I can ballpark any of the studies. Here is the math on the 11 MGD wastewater plant.
MCP treated at 3 ppm volumetrically ... that is 33 gallons per day.
They treated 11 million gallons per day and:
Dropped Pi from 0.14 mg/l to 0.05 mg/l, a 0.09 mg/l drop.
They treated at 1.2 molar ratio of REE to Pi.
11,000,000 gallons x 3.8 g/l x 0.14 mg/l = 5,852,000 mg = 5,852 g = 5.852 kg
Use 95 as the mwt of Pi, and 172 as the mwt of Cerium oxide.
5852 g / 95 g/mol x 1.2 mol Ce/Pi x 172 g Ce/mol Ce = 12,714 g = 12.714 kg/day
12714 g Ce(salt) / 33gallons x 3.8 l/gal = 101 g/liter
SorbX is 10% Cerium oxide, or a trichloride equivalent.
That 11 MGD facility would need 33 gpd SorbX, 12,045 gpy, and they would use about 4640 kg of cerium per year ... 4.64 mt. It is all a matter of what people will pay for that step in water treatment, and what kind of performance premium SorbX can command. If they are paying $1 per kg, then they are a valuable customer of a little less than $5000 per year sales. At $10 per kg basis, they still are only a $50,000 per year customer.
Obviously Molycorp is not interested in the sales work for getting these contracts and it will be up to Univar to submit bids for these towns. These studies are nice support for Univar in moving SorbX. Since these are presented as adjunct treatments to ferric chloride, there may be a price premium relative to the ferric chloride prices.
LOL. Record fines and penalties!?!?!? San Mateo meets some of the toughest water regulations in the world. And you can google:
san mateo ferric chloride
and find the pdf for the bids for ferric chloride. Look up the population of San Mateo and do the math yourself then. You have to take the contracts from a LOT of San Mateo's. And they aren't getting fined with their current cheap chemicals.
That contract is for $94,329.50. I can't say what the population handled is. The town of San Mateo is population 100k, and the county of San Mateo is population 739k. I took it that the water was county wastewater. It certainly could be that the San Mateo contract is for a smaller population. That would change my estimate of the total market.
But it wouldn't change the fact that the wastewater phosphate removal is currently adequate, using ferric chloride, which costs under 50-cents per kg, in bulk.
In swimming pools, a superior product (dumping rust into your pool looks bad), can compete easier because the price is still low, and the performance metrics are beyond the question of whether the water is good enough to pump into San Fransisco Bay (or the Pacific side).
You are correct that all my math is not to be taken as a definitive analysis. It is valuable to work thru the math, but in this case, I've only half worked it thru. That is much more effort than yours, but still, do your own DD.
I should bump that 40 grams to higher. The label for the PhosFree says 1 liter treats 10,000 gallons at 600 ppb. And there should be an excess to favor complete removal. So maybe more like 6%, 60 grams per liter.
I am guessing on the ferric chloride solution strength ... 50% would be a high concentration. If it is 10% then the price gets a little more reasonable, although as I back-of-the-envelope caclulate, the market size gets to be a problem then.
I think SorbX has changed in application. It was originally mentioned as an arsenic (and possibly heavy metals) treatment (it was a cerium + aluminum formulation if I recall). And technically that is a higher end treatment process, with higher competing product prices. But I am guessing the market volume is staggeringly small for that. Now SorbX is basically a cerium salt to precipitate cerium phosphate.
I can ballpark the PhosFIX concentration. PhosFree and PhosFIX treat 10,000 gallons of 500 ppb phosphate with 1 liter. Both Lanthanum and Cerium are trichloride salts ... CeCl3 and LaCl3. And they are almost the same molecular weight.
500 ppb is 0.005 parts per 10,000. You add 1 liter to 38,000 liters of pool. That is 0.26 parts per 10,000. On a cerium oxide basis, the mwts are about 2-to-1 cerium to phosphate (cerium oxide mwt 172, phosphate mwt 95). That sounds like a 4% solution of cerium oxide (equivalent ... about 6% cerium trichloride).
