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Molycorp, Inc. Message Board

votingmachine 309 posts  |  Last Activity: Oct 27, 2014 10:36 AM Member since: May 12, 2004
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  • votingmachine votingmachine Apr 30, 2014 9:36 AM Flag

    Lynas also put their Q1 "report" up on their website. The most pertinent thing to know is the cash burn. The had Au$74.7 million on Jan 1. The had Au$23.4 million on March 31. The cash burn was Au$50 million for Q1.

    For MCP purposes here are the main REO prices that we will see in the Mt Pass revenues:
    REO . . . . . . . . . . . . . . . . . . Q4-2013 . . . . . . . Q1-2013
    Lanthanum oxide . . . . . . . . . 4.28 . . . . . . . . . . . 3.65
    Cerium Oxide . . . . . . . . . . . . 4.25 . . . . . . . . . . . 3.59
    Neodymium oxide . . . . . . . . 54.49 . . . . . . . . . . 51.33
    Praseodymium oxide . . . . . . 95.10 . . . . . . . . . 94.60

    For MCP that would be a market basket of about $12.5 to $13, which is a little higher than they have seen in REO net ASP.

  • votingmachine votingmachine Apr 30, 2014 9:53 AM Flag

    Lynas is future competition. At the moment they are not. They sold 751 tons of REO's in Q1-2014, their record level. The RE market is large enough that Lynas is not yet supplying a very significant amoun. But when they are at full production levels, yes that supply is significant competition.

    To be fair ... Molycorp is not selling that much more REO than Lynas. We just have significant sales in other sectors, such as magnets and alloys.

    Lynas has a cash problem. It has been pretty obviously imminent and no one knows how they will solve it. With only Au$23.4 million as of March 31st (one month ago), they are close to insolvent now. In Q1, they burned cash at about $17 million per month. They probably have under $10 million on hand and a lot of bills to pay.

    The most favorable short term outcome for MCP shareholders is if Lynas shuts down while they figure out how to get money for the payroll and chemicals they need while ramping up. It was just 751 mt but that is still 751 mt of demand that has to move to other sources such as Molycorp. I am loath to wish ill on others for my own benefit, but the reality is that Molycorp should benefit from Lynas woe. I would much rather see a rising tide that lifts all boats than a lake with a diminishing water level but another boat that sank. Sure the last buggy whip makers benefited as others went out of business, but that is not a sustainable growth.

    I am very curious what the financial deal will be. And I hope that MCP management sees the Lynas crisis and takes it as a serious warning that the time is NOW to get the company into a positive financial state. They cannot afford to slip on the schedule for turning the corner, and they really would be best off if they exceed that schedule.

  • votingmachine by votingmachine Apr 30, 2014 10:00 AM Flag

    How does the cost of commissioning the Chlor-Alkali facility get accounted? Is that a cash cost that adds to the Mt Pass operations or is it a capital cost, that buys an asset? I assume the costs go into the cost of production for Q1, but I'm not certain on that.

    The money gets spent either way, and of course the number is important for cash conservation/burn purposes, but the accounting affects the size of the loss-per-share.

  • votingmachine votingmachine Apr 30, 2014 10:45 AM Flag

    Clearly. But converting at $1.25 per share is a HUGE loss. Better for them to figure a way to salvage by "averaging down" If they renegotiate and put up another $100 million, and get a conversion rate re-negotiated for the total $325 bond that is closer to market value, then they are at a better position. Currently they are paid a coupon of 2.75%, which is bad, and expect a repayment of 180 million shares of stock worth under $30 million.

    If they loaned $100 million, and were given some bankruptcy priority (due to the bond position), and had a long term conversion into 1180 million shares (the new debt converting at $0.10 per share) ... that almost is a better gamble than trying to get $225 million from a bankruptcy liquidation.

    If I had a $225 million bond that converted to 180 million shares of Lynas, I would not convert, I would be hoping to get out with only a 50% loss rather than a 90% loss. So maybe they have a plan to ask for immediate access to 700 million shares of common (they sell for $100 million), and they turn the bonds in now, saving the next 2 years of coupon ($6 million per year). Lynas would certainly look better with $225 debt removed from the books ... they might even be able to borrow $225 million at higher interest rate, or at higher conversion.

