You could contact IR and ask them how to know. I'm not involved in any warrant transactions, and I have no idea where the information might be tracked. The number of shares outstanding in the quarterly report will tell you, but that is a ways off. The income from the sale of the stock ($0.01 per share) will also be in the report.
If you contact IR, be sure to share the response here. TIA.
That is lazy on my part. I didn't want to bother reading the 8k. I figured it was the usual formulas.
Then yes, I would exercise the 1-cent warrants immediately. And sell the 18 million shares for $25 million. At that point you have lent $250 million, and already gotten $25 million up front.
What are the sale/leaseback parts? That is the other bit of collateral that funds the deal.
What you buy is Lynas business pieces. And that is worth considering at bargain prices. I just don't think of that value equation in terms of the price of common shares. You buy the things, from the people with title to sell. If that is shareholders, then buy from them. If it is a bankruptcy court, and the money is designated to the bondholders, then buy from the court.
If there is a debt default, that requires the legal protection of bankruptcy, or there is a claim on assets placed by the debt. The bankruptcy process oversees the process of legal claims on assets.
Mt Weld is a world class ore deposit. My guess is that the mining equipment has defined market value. The milling, flotation concentration, and bagging at Mt Weld are probably worth scrap prices. LAMP, which has yet to operate at capacity, is of indeterminate value. Likely it is valued at slightly over the scrap price.
Those are the things which would get sold. If the price is really low on any one, then MCP should look, because a deal in the RE arena is worth considering. But I don't see it in terms of common share value. That isn't to say you can't look at it that way, but I don't.
Aaaand now I look like I am talking to myself. But at least I didn't reply to CB and see his post deletion also delete my posts.
I've said it before. Don't reply to CB. When he deletes his post later, you lose any discussion that accompanied it.
I admit I was wrong in reading the bond conversion, and contributed to the confusion. You can find my old posts and you'll see my change of opinion in there somewhere (why would you?). I'll never claim to always be right. Don't take my posts as anything more then the ramblings of an anonymous idiot on a Yahoo MB. If I say something you think is insightful or helpful, then verify it yourself.
Common sense also applies. Bondholders look for good investments. Here are two bond descriptions:
Buy this $1000 bond (par value). Receive 6% interest for 5 years. Then you will be repaid $1000 or a 140 shares of stock, at the choice of Molycorp, who will choose whichever is lower.
Buy this $1000 bond (par value). Receive 6% interest for 5 years. Then you will be repaid $1000 or a 140 shares of stock, at your choice. If you elect to convert to shares, Molycorp may choose to pay the cash value of the 140 shares, or a combination of shares and cash.
What you suggest is that Molycorp sold the first described bonds, after previously selling $600 million of bonds at 10%, and those bonds were secured. And the conversion can ONLY hurt you. So the bonds are lower interest, unsecured, and have a provision to #$%$. Again, use common sense.
"The Notes will be convertible at any time prior to 5:00 p.m., New York City time, on the second scheduled trading day immediately preceding the maturity date into shares of Common Stock, cash, or a combination thereof, at Molycorp’s election."
Why would Molycorp give away stock valuing more than the cash debt, as you suggest?
The notes must either be paid with cash for the debt amount, or with the number of shares of stock determined by the conversion rate, at the choice of the bondholder. Molycorp can choose to pay the dollar value of the shares of stock, rather than issuing shares.
Anyone can see that the wording of the press release can be interpreted in two ways:
One, which sounds like Molycorp has a choice of paying the face amount of the debt, or providing a number of shares of stock ... this would allow Molycorp to take advantage of lower stock prices to underpay the debt with a lower monetary value of stock.
Two, which sounds as though Molycorp has a debt obligation which might be converted into shares at the choice of the debtholder, but which allows Molycorp the choice of paying the cash value of the converted shares, rather than issuing the shares.
It is the second interpretation which is correct. The bonds have a face/par value which they are repaid at. They have a conversion option, available to the bondholder. That option allows the debt to be at a lower interest rate. You will note that the $600 million is at 10%, but is not convertible. This other debt is at lower interest, but has a stock option that incentivized buyers of the bonds.
