In the August 8th CC, they said that construction should be complete in September and commissioning would take another month.
Yes. I did hint at it in the previous answer that we expect mechanical completion next month that being September. Typically, we would expect commissioning to last if everything goes flawlessly somewhere two to three weeks, but from the school of hard knocks that we all at Mountain Pass come from probably something in the order of four weeks perhaps a little longer. What gives me confidence that we will do fairly well there is that as I mentioned we have assembled a world class team of operators, managers, and engineers. These are old hands in the Chloralkali industry and I am totally convinced that we have some of the best world in that space at Mountain Pass getting ready to fire the plant up as soon as mechanical completion by our contractor engineers at KBR is done.
The next stage Cracking should be complete soon also:
Jeff Cramer - Morgan Stanley:
Hey guys. Thanks. Just on the – you have given kind of timeline of the Chloralkali plant, can you touch on getting the multi-stage crack units fully up and running?
Jeff, what’s left in that unit is primarily instrumentation. So, the build out is essentially complete. So, we expect to go through sort of pressure testing and so on in the next few weeks. And I would expect that, that unit will be commissioned either ahead of or concurrently with a Chloralkali facility.
Long ago, I was labor in one companies physical inventory counting. We had the Chief Accountant running the company on those days and EVERYONE worked for him. We physically looked at the entire warehouse and wrote down everything. It was brutal and things were always found stuck on a skid that weren't in the books.
Molycorp is global. They have warehouses at multiple facilities. I have no idea how they can do a physical inventory count. But the explanation I lean to is that they did that (hey they are cutting production and don't want to cut all the labor). Fanning out and counting the materials, they found materials. Heck, if it was rare metals at Silmet ... 60 mt would be enough to be that valuable.
Or alternately, they have been accounting according to the recipe usage for magnaquench. Say a formula calls for between 900 and 1100 kg of neodymium, with the target being 1000 but the process working with +/- 10%. Well the best accounting for that is to always charge by the weight used. But you can also charge 1000 kg ... even if most times you are using 900 kg. (They sold 3115 mt of magnaquench for $58 per kg in 2012).
The bottom line is the error discovered is in the favor of the stockholders (bank error in YOUR favor). The lawyers are suing based on it being damaging. I can't see them proving any damage and I think they will have a hard time actually getting clients, when that is fairly obvious.
There you go then. You don't know the future. You have no answers. Move along and buy some nice T-bills. Although those might be too daring for you also.
At a glance, and without legal training I would say the lawsuits ALL have no merit. They all jumped on the Q1 error as damaging to investors. I think any financial error is damaging, but the damage from this is laughable.
Have you even looked at what the error is?
They started the quarter with $287 million of inventory, and wrote inventory down $40 million, and ended the quarter with $232 million of inventory. This implies there could have been finished goods added to inventory while raw material inventories dropped, or other changes in composition from sales.
They financially accounted that they sold $146 million. They accounted that they produced for $153 million operational expenses.
Now the error: The $153 million operational expenses produced MORE finished than they counted, or used LESS raw material inventories than they counted. Most likely, a physical inventory count found the miscount. So they either produced more REO's and some went into inventory, or they used less chemicals making magnets or other finished goods for sale. The net amount was a $16 million error. Either they thought they used $16 million of raw materials, but didn't, or they produced some magnaquench or other RE-related finished goods and did not account it properly.
The net result is that there is a reduction in the direct operational costs associated with the quarter. And a $16 million increase in the inventory.
Bottom line: they were sloppy. But they found $16 million of stuff. Investors should be upset about the error, but forgiving because it is small and not damaging, but actually helpful.
I'm a stockholder and I just don't see a corporate misconduct, or a reason to seek recompense for damages. I don't like the mistake, but I also think that it could be an innocent mistake.
I'm not admiring Jane Fonda. But that imaginary story you present is completely imaginary. I looked it up and Snopes debunks it. You can sill boycott her. You can easily criticize the many things she actually did. But don't repeat lies.
Shouldn't the actual amount matter? The current rates are not 15%. Yes they are rising, but they are at what are really quite low rates.