    So converting is not an obvious advantage, but getting the debt off the books helps, and it is also possible that Mt Kellett might want to try a longer term, higher return bet.

    There are multiple schemes of arrangement that might be mutually advantageous.

  • Reply to

    Commissioning Cost Question

    by votingmachine Apr 30, 2014 10:00 AM
    votingmachine votingmachine Apr 30, 2014 10:59 AM Flag

    That makes sense. The tax break is still there anyway as they later depreciate the facility, which would have that commissioning CapEx as part of the asset value.

    Agreed. It is not a meaningful number ... the bottom line number gets obscured by looking at loss-per-share, when there are so many oddities in taxes, depreciation, inventory-write-downs, etc. The important number is the final "real cash" number. There is a part of all of us that wants to see a "beat" of the expectations. But those expectations are for a non-GAAP sort of number anyway, where the oddities get re-arranged. For that the commissioning would be excluded either way. As CapEx it is separate, and as commissioning it is a one-time event.

    Thanks both. That clears it up enough for me.

  • votingmachine votingmachine Apr 30, 2014 11:23 AM Flag

    The inventory write-downs don't generally hurt the non-GAAP number that gets reported as the per-share result. But the magnetics and alloys side has been under-performing, and part of that has been the high cost of raw materials on the inventory side. They have worked thru that high-cost inventory now. That may either add some competitiveness to the Magnaquench pricing, or add to the margins.

    When you look at the revenues by sector using VERY rough numbers:
    . . . . . . . . . . . . . . . . Q4-2013 . . . . . . . . . Q3-2013
    REO: . . . . . . . . . . . . $11 M . . . . . . . . . . . . $14 M
    Chem&Ox . . . . . . . . $55 M . . . . . . . . . . . . $58 M
    Mag/Alloy . . . . . . . . $59 M . . . . . . . . . . . . $73 M
    Rare Metal . . . . . . . $15 M . . . . . . . . . . . . $21 M

    The sector which has shown occasional profits is the Mag/Alloy. And if demand/volume/revenue there is higher then the entire quarter looks better. The margins there should be improving, whether the volume is higher or not. I hope they see big margin improvement, but it is more likely to be small improvement.

    Mcp2014_2020 posted that "Yantai Zhenghai Magnetic Material (ZHmag) reported its net profits rose 66.67% due to a recovery on demand for rare earth magnets from wind turbines and electric vehicles in Q1 this year."

    So who knows? IMO the only way to beat estimates for Q1 is to see a strong result in the magnets and alloys sector. That sector disappointed me in Q4 ... so don't get carried away with any optimism. It underperformed by a lot in Q4. I expected growth from the Q3 revenues and they fell back by a lot.

    One of these days we need to see the REO (read Mt Pass) revenues start to grow as they produce high volume (and hopefully no prices drop any more). That still is a bit further down the road ... certainly not in Q1 results.

    But it is possible for them to have $80 million revenues in Mag/Alloy, with $20 million profits (and $25 million in positive cash flow pre-depreciation).

  • votingmachine votingmachine Apr 30, 2014 1:37 PM Flag

    What I see in the Lynas report is a pretty big drop in cerium oxide prices. Here are the prices I quoted earlier:

    REO . . . . . . . . . . . . . . . . . . Q4-2013 . . . . . . . Q1-2013
    Lanthanum oxide . . . . . . . . . 4.28 . . . . . . . . . . . 3.65
    Cerium Oxide . . . . . . . . . . . . 4.25 . . . . . . . . . . . 3.59
    Neodymium oxide . . . . . . . . 54.49 . . . . . . . . . . 51.33
    Praseodymium oxide . . . . . . 95.10 . . . . . . . . . 94.60

    I think they have a lot of cerium oxide in the inventory. They don't break down the inventory though. But the cerium oxide price is 15% lower so we should expect an inventory write-down that reflects that drop. Goodwill has been written down a lot. I don't know if there is anything left to take there.

