Molycorp, Inc. just announced that it has secured the final funds necessary for the capital build-out of its estimated $781 million expansion and modernization project at its flagship rare-earth oxides facility at Mountain Pass, California. The first phase of its mining project is expected to be operational by next year.

So what?

When completed, the mine will be the first time in a decade that rare-earth oxides are being produced in the United States, which once lead the world in such production. The alloys and magnets that are produced from the rare-earth metals are needed for a range of today’s emerging high-tech and electronic systems and devices, from wind turbines to computer batteries to smartphones to hybrid and electric cars. Today, 95% of the rare-earth metals needed for today’s technologies are extracted in China.

When Phase 1 of the project is completed, expected to occur next year, Molycorp says its manufacturing assets will comprise the world’s first fully integrated rare earth manufacturing supply chain, producing high-purity rare earth oxides, metals, alloys, and neodymium-iron-boron (NdFeB) permanent magnets, widely used in transportation, high tech, clean energy, defense, and other industries.

The re-opening of the site, closed in 2002 (documented last December by SmartPlanet colleague Andrew Nusca), offers a hedge against China’s dominance of the world’s supply of rare-earth metals. Worldwide demand for the elements reached 125,000 tons in 2010, and is expected to grow to 225,000 tons by 2015.

According to a report in The Economist, cheap labor in China ate into the profitability of the Mountain Pass site a decade ago:

“A decade ago America was the world’s largest producer of rare-earth metals. But its huge open-cast mine at Mountain Pass, California, closed in 2002—a victim mainly of China’s drastically lower labor costs. Today, China produces 95% of the world’s supply of rare-earth metals, and has started limiting exports to keep the country’s own high-tech industries supplied.”

The rare-earth element of greatest value is is neodymium, the key ingredient of super-strong permanent magnets: “Over the past year the price of neodymium has quadrupled as electric motors that use permanent magnets instead of electromagnetic windings have gained even wider acceptance,” according to The Economist. Cheaper, smaller and more powerful, permanent-magnet motors and generators have made modern wind turbines and electric vehicles viable.”

The Economist adds, however, that not all electric car makers seek rare earth metals, including the Tesla Roadster, the BMW Mini-E, or AC Propulsion. “The latest carmaker to seek a rare-earth alternative is Toyota. The world’s largest carmaker is reported to be developing a neodymium-free electric motor for its expanding range of hybrid cars.”