I don't think there is any "true value" for gold. It has a market value. It is a thing that is bought and sold, and almost never used. It has almost no role in the world's economies. And quite obviously, there are MANY places to invest. Even if you limit yourself to the "physical". Real estate is of course quite physical. And that limitation is rather arbitrary. If you want to invest in petroleum, you can buy the ownership of petroleum in someone else's storage tank ... merely because the contract of ownership is paper has no bearing unless every method of enforcing contracts disappears.
If you are just another whacko predicting that yes indeed, it is all going to collapse, society and contracts will disappear, only people with food, guns, and gold are going to survive ... well quite frankly that is sheer nuttery. If you think that gold has investment value buy it in the most convenient form. For most that is an electronic, online brokerage, through a modern computerized market, and using the convenience of arranged storage and certification of quality. Buying physical gold has an enormous fee for the transaction.
People have a tendency to toss off a claim about new supply entering the market. I really don't see that MCP has ramped up slightly. Lynas has produced a trivial amount. The only real non-Chinese RE's hitting the market are the RE's smuggled from China.
MCP claims they could run at 15,000 mt per year, with the facility still to add the Chlor-Alkali facility and the second stage cracking operation. When those are complete (September-October) they should be able to push the run rate to the expected capacity. Project Phoenix represent e the only real significant non-Chinese RE production in the world. New and online in 2013.
Avalon has a huge financial barrier to entry into production. I think that barrier is far too large. Molycorp has 2 large production facilites (counting Silmet as large), and smaller production in China. They are optimizing their production currently. They also have access to the Molymet technologists, with their expertise in metals isolation. There is a symbiosis between Molymet and Molycorp, with the large ownership stake of MCP by Molymet, and no real competition on any metals.
Avalon has a nice bit of ore. But it will be nicer when they are another subsidiary of Molycorp. I certainly hope they raise $500 M and make some progress on the plan for the mine and for the flotation concentrate production at the mine site (they plan to ship the concentrate to a processing facility elsewhere). If they have some cash and a set up like that, they would be a valuable acquisition later.
cb_cb480: I'm not sure what your point was in the second message. I agree that using the market cap as a purchase price for the entire company is inaccurate. It is proportional to the price investors should use when comparing the investment. Investors are typically NOT buying the entire company, just a small part of it. I'm not sure why that sounds like I'm disagreeing, because I'm not.
Well, of course you can't buy the entire thing for the market cap. But you can buy a share of MCP at that proportional price. No one will buy the $500 million offering in entirety either. If you are comparing the two, the MCP market cap is the right "number" to use. That is just for comparison purposes, not a "which wallet would Warren Buffet have to use" actual price tag (and he might have to use his medium sized wallet ... not the big one, and certainly not the small one).
By far the better business plan is to build a mine and concentration plant ... similar to the processing facility at Lynas' Mt Weld. Then ship the bags of concentrate to an existing processing facility with large capacity.
Of course that plan exists if MCP eventually buys AVL. MCP won't be buying AVL anytime soon, but the reality is that AVL is going to find that they really shouldn't fund a $1.5 billion construction project. If the deposit has merit, it makes more sense as an acquisition by MCP.
In mining, there are the large companies and the junior/exploration companies. And the established companies buy the ore deposits (at their leisure and at their price). MCP is almost at the end of that construction road. And they have survived. They have adequate funding to carry thru the rest of their CapEx, and an achievable plan to reach positive profit margins. That mere survival is enough to guarantee a position of eventual dominance.
AVL would LOVE to have a Silmet facility right now. Or a LAMP facility (although that facility may have fatal flaws). Or the Project Phoenix facility. But all they can do is present the almost laughable idea that they can build a new facility. Two new major rare earth processing facilities have been built in the last few years: Project Phoenix and LAMP. The investment world is unlikely to pour another $billion+ into another such facility when the previous two are not yet successful.
2 years from now: MCP buys AVL for under 5 million shares of MCP. That is my prediction.