    The neodymium and praseodymium prices have been pretty stable, praseodymium is up. So the issue of inventory as raw material for magnaquench should be a non-factor.

    They have not provided the inventory breakdown at any granular level to see what they are adding, subtracting, and where the inventory is vulnerable to losses, sitting there. I wish they did break these things down further, but they don't.

  • votingmachine votingmachine Apr 30, 2014 7:27 PM Flag

    I agree. It is surprising to see lanthanum not stabilizing at a higher price point. There seem like more uses than for cerium ... I would think higher demand and lower supply.

    I wish that Molycorp provided this info, rather than just the net ASP for REO's. I would love to know the product amounts and ASP's for the entire suite. That is just me, I love data.

  • votingmachine votingmachine Apr 30, 2014 7:38 PM Flag

    Estimates are for $144 million in revenues. I previously stuck together numbers like this:
    Resource . . . . . 1100 x $10.5 ASP = $11.6 million revenues, $50 million loss, ($11 million d&a)
    Oxides . . . . . . . 1800 x $31.5 ASP = $56.7 million revenues, $5 million loss, ($6 million d&a)
    Mag+Alloy . . . . 1400 x $44 ASP = $61.6 million revenues, breakeven, ($7 million d&a)
    Rare Metal . . . . . 75 x $200 ASP = $15 million revenues, $5 million loss, ($2 million d&a)

    Essentially that is a $35 million ops loss (excluding the depreciation and amortization). With $15 million interest paid the cash would drop from $314 million to $249 million.

    But if they were to get good numbers in the Mag+Alloy sector, if $80 million, with a $20 million profit ... that would suddenly boost the revenues to $162 million, and after removing the depreciation and amortization, the net ops loss would be $15 million (and with the interest that would be a $30 million cash burn. That $30 million (non-GAAP number) is about a $0.125 per share loss, which would blow out the expectations.

    The safe bet is that the hit the numbers, but if you are trying to look for a surprise beat, the place to look is the Mag+Alloy segment.

  • Reply to

    Rare Earth Zombies

    by votingmachine Apr 24, 2014 9:06 AM
    votingmachine votingmachine Apr 30, 2014 7:42 PM Flag

    I just saw this. Thanks. The number they give sounds outrageously high for even a high market cap company. I would think a 2nd market would step in and take all those listings if it was that costly.

  • Reply to

    Rare Earth Zombies

    by votingmachine Apr 24, 2014 9:06 AM
    votingmachine votingmachine Apr 30, 2014 7:44 PM Flag

    It sounds like we will get some answers on the Lynas cash issues this week. They are nearly out of cash and it will be hard to get good terms.

  • votingmachine votingmachine May 1, 2014 8:35 AM Flag

    It is in line with prior quarter ASP's ... I think I took into account the pricing charts for the REO's, but I don't recall my method right this instant. The sell some into the China prices, which are lower. I think that if they send Nd to Neo sites in China they account for the Nd on a cost basis ... so it sells at the cost, not the market value in China. It would be incorrect to mark the price a the non-China price ... it either should be a work-in-progress material (no profit margin) or a Nd sale in the China market at the China price.

    They also have the whole LREC thing going on. Another bit of granulaity I wish they would break out. But the LREC shipped to China has to be marked at a very low ASP. Shipping ore/concentrate to Silmet presents another price question. Mixed heavy rare earth that is not processed at Mt Pass is still another ASP question that I usually completely ignore.

    Some of the granularity of product mix and shipping to inside company, inside China, outside China, may get covered at investor day.

  • Reply to

    No news yet.

    by contraryj May 1, 2014 7:55 AM
    votingmachine votingmachine May 1, 2014 9:06 AM Flag

    I think they had more than 6 weeks cash, although obviously it is time for extreme measures now. The cash burn in Q1 had a large ($10 million IIRC) interest payment. So the burn from ops would be about $13 million per month, and they had almost $24 million. I agree that they are looking at the cash things you mention ... postponing payments/purchases, getting advances on sales, temporary idling/layoffs in Oz, and missing the payroll in spots.