4% per liter would only be 40 grams per liter. That is much lower than the 500 grams per liter I used (50%). Once again, I have to say to check the math. This was a post-it note and a pencil and the post-it note already had been used, som it was just the margins. I ballpark it at 20 grams phosphate in the pool, requiring 40 grams of cerium oxide (as a trichloride though).
My guess is that the municipalities treat much larger volumes of water, and use much more concentrated salts.
PhosFIX could be a good product. SorbX might get into the range of negligible revenues.
My guess is that with the final cracking stage they could run Project Phoenix (not a project anymore?) at the rated throughput, and with an output of over 19,000 mt per year. The output will depend on the input grade. Say the design specifies that it can handle 400,000 mt of input at the rate limiting first stage. At 5% ore grade, you get 20,000 mt per year. At 8%, you would be getting 32,000 mt per year output. The system is linked and the capacities are ranges for each section ... input and output limits. I think they may find they can run a higher output, with higher ore grades.
The higher run rate distributes fixed costs over more material, but proportional costs stay proportional. I think that they said in one of the CC's that fixed:proportional was about a 30:70 split. Considering the current low run rates are about 20% of that rated capacity, and the cost was recently about $25 per kg ... $7.50 per kg of fixed costs would drop to $1.50 per kg.
The proportional costs will see the biggest drop when they switch from paid wastewater disposal to Chlor-Alkali wastewater recycling, and from purchased chemicals to Chlor-Alkali electrolytic generation.
Prior to the final cracking stage they ran at a 15,000 mt per year rate, but said the yield hit was getting bad without the cracking. Say they ran at about 250,000 mt of 7.5% RE ore per year (input), and the yield dropped to 80% ... they get the 15,000 mt. But if they were expecting 90% and normally see 90%, they were expecting to see 16,875 mt per year come out. If you don't properly disintegrate the initial material, then the higher rate of processing won't get as much out. I don't know how bad the yield drop was, but they indicated it made it unfavorable to run there.
They should be able to run faster right now, and not see a big yield hit at the higher rates. I hope they have run a test rate and can report on that this CC.
I used 50% as the ferric chloride concentration. That is likely wildly high. If you repeat the San Mateo numbers saying that it is 10% ferric chloride, then you calculate 5-times higher revenues for treatment of municipal wastewater. But the cerium would also treat 5-times more municipalities. San Mateo is wastewater from under 1 million people. 72 of those is 50 million people or so. If you need to have 5-times that number, from the concentration change, you need to treat 250 million people's wastewater. That is most of the US.
So while the cerium price is more reasonable, there is a need to win at competitive bids everywhere, which hurts the returns.
Likely the best answer is to pursue both markets and to eventually stop selling into municipal wastewater treatment. Sell some small amounts of cerium into the cerium market, and sell some into the pool treatment market, and toss the rest.
I wonder at how quickly the rest of the world's cerium would be pushed into the swimming pool market if MCP has success selling cerium at double-digit price equivalents.
I just googled PhosFree and it is a lanthanum treatment, so the comparison is a little different. Basically you are competing with lanthanum prices ... PhosFree is already better than the ferric chloride alternative.
Municipalities will use it if Univar bids lower than competitors and if there is data to show that wastewater meets regulations.
I have much higher hopes for the PhosFIX product line for swimming pools. Pool owners will pay slightly more for phosphate removal, and the advantages of PhosFIX (faster kinetics, efficacy, white flocculant vs brown).
I did a back of the envelope revenue calculation, with a lot of guessing, once before. I'll try to summarize it:
San Mateo County/township had their low bid online ... 50,000 gallons of ferric chloride solution for under $100,000 (Univar did not submit a bid). Say the ferric chloride is 50% and that 50% cerium oxide is equivalent. 50,000 gallons works to about 125 tons (using 10 lb per gallon as density which is too low). 9000 mt (Mt Pass annual) supplies 72 of those towns. Revenues are then $7.2 million ... that is UNDER $1 per kg. It is something but not much.
