Cost savings needs to be front and center. It has been important,but the facts are that the other side of the balance sheet, the cost side is equally important. If there is any way to reduce payroll, drop costs at other facilities ... they have to consider those options. The Chlor-Alkali facility will be the big news for cost savings and obviously should be prominently discussed. But if there is any cost containment anywhere, it needs to be raised.
I would like them to talk about cerium. They said in the offering statement that cerium is not selling. Is there a cost savings available? Can they dump the cerium to inventory at a less pure stage? Can they sell at lower costs than competitors? Can they dump into a SorbX market (at a loss, but still better than a blank)? I have a lot higher expectations for the other elements. Producing ultra-pure cerium just seems to be a waste if it just gets shoveled into a warehouse.
Personally I would like to see the Mt Pass volume increase. They just move such a small amount in that segment. The projection in the public offering is that segement will be the weakest of the group again, with smaller volume.
Q1 was 3274 mt when counting everything
Q2 was 3039 mt when counting everything
They need to show increases. They said demand had shown some recent strengthening at Q2 report. We need to see some kind on increase in volume.
Facility completion report:
Chlor-Alkali and final cracking stage were completed in construction in October. They need to report the commissioning and validation. If the cracking was commissioned, hopefully they have run the production rate tests to try and hit the rated output of 19,000 m per year. Hitting that will require optimization and final determination of run parameters, but it would also be nice to see another run rate test. They ran at 15,000 mt per year rates in Q2 and said the tests showed they needed the final cracking stage to be faster.
The Chlor-Alkali commissioning should be done. It would be good if they have a favorable report. It is best if they report water recycling looks favorable, and chemical generation is as rated with waste-water. Chemical generation with saline is good but not technologically impressive. Some level of recycling (50% would be great) is icing on the cake. Problems would be bad news.
Since they reported the prices already the revenues will be volume driven. Revenue growth over Q2 still would be encouraging.
Credit Facility update:
Obviously the credit line they were seeking was shelved. They need to explain the events and the decision.
They don't provide guidance in any kind of specifics. But they need o address the demand and price environment and what they are currently seeing in the Q4 to date.
Any update on SorbX market acceptance or market testing would be good to have.
They have the Q3 end of quarter number. They have the offering cash to add to that. They have Q4 CapEx planned. They have to have a reasonable plan that makes sense for getting to a profitable operation, before cash exhaustion.
The final bits have all been constructed. The last two were finished in early October. The commissioning is probably complete and that will likely be announced in the report tomorrow.
The highest run rate they had achieved at the last report was 15,000 mt per year. I hope that they have tried another speed test and hit higher rates. They stated the higher run rates were less economical due to recovery but that the final cracking stage would improve that. That final cracking stage was complete (construction) in October. So it is possible they have a run rate test result by now.
So not up and running yet ... maybe. We should learn more tomorrow.
You should not expect the common to move in relation to the dividend. The preferred should drop by the amount of the dividend on the ex-dividend date. But there are something like 2 million shares of the convertible preferred, and they will convert into 4 million shares of common. The preferred is at a premium to the value of the two shares of common, and should drop, as the dividends are paid.
There is no reason to expect a drop in the price of common shares as the preferred moves ex-dividend. The math is simple to follow, just look at the preferred price and the dividends remaining, and the conversion.
You should have expected the dividend announcement. The convertible preferred stock pays $5.50 per year in dividends. The only issue is whether that is paid in cash or in common stock. They announce it every quarter and have always paid in cash. The only alternative to not paying that obligation is to declare bankruptcy ... which obviously they won't do when they are allowed to pay in stock certificates if they don't have dollars. At the time the preferred was sold, they said they would always pay in cash. So even though they just distributed stock, distributing more would have been frowned on by investors.
That sucks. No one knew a $5 share placement was coming. In January, no one knew a $6 share placement was coming.
The stock will follow the company performance. MCP is still losing money. If they move to profitability the stock has a very high upside. If they don't then they will eventually go to $0. I like the chances of success and I'm long. It really is that simple. Either they have a path to profitability or they don't. Businesses that lose money go out of business and businesses that make money stay in business.
Shorts will tell you there is no way to make money, but I disagree.
All you had to do was buy the convertible at $100 per share. And then know that it converts into 2 shares of common stock.
Yep that sweet $5.50 per year is tasty. And then the conversion into $10 of common stock just washes that away. You can do the math at any time. Every share of preferred converts into 2 shares of common ... worth $4.93 per share right now. So a share of preferred is worth $9.86 plus the dividends. $19 is wildly high.
I've pointed it out before but going short the preferred and long the common (two share per share of preferred) is a pretty safe bet. Sell one share preferred for $19, buy two common for $9.86. Pay the dividend of $1.375 in December, Then cover the converted preferred with the common and pocket the difference.
