The bond holders of MCP are fighting over scraps. It is clear now that the world does not need Mt. Pass. I came to this conclusion 2 years ago. What kept MCP alive was the lies; similar to Bernie Madoff. They were believable lies as they sucked in Oaktree only a year ago for more cash.
What was the biggest lie? Vote from the selection below:
1. In 2013, MCP said the poor performance was due to inadequate leach equipment. They spent many millions more to install Leach 2.0 which debottlenecked their process. Or did it?
2. In 2014, MCP said the water balance in the plant was askew due to the chlor alkali plant not running. Once that is fixed, it's a zoom up to 20k tonnes per year production.
3. In 2014, MCP told us that illegal Chinese REE sales were ending and all should be well soon.
MCP never told us the real reason for failure: REE was in oversupply. We could all see it as month after month, prices declined. Towards the end, MCP didn't sell any Cerium which is 50% of Mt. Pass's production.
I have been writing about the demise of MCP for a year much to the dismay of the loyal longs. Everyone who lost money could have saved some of it if they had heeded the obvious warnings as I saw them. The top three warnings were:
1. The collapse of Ce and La prices. Because these elements comprise 85% of Mt. Pass’s production, there is no way it could be profitable no matter how much Nd/Pr they sold.
2. Extended time to start up Project Phoenix. Three years and counting. Total BS. Chemical plants do not take this long to get up and running. It’s like open heart surgery taking 30 days. Impossible. The truth: MCP could not sell out the plant so it conveniently cited start-up issues.
3. The Oaktree target of 4,000 mt/qtr and positive EBIDA would signal the turnaround for MCP. For this to be true, REE prices would have to rise. How is this possible if MCP puts more products on the market. Many longs waiting quarter after quarter for this to happen. It was never going to happen.
Hundreds of millions of $$$ were spent in the last 3 years in a pursuit that was doomed from the start. The key change from the 2011 REE market was demand destruction. Ce was $150/kg in those heady days. But glass polishers who used Ce learned to recycle this grinding agent: demand destruction.
Mt. Pass will not re-open until Nd/Pr prices rise to $300/kg allowing Ce to be treated as a waste product.
Shutting down Mt. Pass became obvious at the end of 2014. MCP did not tell the truth about their shipments and prices. Oak tree will own a white elephant. They own the power plant and color alkali plant outright. But these assets are worthless if Mt. Pass does not operate.
Care and Maintenance is hogwash. It will take at least 5 years before the REE market returns to allow the re-opening of Mt. Pass. By then, all the block valves would have rusted shut. It is better to part out the components. Maybe even scrap steel.
As a final nail in the coffin; it will always be uneconomical to operate a REE plant in California. There is no better evidence of this with the color alkali plant, a tree hugging attempt to make the production of REE environmentally friendly.