You really can independently verify this interpretation. Feel free to look it up yourself.
As I just stated, I donuubt warrants can be exercised at this time. That would not prevent Oaktree from shorting against the box (future box).
Warrants are generally not the same as American Call options, which can be exercised at any time. Warrants can usually only be exercised on a particular date. You would have to look at the details to be certain, but I would guess that is the case here.
CB: Since you delete your posts, I'll respond here:
I'm not sure of what your point is. If things get better then of course it is much better. We have established before that the conversion of debt into shares is at the choice of the bondholder, not Molycorp. I know I was guilty of being wrong on that many times, but the evidence convinced me that the option spoken of in the PR's is the option that Molycorp can either provide, for example, 10 millions shares of market price $10 stock, or $100 million. The bondholder can choose whether they receive a repayment of the bond value in cash, or a conversion into shares of common stock, when they see that as an advantage.
Molycorp has debt that has to be repaid. You can't really deny that. If everything gets wonderful, then I'll be really happy about that.
In 2018 if the stock is over $12, then the BONDHOLDER would choose to convert the $172 million repayment into 23.9 million shares of common stock, worth $287 million. If Molycorp had the choice, they would obviously sell 14.3 million shares of common at the market price and pay back $172 million.
But as it is right now, there is $172 million of debt due in 2018. No stock would be involved at current prices. But you are free to ask what if things get much better. I hope things do. And if they get much better, then obviously, they will be much better, and the problems associated with this point in time will seem long past.
I'm not suggesting that MCP can't pay the debt. I'm suggesting that lenders feel that way. Generally lenders have higher prices for loans to risky prospects. They require things like stock at $0.01 price. The terms of the recent loan tell you the risk prospects (which are still better than Lynas).
Feel free to delete your post now, so that it looks like I am talking to the air.
I think Molycorp CAN be profitable at current RE prices. It is much more of a trick question whether they can be profitable enough to pay back the enormous debt load. Think a little bit about how much money $600 million really is, and how the heck are they going to make $600 million, and what does that mean?
Oh, and I guess you might as well add another $400 million of debt load onto the tab.
I think MCP's business prospects are much better than Lynas'. But the fact remains that lending money is based on an expectation of getting paid back. And when the borrower has maxed out every source of credit, and has loans that already have large payment considerations ... then lending is a tough call. Lynas really doesn't have the money they need for the start of the repayment process they have agreed to. And they don't have a business plan that matches the repayments. Their situation is worse than Molycorp's.
I hope a lot worse, but I don't want to sugar coat the MCP situation.
No. As things stand right now, the debtholders are about to lose a lot and the shareholders are about to be wiped out. Buying the stockholder ownership position in a company where the secured debt positions are the true ownership isn't useful. Sure at a penny per share, the market cap is small, but that price implies a non-ownership of the assets.
The difference between Lynas and Molycorp is that Molycorp's business plan for Mt Pass is to process at a much lower cost per kg, when at final operational status. Lynas' final cost basis is not clear to me, but I think the higher cost basis makes profitability possible only with higher RE prices.
Lynas needs loans to continue with their business plan. But lending them money requires that you look at the business plan, and see profits that will repay the loan in the long term, plus interest. Molycorp barely qualifies for lenders of last resort, and their business is much stronger (but their existing debt load is larger, requiring better results).
If Lynas enters a bankruptcy proceeding, then there is a chance that eventually the Lynas assets get mixed into Molycorp. It depends on if there is a market that will buy the assets in the next year or so. If no buyer of the assets is found, then who knows, there might be a stock only purchase of assets. Molycorp cannot afford a cash purchase. And stock based acquisitions would have to be at fantastic bargain prices.
The LAMP can't be operated much differently. Mt Weld ore can't be purified without a purification facility. LAMP is just an expensive to operate facility. I agree that full scale is better, but the facility hasn't been run at that rate, and there is still the baseline cost you incur at that operation. And the costs look high.
Can Mt Weld ore (very good) be fed into a different processor, and make economic sense? For example could Molycorp feed Mt Weld bagged concentrate into Silmet? Could a China processor do that? Could a French processor do that?