Avalon has a good ore deposit that they have explored in Nechalacho. Meanwhile, Avalon is one of the larger exploration companies with a current market cap of about $86 million. They have about $11 million cash on hand and an ambitious plan to build a mine and processing facility for the Necahalacho ore deposit. Their first cut at financing that plan is still quite ambiguous, but they registered for a stock sale to raise $500 million.
They have a 2016 price prediction of:
$8.75 for Lanthanum oxide
$6.23 for Cerium Oxide
$75.20 for Praseodymium oxide
$76.78 for Neodymium oxide
They plan to mine 730,000 mt of ore, processing to produce 7000 mt of REO's. They estimate a cost of $362 per mined ton, a net of about $265 million operating costs. They expect the products to sell for about $645 million. $380 M less SG&A and overhead, they project to profit well over $300 million per year.
They project an upfront CapEx of about $1.45 billion for the Nechalacho project. They would market product in 2017.
So they will have a few stock offerings, lots of loans to arrange, and a long road of construction. Presumably, stock investors will have to put up half of the CapEx, so they will be buying $0.75 billion of stock, and waiting 4 years (if this schedule holds) for the payoff in 2017.
Of course Molycorp can be bought in entirety fo $1.2 billion. And the construction of a production facility is fully funded (they are arranging a credit facility, but should not need it). Molycorp revenues at the prices projected in 2016:
6300 mt LaO at $8.75 .... $55 M
9350 mt CeO at $6.23 .... $58 M
2300 mt NdO at $75.20 .... $173 M
820 mt CeO at $76.78 .... $63 M
That totals $350 M revenues and costs are projected at $134 M ($7 per kg). And that doesn't include the additional revenues from rare metals, alloys, magnets, SorbX, etc.
OK then congratulations on THAT call. I don't need congratulations when I am right on a call, I just take the money.
I am constantly amazed that anyone can post as though what they post anonymously on a Yahoo MB constitutes a valid investment or trading basis. Why bother with that claim. You were right on this just as you were wrong when it was $5.60 and you said it would never go over $8.
I'm not wrong, I'm long. The price swing from August 9th to August 21st in the absence of relevant market news, is something I just don't try to predict. I am long because I think the fundamental business plan is worth investing in for a long term gain. There was nothing that happened those days to change my opinion. Some lawsuits were announced ... I don't think those influenced the market price determination.
I am doubtful that you will survive and prosper with a strategy of short term trades. If you made money ... well then you don't need my recognition ... have your tax accountant congratulate you at the end of the year.
Go ahead and take it to $5. That claim is funny to me as I've noticed that the market determines the price. I challenge you to do it. I say you are not the king unless this stock trades at $5.00. You say you can. It is money on the table. Make the trade and move the price.
And you realize that every share sold short, someone took the other side of that bet? That is what makes a market ... the difference of opinion regarding value. I prefer to formulate my own opinion of the value of things but if you like to hand your trading decisions to someone else, well, that certainly seems wiser in your case.
So the lawsuits are for people who bought between August 2nd and August 7th.
Here are the historical price data:
Date ........... High ..... Low ...........Volume
Aug 7 ........ 7.25 ...... 6.90 ......... 4,626,900
Aug 6 ........ 7.38 ...... 7.02 ......... 4,653,800
Aug 5 ........ 7.47 ...... 7.23 ......... 4,175,700
Aug 2 ........ 7.48 ...... 7.25 ......... 3,754,400
So 17,210,800 shares between $6.90 and $7.48. Say that all of those 17 million shares were buying strictly because they JUST read the Q1 report and were profoundly impacted by the costs and inventory. Say they ALL bought at an average of $7.18. Then there is a upward potential for $17 million of losses.
But of course most will look at the drop in share price and assign the drop to the earnings miss, not the notice of a restatement. The lawsuit represents almost no one, and I fail to see how they would claim their clients were damaged. The restatement is somewhat trivial in effect. Damaging as an indictment of accounting, but superficial in actual changes. I am just not able to argue that the damage to the stock price is from the restatement. The stock price is down because the results were a miss.
I think to show damages you would have to look at comparable misses, and do the statistics of the price changes and standard deviations. My guess is that MCP is in the normal range.
