Molycorp calls off deal with Japanese company

Molycorp has called off a deal that would have brought a $130 million cash infusion from Japan's Sumitomo Corp. in return for rare-earth supplies.

When the transaction was announced last December, Molycorp billed it as an important contribution to its strategy of being "on time and on budget." Sumitomo was to have purchased $100 million in Molycorp stock and granted a $30 million low-interest loan, much of it coming from the Japanese government.

However, the government did not participate, so Sumitomo had to line up other sources of capital that wanted discounted rare earths in return. Molycorp decided it didn't want to grant discounts.

Also, Molycorp has found other financing, making the Sumitomo deal unnecessary.

Rare earths are critical ingredients in industrial magnets used in everything from smart phones to hybrid cars to guided bombs. China controls more than 90 percent of the rare-earths market, but Molycorp and others have recently entered it.

Molycorp shares rose $2.34, or 4.8 percent, Friday to close at $57.34 on the New York Stock Exchange.