U.S. rare earth metal supplier Molycorp today said that it is planning a joint venture with Hitachi Metals to produce rare earth metals in the U.S.

No definitive agreement has been signed but the talks envision production of neodymium-iron-boron alloys and magnets, according to Molycorp. If conditions are met, the companies could start producing rare earth magnets in the latter half of 2011.

Molycorp is in the process or reopening a mine in Mountain Pass, California to extract and process rare earth metals, which would be the only mine in the U.S.

The supply of rare earth minerals has caught the world's attention because China produces about 95 percent of these metals which are used in a range of products growing in demand.

A few pounds of permanent magnets made using neodymium are used in hybrid cars. To build efficient and reliable direct driver wind turbines, manufacturers needs hundreds of pounds of permanent magnets from these materials.

Smaller amounts of rare earths are also used in consumer electronics, disk drives, and flat screens. These minerals are also used as phosphors to produce pleasing light in efficient lighting.

Earlier this year, supply of rare earth metals from China to Japan was restricted, raising alarm around the world. Last week, the Department of Energy released a report (click for PDF) listing many materials crucial for the economy, which included rare earth metals.

Molycorp now produces some metals but is in the process of rehabilitating the Mountain Pass mine, which it expects to do by the end of 2012.