Playing with that ($8 million) per month ... say they are making a steady $1 million per month progress:
Q4 then was:
April: ($9 million)
May: ($8 million)
June: ($7 million)
Jul: ($6 million)
Aug: ($5 million)
Sep: ($4 million)
Oct: ($3 million)
Nov: ($2 million)
Dec: ($1 million)
That ends the losses with cash left. BUT the critical moment in time is still September, when they start the month with about $27 million cash, and need $40 million for Sojitz. And they can't show the books to Sojitz with continuing losses, and expect much leeway.
I think Sojitz has no incentive to re-negotiate today. When September rolls around, they might be willing to delay until January, if they really believe that January will start profits, and there will be $15 million cash to start the year. In that case they might be willing to give them a little more rope.
I don't see how that level of fast and immediate progress can be made. But good luck to all the longs here. Might as well let the roulette wheel keep spinning at this point.
No sugar coating the bottom line:
$23.4 million cash on April 1, 2014
$42.1 million cash raised in stock sale
$26.5 million revenues in Apr-May-Jun
($1.3 million) CapEx
($2.4 million) interest
($50.2 million) operations, administration, and royalty costs
($2.1 million) cost for stock offering (means the net on the offering was $40 million exactly)
$38.1 million cash on hand June 30, 2014 (with $4.8 million reserved for Sojitz)
The average revenues per month were about:
$26.5 / 3 = $8.83 million per month
The average costs per month were about:
$50.2 / 3 = $16.73 million per month
The average loss was then $7.9 million, call it $8 million.
With NO CapEx or interest, they were burning cash too fast in Q4. If they were making progress and the month of June was better then MAYBE they have a path forward. If the Q4 was something like:
April: ($10 million)
May: ($8 million)
June: ($6 million)
That would be very rapid progress. I think an upward slope is a reasonable assumption, but not that rapid. I just can't see a way to not burn the remaining cash in coming months. They currently are on a path to default to Sojitz, without a Sojitz change of terms.
I don't know how they can survive unless they turn profits before they burn the cash. I'm not sure what they can offer Sojitz that is better than a legal claim in Malaysian/Australian bankruptcy court. If they are making money, sure, Sojitz will wait ... what choice do they have? But if they aren't making money, there is no reason to wait ... not one that I see. At that point Sojitz would reasonably expect that further operations only lead to further debt to make claims in an eventual court battle.
A stock for debt swap is too large. Lynas is about a $300 market cap. To offer Sojitz $250 million, they would need to be handed at least 75% of the (new total) outstanding stock ... that implies giving them 3-imes the current outstanding stock as new issue ... no one would accept that.
They moved the corporate HQ. The Mt Weld mine is still in Oz. I don't know the endgame for Lynas, but they tapped stock markets LAST quarter, at a very unfavorable price, and with a very limited cash raise.
If they are cash flow positive before the cash runs out, then they probably can get some wiggle room on the debt. If they burn the remaining cash without turning that corner, I don't see how they can ask the markets for the amount that would keep them running AND pay the $40 million debt payment.
Given the situation, I think that is a low probability. I would guess that Sojitz goes ahead and demands full payment, and lets the bankruptcy courts of Malaysia figure it out. There might be a VERY strong basis for saying that the bankruptcy rules of Oz apply. Moving to Malaysia just before bankruptcy might be considered shady, if it offers some special protection. With property in Oz, they could probably still file there.
It is on the Lynas website. In addition there is a nice analysis on the LYSCF MB. The bottom line (to me) is they burned $56 million in the April-May-June quarter (their Q4), and they had $38 million cash on June 30th.
They raised $42 million in the quarter with an SPO at low prices. They have a debt payment of $40 million due in September. So unless they raise more money, earn several $million in the current quarter, or get a deal on debt ... well, something has to give. This quarter will put them up against the wall.
Ramp at LAMP is progressing. They increased production for the 4th straight quarter. They are not yet at full levels but are close. Their costs are still far too high, even with the Mt Weld mining and concentrate production shut down.
Lynas stock (LYSCF) is down about 24% today.
I don't really see anything to inform on MCP Q1 expectations. ASP was down, but the ASP is a product mix property. They sold more ... and probably more cerium, which drops ASP. The perils of ramp up and cash burn are illuminated but we all know that risk. I think the obsession on this MB with the cash burn, and the cash on hand, and the production volume ... well, those show investors see the picture.
We will see how adequately MCP is capitalized in a few days. They started Q2 with $236 million. They might have added a bit from the lawsuit. They will have revenues and expenses that exceed the revenues ... leading to some level of cash burn. If they burn less than Q1, and indicate that ramp up progress is on a track to success, then that will alleviate a lot of the cash concerns.
You can say this about any stock. They will disappoint and the stock will fall, after enough disappointments the price will be under $1, and then it gets delisted and then it fails.
Of course that is possible, and you clearly believe it. But it is still very unlikely.
Heck, the analysts HATE MCP, and they sill have 2015 as a loss o only $0.19, an generally accept that MCP's long term earnings path is upwards.
Do you have any basis for projecting disappointing Q2 and Q3? It sounds pretty lame without an actual basis.