The lawsuits should get dismissed as having no merit. But we will have to wait and see.
I was confident of it earlier in the week ... pondered selling some calls but didn't. Today ... I don't think so. That 40-cents to the downside puts 7 close to out of reach. I think the stock will go back up ... today's prices are a nice discount to the last month of trading.
The market is pretty flaky today. There is a Yahoo story about the "disaster" report of Walmart ... they reported EPS of $1.24 on revenues of $116.2 billion, missing the $1.25 and $118.5 billion expected. The headline is:
Walmart Earnings Disaster Exposes a Collapsing Economy
And the other big thing playing with the talking heads is that the Fed might look at job growth and raise interest rates to 15% and force the money out of the banks and into treasuries ... why who knows what that crazy Fed will do that will just kill the economy ....
The drop today looks to large though. I don't think the price will climb back t $7 tomorrow, even though that does put the most contracts to worthless.
The shorts are riding the market down today, but borrowing shares might be getting hard to come by. Many shorts have bet the short-side with Put options ...and it really looks bad for them.
From Yahoo, Out of the Money Puts expiring tomorrow:
$3 strike ....... 12,507 contracts
$4 strike ....... 2,273 contracts
$5 strike ....... 4,137 contracts
$5.5 strike .... 475 contracts
$6 strike ....... 7,619 contracts
Total: over 27,000
Slightly in the money Puts:
$6.5 strike .... 1,922 contracts
$7 strike ...... 5,924 contracts
Of course Call side the longs are taking a beating with almost 20,000 contracts at $7 and over 18,000 contracts at $8.
Longs need to just buy a stock position you are comfortable with and leave options alone.
I thought you controlled the stock price ... any trade is easy for you. You shorted in June under $6 and planned to stop the stock from surpassing $8. Shoot just move it to $6 and cover for another profit.
I agree. I don't think I stated that Silmet mines, I think that I stated that Silmet PRODUCES. If I did say mine, that is incorrect as far as I know. The caveat is that I am still uncertain if Mt Pass ore has rare metals that coexist in the ore.
SIlmet definitely produces tantalum and niobium. They list the production capacity as up to 3000 mt of RE's per year and up to 700 mt of rare metal products.
I think a great deal of the gallium business is taking mining scrap, waste, and processing to purity.
Rare metals facilities can be seen at the Molycorp website, although they are not easy to find:
"About Us" top tab
"Our Facilities" link on the right
"Sillamae" link on the schematic
This does not take you to SIlmet, but now on the right is a new set of links If you want to see Silmet use the expanding links ... you can eventually get to the tantalum and niobium.
The links for the rare metals are informative. Most of the facilities are re-processing ... either up-purifying to 4N and 6N, or converting to compounds. Wandering around I found this:
In addition to high purity gallium, Molycorp manufactures gallium nitrate that is produced from 4N gallium. Primary gallium production takes place at our Stade, Germany facility. Secondary gallium production takes place at both of our Blanding, Utah and Peterborough, Canada operations.
Gallium is a widely distributed element associated with many other minerals. Since it is not found in concentrated deposits, it is rarely mined directly. Gallium is primarily obtained as a by-product in the recovery of other metals such as zinc and aluminum.
Tantalum and niobium are often found in rare earth ore deposits. I have assumed that Mt Pass ore must have some of them, although I don't know what metals or what amounts. I thought I had seen a tantalum amount before ... but I don't recall where ... those 2 are often co-products with RE's. I will look around.
I knew that they are in the business of recycling gallium. I also assume that they have some mineral sources although that may not be true. Niobium ASP's are not that great, although they definitely mine that. The rare metals are an attractive product. They currently produce quite a few high value metals, and that could grow. Gallium is a nice mineral to be selling right now. The demand is going higher and prices are quite strong.
More than 100 billion Gallium Nitride LEDs will ship in 2013. 2014 is expected to see strong growth again.
In the CC, there was this comment:
"That said, the LED market demand trend is expected to provide a growth driver for a gallium rare metals business of where we come out in the majority market share in gallium tri-chloride, the primary raw material for gallium used in LEDs."