Molycorp Inc (MCP.N) said on Friday it has broken off talks with Japan's Sumitomo Corp with regard to a financing deal, as the investment is no longer necessary for the implementation of its business plan.

Last month, Molycorp said it was still in talks with Sumitomo to work out the delayed $130 million financing deal.

The deal, which was originally expected to close in February, called for Sumitomo (8053.T) to buy $100 million of the company's shares and provide $30 million in debt financing to the rare earth miner. [ID:nN1E77A1G9]

We are generating significant operating revenue from sales of product to customers around the world, including those in Japan, said Chief Executive Mark Smith in a release. Thus, the original investment in Molycorp that Sumitomo offered is no longer a critical need.

Molycorp currently produces rare earth products from stockpiled concentrate. The company is in the process of a $781 million expansion and modernization of its Mountain Pass mine and processing facilities in California.

Last month, Hitachi Metals said that it had reached a supply deal with Molycorp on materials for its neodymium-based magnets, but added it would not pursue a joint venture with the U.S. company to produce rare earth magnet alloys.

Molycorp has said it remains committed to its mine to magnet strategy, an approach designed to enable the Colorado-based miner to gain full value for its rare earths.

Rare earth oxide and metal prices have spiked as China, which produces some 95 percent of the world's supply, has repeatedly clamped down on exports.

This has left Japanese companies scrambling to secure reliable supplies of rare earths, which are used in a range of high-tech products from smartphones to hybrid cars.

In June, sources told Reuters that Sumitomo was struggling to find customers for Molycorp's rare earth products as Japanese demand for light rare earths had plunged and prices were seen as too high. [ID:nT9E7H2010]