    Most companies have forecasts/orders they will sell into in the quarter, and monthly times. And they have an aggressive forecast for production. I think the cash burn in Q1 was larger than expected and it makes it likely that they don't hit positive cash flow before running out of cash. But I think they could stretch the cash on hand a bit further than 6 weeks.

    But realistically, you can't cut it so close that one day you have no cash in the cash box, and the next day you make your first dollar. Something going wrong then precipitates failure. They are at a cash position that is already too close ... if someone tested a shipment and returned it for credit, or withheld payment pending further QC testing ... that kind of ordinary friction has to be covered.

    The issues I see are that new debt can't be done, without the consent of existing debt. A share offering is unwelcome at the market price/market cap. A negotiation with existing debt for more debt at loan-shark terms is the most likely path ... depending on if they think the loan-shark terms are going to be met (lead to value), or whether they think the best option is to allow bankruptcy.

  • Reply to

    A good time for Lynas to slow or stop

    by monetizeall May 1, 2014 9:16 AM
    votingmachine votingmachine May 1, 2014 11:48 AM Flag

    Not really comparable situations. Lynas is in a cash crisis. Molycorp is still losing money, but is not nearing a cash crisis. Molycorp ended 2013 with $314 million. Lynas ended 2013 with $74 million.

    Both are at the end of the construction road and are at the put up or shut up point where they have to run the business they designed and built. Lynas has an additional cash problem where they are out of money at the time they are still ramping the new business up. Molycorp is ramping up with a cash cushion.

    Molycorp of course, still needs to "show me the money". They are done building and beginning to operate the business they claimed would be low cost and decent margins. I see that there is no cash burn issue with Molycorp. They could burn it all and fail, but that is a general failure, not a point failure.

    IMO, there is a critical difference between a failure of the business plan and a failure due to a critical moment. I am reminded of the story (probably apocryphal) of FedEx. I have heard that the business hit a cash wall early on, and the founder took the last $5000 cash to Vegas and won $32,000, keeping the business afloat. Obviously FedEx has a good business plan and a good business. But equally true, it could have had that "point failure" of cash shortage kill it. Lynas is at that sort of moment. Molycorp is sufficiently funded to cover cash burn while they begin to execute.

    MCP has analysts predicting they will lose $0.62 per share in 2014. With 240 million shares that is a loss of about $150 million. Which is much less than the $314 million they ended 2013 with. Analysts expect 2015 to be break even. The FedEx story went on ... FedEx grew from that small company in the 70's to today's $30 billion company. We will see with Molycorp if they can turn the corner and grow. But it seems pretty obvious to me that they have a cash cushion sufficient to test that, while Lynas does not.

  • Reply to

    $40 million capital raise

    by monetizeall May 1, 2014 10:44 PM
    votingmachine votingmachine May 2, 2014 9:27 AM Flag

    If they raise $40 million by stock sales they keep the $40 million. The deal described is stock. They have to be thinking they can get to a breakeven operation soon, if they are talking of raising $40 million. They had $73 million at the start of the year and have $23 million now. If they were losing $12 million per month in March, and see that shrinking each month, they could be hoping to get to a positive operational result quickly, and then do another quick offering to cover the $35 million debt payment.

    Say they lost $10 million in April, $7 million in May, $4 million in June, and $1 million in July, with August on path to a profit. They pre-announce on July 1st the Q2 numbers. Then at the report they show they progression, and state they are operating at breakeven currently. Then they probably could do a larger stock sale. They would basically burn the entire current $23 million, but have the $40 million on hand. That covers the September interest and they should be able to access the markets for the $45 million they need next spring.

    That is all VERY optimistic conjecture, but it sounds more like a stock sale being planned. And a small one. So they must be hoping for a better day later.

    I can see your analysis of the end state operations in the best case as sensible, which means that although they can shrink the operational losses, the final numbers don't grow to anything very impressive.