PhosFIX is an unknown concentration solution. A competing product PhosFree will treat a 10,000 gallon pool with middle range Phosphate, with one liter. That sells for about $15. Call it half a kg of cerium oxide equivalent for convenience. Now you are talking about a good price per kg ... say the preparation is $3 per liter and the cerium costs MCP $4 per half kg. On a kg basis the 9000 mt annual production would generate $135 million in revenues.
There are 10 million swimming pools in the USA. Average is probably over 20,000 gallons per pool. Potentially, if every pool treated for phosphate every year, and 25% used PhosFIX, that could use up ALL of the Mt Pass Cerium output. (I've no idea how many treat for phosphate).
Those are all REALLY sloppy numbers. Don't use them as more than a very loose estimate. In my previous post I had a number: 4 pounds of PhosFIX to treat 10,000 gallons. That would be about 1.5 liters ... but likely that is at higher phosphate levels ... PhosFree also calls for 1.5 liters at high phosphate, and recommends weekly small doses.
I see a good overview of MCP. Google the following:
Molycorp’s share price has fallen more than 32% in the last one year alone; however, higher revenues and depleting customer inventories point towards a turnaround for US’s largest rare earth producer
There should be a Feb12th article from "bidnessetc" I found the business segment figure they had better than most.
For some reason all the financial websites ind the same dates, even when an event is not yet scheduled. Molycorp schedules the quarterly and annual report dates about 2 weeks ahead. They sometimes announce the date of the report less than 2 weeks prior ... the SEC only requires a week notification.
They always report on a Thursday. Q1-Q3 are quarterly reports and are generally sooner than Q4 annual reports. I've been guessing at March 6th or March 13th.
But to be clear, until Molycorp announces a date, there isn't one.
Molycorp has not scheduled that event yet. Today is right about when I expect the announcement of the date. I think they announce today that they will report on Thursday March 6th, after market close, with the CC at 4:30. That could be a week early though. They may schedule for March 13th.
Currently the supply side is refusing to produce. Both Lynas and Molycorp are producing below the amounts they could produce, because production at current prices and at current cost basis is just more loss. Chinese rare earth producers are limiting production also.
There is a supply-side discontinuity whenever additional production is brought online. A new facility adds a step function increase when it is completed. The path that everyone is on currently is to only ramp production, not to apply full production.
I don't think prices from 10 years ago would be in play. Energy is a very large base cost in mining and production, both directly and indirectly. Energy costs are twice what they were 10 years ago.
It is difficult to say if China will actually take the cost of environmental responsibility into the mining and production process. Currently they ignore environmental damage, and that is a huge cost savings for Baotou and other Chinese producers. China needs an environmental movement to force adequate controls. If the costs for the environment get added into the cost of production, then the incentive to reduce production and drive prices higher stays in place.
Unfortunately the slight bit of environmental responsibility required of official miners has driven the growth of the unofficial/illegal mining, with worse environmental practices. Thinner profit margins then make the environmental cost harder on the official miners.
I know that prices were once lower, and therefore, you can present the decade old price as a possibility. But there are many reasons why those prices are long gone and won't come back. You are correct that Lynas and Molycorp are introducing new production facilities with about a combined 30,000 mt per year capacity. We will just have to wait and see the actual run rates, and prices.
Gambling is betting on random events. If you conceive of REE prices as random, and not market driven, not supply-demand driven not predictable ... but a random event then of course, a thing that depends on that random event would be random also.
I think that REE prices are market driven. I think that demand is predictably going to increase. I think that prices are near a local minimum.
Around the web:
September 12, 2013 – Rare earth metals consultants TRU Group says latest monthly data suggests that REE prices may have reached a low and indeed bottomed-out.