That does appear to be the common prediction. No money. No potential. Bankruptcy looming. Your projections are in line with the rest of the analysts.
The audited results will speak for themselves though. Your prediction of imminent bankruptcy will either get confirmed or denied. Presenting the results as BS, because they might not confirm imminent bankruptcy sounds like a weaseling out of a position you've been wrong about for quite a while. You've called for a SPO about every week. You've claimed the cash is nearly gone. Now you are ready to call the audited results lies, to get ready to support the same claim for another quarter. That sounds like less confidence now.
Everywhere you turn, the analysts are predicting failure. Predicting the bondholders are about takeover. Predicting the cash burn has no end. That is fine. But predicting the Q2 results will be lies is quite over the top. Why not just take the numbers at face value. The cash on hand is the cash on hand. The production levels are the prduction levels. The revenues are the revenues. Management has yet to project a firm schedule for profits ... expecting that is wild, especially as an expectation of lies
What is it with your prediction of an imminent cash raise? You predicted Monday, and Monday came and went. You predicted by the end of July, and unless they announce an offering and place it in two days, that prediction is going to miss.
There seems almost no chance of an offering prior to the Q2 report. An offering would need the latest financial accounting, and anything less than the exact report would be ambiguous at this point. They will report next week. You will learn the exact cash on hand, and the exact production, and the approximate July production. They will be asked again if they are going to need cash, or if they are going to turn profits before cash exhaustion, and asked if/when that will be.
They do not need cash immediately. Even using the awful projections that Seeking Alpha uses for quarterly cash burn, the cash lasts until Q1-2015. And face it, those are basically a terrible projection. Molycorp hasn't clearly committed to the timing for the goal of profitability, but they are going to have their feet held to the fire again next week ... they have to clarify the timetable of production and profitability, or clarify the cash needs, if only by omission.
It looks to me that you are buying the Seeking Alpha story that the cash burn requires immediate cash. The current schedule of events indicates they don't.
A few days ago this showed up via fly-on-the wall:
China will increase its quotas for rare earth production and exploration by 10% this year, a senior official at the country's Ministry of Industry and Information Technology said, according to China Daily.
Today, this came out:
China Daily reported that China’s Ministry of Commerce has released this year’s second round of rare earth export quotas. Though demand for the metals is on the rise, it looks like the ministry has no plan to raise quotas.
As quoted in the market news:
The export quota includes 13,691 metric tons for light rare earths, down 130 tons from last year,and 1,809 tons of medium and heavy rare earths, up 130 tons.
The total export quota this year is 30,610 tons, down 389 tons from last year.
First-half exports of rare earths surged some 50 to 60percent as a result of increasing demand overseas, low output by suppliers outside China and lower prices.
I notice a 6-30-14 video on the website that presents the Mt Pass facility ... just barely mentions ramping up. 4 minutes long and a pretty good overview of the facility tho.
No one reports to Yahoo. Yahoo is a news aggregater, not a regulatory oversight agency. I'm not sure that it counts as removing evidence when you don't report that you don't hold a company ... if I understand you correctly, you want every company to report the RFC ownership, even if that ownership is zero shares ... Or you want RFC to record the companies they don't own any part of. Either way that seems unreasonable.
It is interesting that RFC has sold off. They announced that plan, but the only recent update was a mid-point of that sell-off. Nasdaq's website still shows them as owning 16 million shares, but that is thru 3-31. The big new owner is BNB Paribas, who bought 18 million shares in Q1. Nasdaq does not show a Q2 change for RFC ... where do you see the Q2 sale?
I'm not in the market for a new car ... 2008 and 2011 model years going. But the numbers n the Nissan Leaf are amazing. I'm definitely considering that for next car. The Leaf costs about 3-CENTS per mile for fuel!!!
I ballpark it that gas is about $4 per gallon and mileage is about 20 miles per gallon ... so gas costs about 20-cents per mile as a fuel. The operating cost difference is going to shift consumer demand eventually.
I want to put solar panels on the roof and get an electric car. These days solar panels pay back the installation in just a few years of free (net) electricity. Those may have a few dollars of RE's in them, but that switch makes too much sense.
They had the April number by the Q1 report date. I think they will have the August number by the Q2 report date.
I'm guessing 850 mt for August, with a cost basis around $21.
The terms of the settlement were sealed. Presumably we will see a number in the accounting. But the settlement clearly imposed silence on both parties.
It was not HUGE. But it was potentially between $0 and $45 M of damages. I think another post made sense in stating that it was unlikely to exceed $31 M ... the amount paid to M&K for their design work.
Look again. It is not a lawsuit. It is an "investigation".
"Zeldes Haeggquist & Eck, LLP, a shareholder and consumer rights litigation firm, has commenced an investigation on behalf of investors who purchased Molycorp Inc. (MCP) Senior Convertible 6.00% Notes due 9/1/2017 (the “Notes”). Specifically, Zeldes Haeggquist & Eck, LLP is investigating whether Molycorp and its top executives and officers made false and misleading statements in the prospectus and registration statement that the Company provided when issuing the Notes to the public on August 17, 2012. "
Waa,waa,waa. Read the prospectus again. If there are "false statements" then there is a potential lawsuit.
