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 other possibility not mentioned is that Molymet will buy a new issue from MCP directly. If the number 10% is correct, they would put up about $140 million and buy about 20 million new shares. MCP outstanding shares would increase to 210 million, the market cap to $1.42 billion, and the cash on hand would be substantial.
I'm not guessing whether this is a prelude to a Molymet share placement or a Molymet market buy. Either way, Molymet has a strong vote of confidence in the Molycorp plan. Both are good for shareholders, but in different ways. A share issue dilutes, but obviates the need for a credit facility. Open market buys support the share price, but need the credit facility.
Since Molymet is on the board, they cannot trade on insider info. The status of the credit facility is currently insider info. The Q3 report will be prepared and released in early November (my guess is 11-7 or 11-14). It is a tricky proposition for Molymet to buy without them violating the 30-day window of insider trading.
These are all just random thoughts.
I found it googling Molycorp in the news. Some highlights:
Molycorp has 26 locations spread across 11 countries. Its downstream operation ties it to the prices of rare earths, but that could prove to be a boon if rumors about China planning to buy these metals to build a national stockpile are true.
According to management, companies reliant on these materials have held reduced inventories, but as demand picks up, the same companies will need to replenish their supplies and will look to Molycorp. As a business with a high barrier to entry, Molycorp has few competitors outside of China.
The company has enough cash on hand to survive hard times: $264 million, compared with current liabilities of just $181 million. Molycorp is looking for a revolving line of credit as well to the tune of $125 million to help pay ongoing capital expenditures related to the company's deposit in Mountain Pass, Calif. Molycorp has an operational capacity of 15,000 metric tons per year and is working toward a goal of 19,050.
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.
Not a lot of change in the analyst estimates:
5 analysts. High estimate -0.18. Low estimate -0.38. Average -0.27.
6 analysts. High estimate -0.18. Low estimate -0.30. Average -0.25.
4 analysts. High estimate -0.18. Low estimate -0.25. Average -0.23.
Sales volume and sales prices are really hard to predict. Prices dropped, but demand was higher.
Last quarter they surprised with a smaller net cash loss than expected. This was on the heels of a cash raise with debt and equity. The position of the company appeared to be improving. The stock jumped 30% in a day.
7 more market days after today's close, MCP reports. volume should stay strong as investors take sides. The stock price is still incredibly low. On May 10th, the day after they announced Q1 results, the stock closed at $7.34. Now another 3 months have gone by and the general RE market is showing some signs of life, and Molycorp is in the home stretch of finishing some critical infrastructure. Meanwhile short interest increased from 42 million to over 48 million since that date ... an additional 15% short increase.
Sure this quarter is a sizable loss. The analysts all agree on that. But the future is bright and it is getting nearer. Shorts are wildly wrong on MCP.
Covering short shares is buying. That demand raises the price.
It is impossible to tell the price after covering. Say there are 100 shares of a company, all in the market. Say there are 25 shares borrowed and sold short. There is actually demand for 125 shares of ownership at that market price. You could argue that the investment long dollars stay constant during covering ... so if the shares are at $10, there is a $12,500 investment interest in that company. When the shares short are covered, that $12,500 would correlate to a $12.50 per share price. Of course the buying of 25 shares (and removal from long hands) is demand, and who knows what the actual price of 100 shares is after the 25 are returned.
It isn't rocket science. A short position generates new shares. In one account (a margin account) the shares are bought and held. The account manager lends the shares to a short seller who sells the shares. Now the shares are in 2 places, the new account, and the original account. Both accounts own shares. The same shares in fact. The process can continue, with margin accounts always being loanable shares. Selling short is dilution. Since covering the short position takes shares back out of the market, it is share count contraction, and should raise the price.
There are many. September is the expected completion of two critical components of Project Phoenix. September/October is expected as a time frame for completion of another debt facility. September is the end of Q3. Soon after the market generally responds to earnings reports as they begin in October. Molycorp will report in November.
Rare earths will soon have a central market in China. That will begin to make prices more clear and inventory more clear, and eventually allow better planning of suppliers and consumers of RE's. The current actions of China in pursuing the illegal mines and closing them is favorable, although it is still ongoing.
The financial situation still is in doubt with MCP. Excessively large losses in Q3, coupled with delays in the facility completion, coupled with inadequate credit arrangements would still be devastating for MCP. Probably the most critical is remaining on schedule for facility completion. The cost of goods advantage of the completion is significant and the impact on the bottom line is critical.
Currently we wait for news on the Chlor-Alkali facility and the new cracking stage facility. If these are completed in September, and commissioned in October, then we should have a clear report on them at the earnings report, with the expectation that the cost side will begin to be favorable at that time. IMO, the credit facility is a redundant backup, and will be unnecessary ... with the current RE prices and with the current schedule, they should reach a positive Mt Pass profit margin (long) before cash exhaustion.
