Yes, although that would be long term and favorable rare earth market conditions. I think that the long term value will be predicated on EPS. They have to get to operational profits quickly. The company should trade at a multiple of 10 at a steady state EPS ... most miners are in the low double digits. I think it is difficult to see that level now, because there is too much growth to get there.
Say that for that share price they need $8 EPS. With 188 million shares that is $1.5 billion profits. At phase-1 levels that would be an average of $79,000 per ton profit. At phase-2 levels that would b $40,000 per ton profit. Assuming the hit the $7000 per ton COGS, then they need a much higher price than the current market price. The current market basket price as REO's is about $24. So one path would be to survive the current cash-crunch, move to lower COGS for phase-1 profits, and then to build out phase-2 as market prices rise.
It is also very important that Molycorp does not just sell REO's (rare earth Oxides) but also sells metals, alloys, Magnaquench, XsorbX, and a decent amount of other rare metals. Globally looking at the market basket price of Mt Pass as REO's is a bit misleading. They sell a wide product line and it will get wider.
The business plan that CK presented is to focus on reducing the cash cost of REO production at Mt Pass. If they execute on that then they can stabilize as a profitable company. Growth will then depend on economic growth and growth in demand for rare earths. There are people forecasting all over the place. My expectations are massive losses in Q1, lower losses in Q2, and closer to break even in Q3. Possibly small profits in Q4. They should also be done with ALL phase 1 expenditures before then. If the prices of RE's stabilize, they can have a decent 2014. Anywhere from $0 to $2 EPS.
Obviously, if you assume higher PE multiples then the path is a little easier. At a PE of 15, they need $5.30 to reach a share price of $79.
I give about a 10% chance of being near the upper end of my range of 2014 EPS. And if they are near that upper end, the PE is likely to be generous ... 15-ish. A 1-in-10 chance of $30 is equal to $3 for a gambler. If the chances were strictly binary, bankruptcy or $30 at 10%, then the share price would be $30, using gambling odds only. I think the most likely scenario is in the low end of my range. I'll toss out some gamblers odds:
Failure in 2014: 10% ............. $0 stock
Losses but survival: 5% ........ penny stock
$0-$0.5 EPS: 35% ................... $5-10 stock
$0.5-$1 EPS: 25% ................... $8-18 stock
$1-$1.5 EPS: 15% ................... $15-25 stock
$1.5-$2 EPS: 10% ................... $20-35 stock
Gamblers current price: $10 -11
Do your own math and assumptions, don't just hope for $79 someday. I made up those odds and prices but I do think the right investment position is to buy this, then watch and wait.
Anything is possible. If China and Japan conflict continues to persist and China "stops" selling REE's to japan this will jump up big.
Malaysia has elections coming up and could shut down Lynas, another scenario that would cause MCP to sky rocket.
Outside of these I can think of a few other dozen scenario's that will cause this stock to pop.
I like to play MCP long as it is often oversold after bad news. Last year I was up over $7.00 a share playing the "pops". Looking to get back in now as a lot of the "bad" stuff is factored into the price and this stock appears to be heavily oversold.
I have been scouring internet looking for reputable new sources election predictions. Several weeks ago, from everything I read, consensus was BN stays in power because of the advantages of being a 56-year regime (with corresponding corruption); with an equal playing field, they'd probably lose.
As of today, all news reliable news sources are going with too close to call (still, with the corruption and media edge, BN is going to be hard to defeat).
Everyone, please look yourselves, and post if you get any different sense.
But it is an amzing situation for both MCP and Lynas investors. Opposition has softened stance and said it would be happy to keep LAMP open if it is completely safe. But it will immediately halt operations, and the chances of it being found completely safe is nonexistence. So, the election is too close to call, and if it goes against Lynas, they *wink* out of existence (for 5+ years, at the very least). MCP prices bumps, and as implications are worked through, shorts begin to cover. Ultimately, it would make MCP a very safe pick, with huge upside.
And amazing that it is only a couple of weeks away. A victory for opposition in 2 weeks would certainly be quicker/easier than waiting for Chlor Alkali to come on and for MCP to lower costs.
One note on elections and LAMP: Lynas's ongoing big mistake is the idea that they will get past elections and be free to operate as they'd like. They are still going to be operating in a hostile environment, where scientists who are independent of the gov't are going to be looking for proof of harmful practices, and protests and opposition will never stop. (And new management/PR still show their contempt for Malaysians).