  • Reply to

    $40 million capital raise for Lynas

    by monetizeall May 1, 2014 11:48 PM
    votingmachine votingmachine May 3, 2014 4:40 PM Flag

    Molymet owns MCP stock. What they own is the same thing as every other long, a portion of Molycorp. That is far different from a partnership in the Mt Pass mine.

    The revenues are typically divided into 4 market segments. And the resource segment has been the smallest part of the revenues. Just read the quarterly reports. They also have said that while they are losing money on the resource sales, they will not be pursuing additional volume. As long as they were operating the legacy facility, and the incomplete Project Phoenix, they were operating at a negative margin on the resource side, at Mt Pass mine. Now they have finished Project Phoenix. The finished Project Phoenix generates a positive margin, at the target production levels and costs.

    The coming report will be a loss, and the loss will largely be driven by the large losses at Mt Pass ... same as the last several reports. The question is whether Molycorp can deliver on the cost and production goals, now that the entirety of Project Phoenix is complete, and the final CHlor-Alkali commissioned 2 months ago.

  • Reply to

    Trading hault or suspension. From DY board.

    by contraryj May 5, 2014 12:42 PM
    votingmachine votingmachine May 5, 2014 2:30 PM Flag

    The longer this takes the more it looks like an emergency halt, and not just a delay while they prepare a package of news and deals for the market to digest. The initial halt made me think they have a plan in place and are just going to rip some band-aid off, but at least it will be done. Now as time creeps by you have to begin to think they DON'T have anything settled, but are in a tighter cash situation than expected.

    It is a long halt. And it is going to lead to speculation on everyone's part. There is money to be made in a rescue from near bankruptcy, and money to be made in bankruptcy. I took a very small position in SIRI when there was a believable rumor that they had a White Knight, that rumor turned out to be true. It could have gone bankrupt, it didn't. My only regret is that I sold long ago. Certainly keep an ear peeled for any rumors. At the moment ... anything can happen.

    For anyone with a losing position. Siri was as low as $0.08 when they were going bankrupt. SIRI traded as high as $4.18 last year and is $3.20 right now. I am the all time idiot, because I traded in and out, and when I finally traded completely out, I had over 220,000 shares. AGGHH. Just typing that makes me want to kick myself. But hey ... you just never know.

  • Reply to

    Trading hault or suspension. From DY board.

    by contraryj May 5, 2014 12:42 PM
    votingmachine votingmachine May 5, 2014 4:56 PM Flag

    As time slips away, you have to think here isn't a deal in place, but that they are winging it, and that it must be desperation time.

    There is nothing to make me buy, but I do admit that with the right deal, I might see an opportunity. Right now, it looks like stockholders are more likely to own all-of-nothing, and the question is if that switches, and they own part-of-something. In the case of SIRI, 40% ownership of the company went to the White Knight. But 60% of an adequately funded business was an acceptable proposition for shareholders ... especially when the alternative had looked like a forfeiture and seizure by the guy who had been buying the debt up and was pushing for failure.

    I am very skeptical of the situation. This no longer looks like a halt while they work out the last details on a deal that was difficult to keep secret. I don't see any rumors at all.

  • votingmachine by votingmachine May 6, 2014 12:04 PM Flag

    I notice that the volume for the last 6 days (not including today is low. The average volume is falling. Going back to April 5th (about a month ago) only 5 days of 20 market days have been over 4 million shares volume.

    Volume will pick up with the news events coming up. MCP stock has sold off back to near the all time lows. Th last reported short interest was 65,456,472, for trades settling by 4-15.

    I sure hope that Molycorp beats and then has a good show at the analyst day. The shorts need to start feeling some pain rather than playing on the Yahoo MB, while running the stock down.

    This stock is crazy good value here. It has fallen as though they are going to announce just awful results, and have nothing positive to say about the future.

  • Reply to

    Should see 3.25 after earnings

    by silverfin226 May 6, 2014 10:56 AM
    votingmachine votingmachine May 6, 2014 12:06 PM Flag

    That would be absurd. 30% lower than the current price, which is a dime off the all time lows? Get real. Molycorp hasn't had any good news at quarterly reports for a long time and it is pretty clear the market is pricing in a big miss.

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