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.
Sweet. 2.2 million buy. And it is a new position. It might get added to, as it is currently down. Bottom line is that this stock is wildly undervalued.
Waterloo was the decisive battle that ended Napoleon's second war of empire. In that battle, Wellington combined with Prussian forces to defeat the Imperial French Army and effectively end the 2nd Empire of Napoleon.
There is a second financial story that gets often overlooked. Nathan Rothschild was a prominent trader in the English stock and bond exchange. He also used a network of information gathering to give him frequent advantage. His agents were on both sides of the battle lines, analyzing the situation. Rothschild received intelligence bulletins that preceded the rest of the market.
Rothschild went to the stock exchange and took up his usual position beside the famous 'Rothschild Pillar.' Rothschild gave a predetermined signal to his agents who were stationed nearby. Those agents immediately began to dump consuls on the market. As hundred of thousands of dollars worth of consuls poured onto the market their value started to slide. Then they began to plummet.
Word began to sweep through the Stock Exchange: "Rothschild knows." "Rothschild knows." "Wellington has lost at Waterloo."
Selling turned into a panic as people rushed to unload their 'worthless' consuls or paper money for gold and silver in the hope of retaining at least part of their wealth. Consuls continued their nosedive towards oblivion. It was selling for about five cents on the dollar.
Nathan Rothschild continued to give signals. On the cue from their boss, dozens of Rothschild agents made their way to the order desks around the Exchange and bought every consul in sight for just a 'song'!
Today's completion is the completion of the last large bits of Project Phoenix. Molycorp started as a private venture 5 years ago, and became a public corporation 3 years ago. The construction of Project Phoenix was the main focus for this companies business plan. Having a low-cost, modern, processing facility is a significant step in the path of this company. They should have these new parts commissioned and operating in a 4 weeks or so.
The expectation is that by the beginning of 2014 they will have cash costs for production in single digits. That will already be a very low cost, and the optimization will lower it further. If they can enter 2014 with production costs under $10, they will be operating Mt Pass at a profit.
The largest drop in the costs for producing RE's at Mt Pass will come when the Chlor Alkali facility is operating. It will allow onsite water and chemical regeneration. During the CC for the Q1 report, MCP had the construction completion targeted for the end of August / start of September. Assuming progress is still on schedule, they should be about 2 months from completion, and another short time for testing and commissioning.
The Q2 report CC will give us a much more precise expectation. If they confirm that timing in a CC that is already a week into August ... then the likelihood is that the costs will be dropping in a short time. Since the cash on hand as of June 30th will also be clear at that time, the only math question will be will the reserves be adequate to carry the company thru that short gap before the reduction in costs.
The picture for the future of MCP is about to get a lot clearer. I don't expect MCP to predict that they will turn the corner in Q4 ... they are not going out on a limb. Probably they will keep repeating that profitability will happen in 2014. But things will be clear enough to understand the Q4 situation ... even at this early juncture.
They mark inventory to market prices and therefore dropped the value of inventory to the market value, for a (paper) loss. The price of any inventory dropped further in Q2 and there will be another (paper) loss of inventory write-downs. The inventory was not marked down on a whim, they mark it to the market.
EG, if they have a kg of Neodymium oxide on the shelf, if has a market value at that moments market price. The prices dropped in Q2, so the value of the inventory will be written down again.
Hopefully they are reducing inventory, not growing it, although the inventory may increase in value for a (paper) gain in Q3.
They are also actually trying to minimize production, in order to cut costs. If they can sell that kg of Neodymium oxide from inventory, that is preferred to the manufacture of a kg for the order. Until they have everything running (Chlor-Alkali for chemical recycling), they are operating at a loss on a per kg basis. Part of the plan of the moment is to mimimize operations ... keep the core functionality fully capable, but keep it at a low level.
On the Magnaquench side, they have inventory of Nd oxide that is input raw materials for magnaquench. Since that inventory was last marked to the Q1 price, and prices are down again, they have a reduction in operating profit there. Consider that they had a kg of Nd oxide, on the books at the end of Q1 at $80. Then they make magnaquench with it ... say that the 2 kg sell for $100 total. Then the $20 barely covers the cost of sales etc. If they had bought a kg of Nd oxide at $65 and sold the magnaquench for $100, then they have $35 profit to cover the overhead. Unfortunately they secured Nd oxide at high prices and now it is killing magnaquench margins.
It's true they marked down inventory, but it isn't true that it won't happen again. And until they get the Neo-side inventory down, or the prices stabilize, they lose a profit center that otherwise could be counted on.