Can LAMP be operated profitably using a different feedstock? If it costs $20 per kg for LAMP to output REO's from concentrate, could Avalon run it with $40 per kg market basket (Mt Weld is under $30) RE's?
Could an upgrade to LAMP drop the costs?
No way to tell really. If they merely wipe out stockholder value in a liquidation ... say the company was sold exactly as is to a new set of shareholders for $400 million, and the debt paid ... that might make a stronger rare earth company.
The main problem with that is that Lynas is not really worth $400 million. The business plan is not strong IMO. The reason to invest in Lynas is always to make money and the company has a questionable plan for that. Their ramp up plan still ends at a high cost basis.
If Mt Weld became available ... that would be worth acquiring. LAMP is not so valuable as a processing facility.
The short term is favorable for MCP. Lynas has to be shut down in a bankruptcy proceeding. Operations cost money ... they haven't made it to breakeven. And shutting down puts the entire enterprise "off" for quite some time. The prices of rare earths will rise with loss of supply. MCP might pick off some customers. But it is disruptive of things and the disruptions can bring strange short term swings.
I don't think they have $40 million. And they are operating at a negative cash flow (almost certainly). And they apparently have not talked to the lenders of last resort (like Oaktree). There seems nothing left but declaring bankruptcy.
I've no idea how else they resolve this. I've no idea what a bankruptcy proceeding would mean for Lynas operations (cash flow negative, currently). I've no idea what the long term fate of Mt Weld, or LAMP will be. But it would appear that the deadline for paying $40 million will arrive, without $40 million to pay it.
On June 30th, they ended that quarter with $38.1 million cash. They burned cash at about $8 million per month in that quarter. If they burned $15 million in July-August-half-September, they have about $23 million on hand. If they burned at the same rate as the prior period, then they are probably under $20 million.
Lynas has much larger debt issues and cash flow issues than Molycorp had, prior to Oaktree financing. Lynas has an imminent debt payment de, wothout cash on hand for it. And they have no financing deal (MCP took months and go as rough a deal as I've seen). And now they can't seem to get a re-negotiation from one ondholder.
Here is a news item:
RARE earths miner Lynas has ceased talks with Nomura over the restructure of an existing senior debt facility worth $US225 million ($250m), meaning it will soon need to make a sizeable repayment.
Investors reacted negatively to the news. Shares in Lynas tumbled 13.33 per cent to 13c at against a benchmark fall of 1.04 per cent.
Under its current loan arrangement with two Japanese firms, Lynas is required to make four repayments between this month and March 2016.
It was seeking to replace that arrangement with a new deal with Nomura Australia, a local subsidiary of a Japanese financial company, that would require just one repayment in June 2016.
But Lynas has ended the talks with Nomura, meaning it will need to make a repayment of about $US40m this month.
And there are rare earths under the sea also.
The "rare earths are not rare" observation is wildly overplayed. Rare earth processing is rare. Rare earth deposits with positive economic recovery are rare. Rare earth comments with insight are rare.
When there is a rare earth mine and rare earth reaching the market from Afghanistan, then there is the possibility of that being a market changing source.
You would think that Apple would be out of business by now with the relative abundance of computer makers and cell phone makers and music player makers. After all, the only reason for "rare earths" importance is the word "rare". A simple linguistic trick overshadows every rule of business. Apple computers are not Apples!!!
So it is September and the $40 million for Sojitz is due this month. And is surely larger than the cash on hand.
When is the Sojitz due date? Is there any news to say how they handle that deadline?
What expense? I will have to look at the numbers. My recollection is that it is an amortization of an expense for the loan, counted as interest.
The run-off that is a problem is agricultural run-off. Municipalities treat sewage waste-water to keep bacterial load and toxicity down. But ordinary rain, that falls on streets, yards, fields, pastures, and everywhere else ... just runs into the streams, rivers, and onward. That water is not treated and if it has high fertilizer, or high organic content, it supports algae blooms.
So, no. SorbX would not help in the current processing of rainwater run-off. Because there is no processing. You mostly answer this question yourself, but it seems obvious that SorbX is part of a water treatment process, and the problem is untreated run-off, that SorbX won't help.