The dividend is a feature of the preferred stock. The announcement only has two forms: pay the 5.5% ($1.375 per quarter) as cash, or pay the 5.5% as common stock. They have always paid as cash. Every quarter they announce the dividend and every quarter MB posters are convinced that it means more than just the repeated announcement that accompanies a regularly scheduled event.
The only large thing I have spotted so far is that the $650 million at 10% that was borrowed in 2012 for the Neo purchase has interest paid on June 1st and December 1st. So half of $65 million would be an interest payment of $32.5 million.
There are $360 million convertible notes at 6% from 2012 have interest paid on March 1st and September 1st.
There are $230 million convertible notes at 3.25% from 2011 have interest paid on June 15 and December 15. That would be about $3.75 million.
There are about $43 million of bank loans at 3.57% interest. If payments are purely even across the calendar then Q4 would be $0.38 million.
It looks like Q2 and Q4 have larger debt servicing than Q1 and Q3. They may account it as exactly even costs though, by taking charges in each quarter for the twice per year payments.
I will look into it. The comment is not about MCP debt ... I really have no idea. But debt payment irregularity is something I've come across (on other companies). It is a stretch to attribute a large loss to that in Q4, but I was covering my ignorance on that point.
Is there a handy place to see all the debt issued (including any Neo legacy)?
No. It is down to $5 because they issued and sold 51.75 million new shares at $5. There was a new public offering of shares. That is the critical missing information.
Whose estimates? Right now Yahoo estimates are for a 93-cent loss for 2013.
Thru the first half, they had 51-cents of losses, 15-cents in Q1 and 36-cents in Q2. Estimates are for a 29-cent loss in Q3, although everyone should be expecting a number that is about the same as Q2. Another 36-cent loss puts the total at 87-cents of loss thru Q3. Quite frankly, I can't see any possibility that they will post a second half loss of 71-cents, which is what the $1.22 per share loss implies.
In the public offering, they sated that Q4 might be break even before debt payments. Now debt payments are curiously irregular. I don't have any spreadsheets with the debt payment schedules. If there is a huge payment in Q4, then of course that would account for a huge Q4 loss.
I think the estimates need some clarification. If we are at a loss of 87-cents thru 9 months, I need to see a debt payment schedule to buy that the Q4 will add another 35-cent loss.
The estimates do suggest a dramatic turn of events. But what is the basis for that?
Not really. The offering of stock at $5 was what pushed the price down "20%. over the past month". The analyst estimates are just changing to reflect the cerium outlook and the Q3 projections with the offering.
I see the failure to mention the offering as an indication of sloppiness and inaccuracy.
Just short it now. If you think $4.09 is coming, don't wait for some imaginary long position. Play your prediction and short.
What I find funny is the new commitment to team names. The Cincinnati Reds thought nothing of changing names during the McCarthy era. Better dead than red. Teams changing names is hardly critical. They currently are the Washington Redskins. I think there is ample evidence that that is offensive at some level. Just change it.
Personally I like the Washington Generals, but that might be taken.
I want to point out that you are taking the name of a sports team far too seriously. If it offends, change it. You clearly think it is insignificant offense. But if it is an offense, what does it matter about changing the name. I'm a Colts fan, and if they were to change today to the Dragons, I would still watch them, and root for the same team. It seems to b very important to the conservative crowd in particular, that the name not be changed. Somehow they have taken any cultural shift (even something as innocuous as a football team name) as a sign of the end times.
I'm not sure why the pending earnings disaster is not already priced in. They already announced the bad news. They are selling no cerium. They still see small demand in other elements. Prices suck. Q4 won't even be break even, but will be a loss.
They have to confirm that disaster with the actual details of the disaster, but I find the prediction of disaster as market news to be a bit puzzling. That news is already out there.
Bankruptcy will come if they lose every bit of money and can't pay their debts. I sill see it that they will turn the corner and make money.
The line of credit is a tough one for banks. It would not be in a primary position for recovery, but would be secondary, or even tertiary ... down the list. And the reason that the company would access it would be because they burned thru all their cash. You really have to have a high recovery scenario ... either you run the numbers and see a no-fail operation coming along, or you run the numbers and see that failure leads to a recoverable debt at a reasonable rate. But f you look at the debt and a conservative liquidation plan and see a max of 50-cents on the dollar recovery ... you almost need a 50% interest rate.
It is a catch-22 ... When they do hit a profit for a quarter they are worth lending money to, and they don't need the loan ... when they are losing money, they need a loan, but aren't worth lending to. The banks would rather buy a treasury and loan to the US government ...
I thought they would announce a fairly ridiculously high interest rate, but get a line of credit. Apparently it just didn't work that way.