Market Outlook: Rare earth prices are expected to remain depressed in Q1 2014 as domestic and overseas demand will remain weak. Nevertheless, prices may rise at the end of Q1, drawing some support from ongoing consolidation in the industry required by the Ministry of Industry & Information Technology (MIIT) and possible stockpiling by the State Reserve Bureau (SRB).
As the Chinese Spring Festival holiday approaches, market players are looking at possible market directions in 2014, especially in the first half of the year.
Supply and demand are still the main factors behind the fluctuations in rare earth prices.
Prices for rare earth concentrates in both southern and northern markets are forecasted to have little room to move down in the near future on support from increased production costs caused by increased environmental protection measures as well as from the government crackdown on illegal rare earth mining.
Meanwhile, the expected establishment of large rare earth groups in China is likely to effectively regulate China’s rare earth supply in the future, which will also contribute to support prices in the longer term.
On the other hand, a pickup in demand for rare earth materials from downstream NdFeB magnet producers is likely to be seen in the coming few months ...
Do you know the accounting for interest that MCP uses? Is it the interest expense for the quarter or is the interest pre-assigned, so that the numbers are regular? Since the large $650 million debt at 10% is paid interest in Q2 and Q4, the irregularity makes a difference in estimating the size of losses.
OK. I expect no SorbX sales. So SorbX sales would be a pleasant surprise. If they hit on the other items then I would actually take that as a pretty good report and CC ... depending a lot on the Chlor-Alkali report.
It is perhaps a bad choice of words to use the metaphor "icing on the cake" when there is no cake to speak of. What I meant was that if they say Chlor-alkali was delayed, but is fixed and ready, if they say that Magnaquench has no inventory, if they say that prices and demand in Q1 to date are good (taking into account the notorious rare earth "boat holiday"), if they say the ran at test rates of 19,000 without significant issues, if they say the cost was $20-ish per kg in Q4, if they say the cost at 19,000 run rate was $15 per kg, ...
there was a lot unspoken in my "icing on the cake" ... what I really was saying was that if they report the expected Q4 losses, and in updating the current progress, they mention some positives, then SorbX sales would be an additional positive comment.
My expectation is for a loss that is not much different than the analyst estimates. Maybe my range is a bit more to the upside ... Nasdaq has a range of ($0.14) to ($0.41). I would be surprised by that high end of losses. The analyst with the ($0.14) estimate seems over-optimistic.
So I am more interested in the CC comments, particularly about Chlor-alkali and about run rates and cost side metrics. I am taking as a given that they have Q4 losses, which in a realistic phrasing outweigh the pretty stories in the CC.
The $650 million debt has $65 million per year interest, paid in 2 allotments of $32.5 million, in June and December.
I don't know if they account the interest as even every quarter, or if they account for it as it gets paid. Since the biggest interest payment is Q2/Q4 payment, it matters to estimating the interest losses for Q4.
In general, the quarter should be a repeat of Q3. The average share count should be a little higher.
The cost at Mt Pass was about $25 per kg at the end of Q3. Hopefully they have reduced that a little more.
Key things I would like to hear from the CC:
A speed test for the current Project Phoenix with a run rate of 19,000 mt per annum. And a report that the run rate was acceptable, even if still not at the optimal.
An update on the Chlor-Alkali facility. Ideally they would surprise us with completion of the commissioning. Otherwise, a detailed explanation of the remaining schedule and why the latest slip has occurred.
An indication that there is no inventory in the Magnaquench system, and all Magnaquench from here on will continue to have positive margins. A number for expected margins would be nice.
Any indication that future demand growth is going to be growing even faster.
A cost of under $25 per kg from Mt Pass, with an estimate of the cost at the the 19,000 mt per year rate.
Any kind of sale for SorbX would be just icing on the cake. It is reallyu too early to expect any sales, but still, I would love to see some.
As I said, I used 200 million for the average share count. I usually get that wrong. To me the share count increased in October to 240 million, so the average is between the 189 million at Q3 end and the 240 million at Q4 end.