This is a new level of ambulance chasing. They have no clients, and no idea what they think is a problem. But if anyone wants to employ them, they MIGHT find a false statement, and the MIGHT bring class action.
I said "today's numbers" but I notice it is July 23rd. The July 24th numbers will be tomorrow. Try the short interest locations then.
They have tossed out the number of 1000 mt per month production as being the point where they are cash flow positive on a per kg basis. That production level has to be hit soon, even if they are behind schedule on the ramp.
They need to stem the losses before they burn $236 million, or they need to raise more capital. They surely have much more than $50 million cash on hand. And they may be able to look at the production levels and predict with some confidence when they can hit a cash flow neutral production level at Mt Pass. And those losses are the cash burn problem.
I can't say they won't need cash. It certainly is not the case that they have a large cushion. But they had $236 million. The current cushion is smaller, and the window for success smaller. But nowhere near as small as you say.
You've been predicting a stock offering for quite a while now. It is a legitimate concern and a legitimate prediction. But the prediction for an announcement of an offering NEXT MONDAY, is a bit out on a limb. More than a bit, actually.
That is ridiculous: "operating cash of some $50 million"
They had $236 million CASH on March 31, 2014.
They had an awful Q1, but the plan they are following is to be operating at capacity by the end of the year (although they clearly are behind schedule). Every quarter should see increased production, increased revenues, and decreasing costs per kg.
There just is not any way that they have spent $186 million since March 31st, to leave them with your "some $50 million". Most likely they will have slightly better numbers than Q1 due to the Q1 seasonality depression of sales.
The big losses are at Mt Pass. Outside of Mt Pass, the company makes money.
$15.6 M revenues
($49.5 M) loss
($13.1 M) depreciation, etc.
($36.4 M) actual cash loss
Chem and Oxides Segment:
$46.6 M revenues
($0.6 M) loss
($3.9 M) depreciation, etc.
$3.3 M actual cash gain
Mag and Alloy Segment:
$55.9 M revenues
$9.5 M profit
($4.2 M) depreciation, etc.
$13.7 M actual cash gain
Rare Metals Segment:
$20.4 M revenues
($2.2 M) loss
($2.1 M) depreciation, etc.
($0.1 M) actual cash loss
What the business plan calls for is to improve the business at Mt Pass. The production volume is to increase, with cost per kg decreasing, and the revenues to increase, as they sell the output. In the short term, the ramp up will increase costs, as they produce less efficiently. They have $60 M CapEx budgeted for the Mt Pass de-bottlenecking.
I'm not seeing any way that they have spent $186 M. My guess is that they have spent less cash than last quarter, in Q2. Mostly because I don't understand the interest payment schedule, and the interest expense in Q1 ($36 M) was in line with payments where the higher amounts are due iin Q1 and Q3.
The resource segment will see higher revenues, but higher costs. The effects of lower cash cost are still down the road. Some small effect may show up, but not enough to see positive cash flow per kg, in Q2.
I have found the reporting is always less timely than expected. Today's numbers will be sometime after market close. I also have found that the short share report usually shows up faster in different places, with theWSJ before the NASDAQ.
Google: short interest wsj
then navigate the Wall Street Journal Short Interest Stock by Stock Listing to the M's, etc.
Google: short interest nasdaq
The data is clearly presented but they won't have the latest numbers as fast as the WSJ site does.
I don't think he was short. He really seemed convinced that posts to this Yahoo MB move the market ... same as our serial, resident, short over-poster. There was a time when a Yahoo MB was a vehicle for pump-and-dump or short-and-distort schemes. I am convinced that they play a very small role in market sentiment, and that is more a reflection than a proximal cause.
CB has some rose colored glasses for MCP. I enjoy that, but I would never use a MB as the final word in determining value.
Trust but verify. I'm wrong, you're wrong, we all make mistakes. Anyone might say something insightful, but check it independently. Reason it for yourself. Verify the facts. Use the board for bouncing your own ideas out there, but don't use it as the information for investing.
"If MCP were to achieve $7/kg but only sell 30% of what they make, can they be profitable? "
The key is to sell the 16% that is Nd-Pr. If they sell that at $75 per kg, then they make money. Do the math.
16% x $75 / 100% = $12.
Molycorp needs to sell 16% of the produced goods to be profitable. And with the strong demand for Nd-Pr, those are the elements that are easiest to sell. They also should be able to sell the lanthanum, but that is a smaller amount of revenue, simply because lanthanum is abundant and cheap.
Currently Nd-oxide is $62 per kg FOB in China. Pr-oxide is about $150 per kg FOB in China. Molycorp produces about 12% Nd and about 4% Pr.
((12% x $62) + (4% x $150)) / 16% = $84 per kg currently.
If you use $84 instead of $75, above, you get a $13.4 price per kg produced, even though it is selling only 16% of the production.
Again, it is both:
What you make.
What you sell.
The cost of what you make and the price of what you sell then determine if the business makes money.