatsugawa, Japan. Operations are expected to start January 2013. The three companies will start working on the new facility in December. Plans to expand into the U.S. and elsewhere are incorporated in its goals.

Molycorp Inc.'s shares rose after the deal announcement, hiking by as much as 11 per cent at $29.97 on the New York Stock Exchange.

The JV will make sintered neodymium-iron-boron or NdFeB permanent rare earth magnets. NdFeB magnets are made with the rare earths neodymium, praseodymium and dysprosium, key components in many advanced technologies, including motors used in the power trains of electric vehicles, hybrid vehicles and wind power generators.

The three companies target the automotive and home appliance markets since these are the significant demand drivers for permanent rare earth magnets, according to Molycorp Inc., adding the JV has received a provisional supply agreement from a major automotive maker.

China, the world's second-largest economy, supplies 95 per cent of the world's demand for rare earths. In 2010, it started slashing export quotas as it closed some of its rare earth processors due to environmental concerns.

Molycorp Inc. said the agreement highlights the JV's desire to provide a stable source of supplies of rare earth materials for magnet manufacturing. Molycorp Inc. is the largest owner of the rare-earth deposits outside China.

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