If you look at the Molycorp Rare Metals facilities, it is quickly apparent that MCP has a large presence in Gallium production. Gallium is currently about at $300 per kg. Silmet is the world's largest niobium producer, as well as a significant tantalum producer.
The rare metals are a growing part of the MCP product line. It may look small ... last quarter only $25 million in revenues, and an ASP of $339, but they have made moves to increase production across the Molycorp facilities. Rare earth products remain the largest part of the business, but MCP has an important presence in several valuable metals.
This remains one of the most difficult areas to predict, as the volume is still low, and the prices are quite variable. Q1 had only 81 mt sold, at that $339 ASP. For 2012, they sold 366 mt at an ASP of $215. Clearly the 2012 average of 91 mt per quarter was not hit in Q1. And 10 mt is a sizable revenue chunk at $339 ... $3.39 million.
Of course Niobium is a lower price rare metal and the mix of the metals sold can quickly change the ASP. If they had sold the same 81 mt at the $215 ASP, the revenues on those would have been almost a third lower.
With the need for closing the gap on losses, even a small boost in rare metals can make a difference. Lets hope they moved 100 mt and at $300+ ASP ... that would add another $5 million to the revenues line.
They DO make and sell dysprosium. They process dysprosium out of Silmet, I believe. Just look at their product list.
Scarcity is irrelevant. Iron and copper are also quite abundant and are mined VERY profitably. Many things are profitable and abundant.
Lynas produced 144 tons in the last quarter. They are not a threat to flood the market. Further, they have indicated they will support prices and won't sell production below their cost basis for full production.
But since you have a basis to believe MCP will not succeed, you should short. Be sure to post everything you consider informative on this MB.
The important top line numbers:
Volume: 3039 mt ... this is disappointingly low
ASP: $45.04 is good
Revenue: $136.9 million ... this was about where expected.
Gross Loss: $18.5 million (less than 10-cents per share) about where expected.
Mt Pass basket price: $17 ... a little lower than expected.
1485 mt magnets, at ASP $45
$37.4 million real cash burn
$264 million on hand
$167 CapEx left for 2013
Run rate of 15,000 mt per year ... getting there.
LOL. The days of moving the market by posting on anonymous Yahoo MB's is over. Clearly the volume of posts (canine_cunning 4434 since June 8th, equine_genius, 526 since July 8th) indicate that someone still thinks that slamming on these boards is influencing the market.
MCP is increasing in price. The shorts are increasing their positions and their posting. I like being on the side of increasing price.
Travis H s an idiot. No other way to put it. And you may not be aware of that. MCP is certainly in the business of producing and selling rare earth oxides. They have just finished the last stages of construction on a modern purification facility and are currently commissioning those last pieces. Prices have indeed dropped a long way from the highs but are still quite sufficiently strong for MCP's business plan to succeed.
The business plan depends on the final facility having the operating costs significantly lower than the costs have been with legacy production facilities. The ore they process has many elements in it and the elements when purified will have a basket price, and they will have individual prices. Globally the cost of production has been predicted (by CK) to be in single digits by the beginning of 2014. Production capacity will be 19,050 mt for 2014.
Here are some current prices and projected revenues for full producion:
49.1% .... 9,354 .... Cerium .................... $6 .... $56,121,300
33.2% .... 6,325 .... Lanthanum ............. $6 .... $37,947,600
12.0% .... 2,286 .... Neodymium ........... $80 .... $182,880,000
4.3% ........ 819 .... Praseodymium ..... $110 .... $90,106,500
0.8% ........ 152 .... Samarium .............. $33 .... $5,029,200
0.1% ......... 19 .... Europium ............. $1100 .... $20,955,000
0.2% ......... 38 .... Gadolinium ............ $132 .... 5,029,200
The total is almost $400 million. At $10 ker kg cost, they will have operational costs of $190 million. If they drop to their target of $7 per kg they will have proportional operating costs of $133 million. The business plan depends on them locating customers and demand for all of that, and they may struggle with that in 2014. Demand will grow though.
It is important that you understand that this is ONLY Mt Pass RE oxide business. They have a great deal of other business. Silmet, Magnaquench, Alloys, Rare metals, etc.
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.
The market cap is $1.4 billion. If they are successful at getting phase 1 accomplished on schedule, this is easily a $3 billion company, and with any kind of rare earth demand, a $5 billion company. If Sorbx and the new Magnaquench formulation start gaining traction, the market cap should be higher.
And those are not even considering the dilution from shorts and the pressure of short covering. In a cycle with increasing market cap, the shorts will keep shorting and covering for losses, the whole way up.