This block is used for refining minerals. You can't place this factory on your ship and it doesn't use any energy. Once it is placed, open it up by pushing r. It'll consume ten minerals of the same type and level, and process them to give them back to you as a single higher level mineral.
You can make an L5 5 mineral out of 10.000 L1 minerals of the same type.
It's indeed a very useful block considering that shops will buy ten L4 minerals for 100.000 credits, while they'll buy you a single L5 mineral for ten times more credits (1.000.000c), despite both of these trades are equivalent to your eyes.