This is a Yahoo message board. Don't take it as a barometer of investor sentiment. It is 90% garbage. Longs know the risks.
I agree about the vagueness of the answers. I posed a few rants about that after the CC. The company is in the homestretch of their business plan, and all they said was vague talk about obstacles and difficulties.
I don't really agree that the risk of bankrupt failure is as high as your warning seems to indicate. Mostly, people recognize that this stock trades heavily on the quarterly reports (a bit ridiculous, but it is what it is). That talk of obstacles, and failure to commit to even the worst end of the timeline (previously, saying second half, now saying the goal was December, and will be tough) ... that talk tells everyone to expect another several quarters of bad reports.
The loss center for the company is the Mt Pass operations. Every quarter they are running at high expense and lower revenues. They need to have the high volume low cost production that the facility and business plan call for, to move to good results.
Most of my anger has to do with the vagueness of the schedule and lack of information. It is unacceptable that they are providing only quarterly updates to the most important part of their business plan, and they are unwilling to speak with any detail, or endpoint confidence.
Project Phoenix is wildly behind schedule and over-cost. And on top of that, they won't tell us anything.
This message board is largely the playground of a few disruptive, high volume posters, who think that the content will move the market. It isn't in any way a meaningful market sentiment indicator. Of course there are passionate longs and committed shorts, and a few of them argue here. The majority have more nuanced positions, and since the content is #$%$, aren't going to read and respond.
Good for you for being successful.
But the fact you mention and accept is that the market is crooked. A great deal of it is run by investment banks. Whether thet are running an IPO for a company without earnings and hyping it, or hiding risks in exotic derivatives, the market is rigged in favor of large Wall Street, and against investors.
The entire point of a stock market is to allow capital raising, and to allow partner ownership of businesses. It is fine that you accept the risks, and think an occasional loss from a lure of fast riches is just the price of doing business. But I would encourage you to not be so blase about a system that has already taken money from you, but not yet at a level you cannot tolerate.
You are right that listening to anonymous posters on a Yahoo MB is foolish. But you are wrong when you say that the market has an acceptable level of crookedness, because you are still making money. No level of crookedness is acceptable. Yes, we all are personally responsible for our risks. If you bought Enron ... just your risk, fraud happens. If you bought Twitter, just your risk, controlled hype by large players happens. If you listened to a news story and invested, your risk, dishonest reporting is the way of the world.
I am not so sanguine about the market. I think it is bad and getting worse. At some point buying stocks will be worse than buying a used car at a small crooked car lot. That beautiful car, driven on Sunday, by a little old lady, will turn out to be the million-mile hoopty, which was in a river for a week. Your ability to make money gets diminished by people giving up on the chance at an honest market.
I'm still holding. I didn't see a reason to make me react with the speed it would have taken to avoid the haircut after the quarterly report. Anybody would prefer to have sold at the higher price, even if they like having a long stock position.
I don't have a stop-sale price. I generally think stops are just a way to lose money, more often guaranteeing a loss, rather than protecting. Stock prices have a way of random walking thru any tight stop, causing a sale at a temporary minimum. So I try to digest the news and make informed decisions. The speed of the market is faster than me.
I don't have the general CEO worship mentality of most investors, who need to believe in the magic of the management. I believe that businesses should be understandable enough to be run by monkeys, because that will be the case sooner or later. Mines are especially simple, and mining management tends to match that simplicity. It really isn't some crazy difficult thing. We love to think the processing is wildly high tech, but miners have been mining for THOUSANDS of years. Rare earth isolation is a bit more excruciating chemistry, but it is still just repetitively taking dirt and running the same process over and over.
I think the business case is still strong. The ore is good enough, and the processing technology is nowhere near as difficult as generally believed. The high cost is a mixed situation: it sucks to be the owners of a business that needed and spent way more money than originally expected, but it is a true barrier to entry.
I think that management is adequate to the task of telling the engineers to de-bug and ramp up the facility. They may not understand the nuances ... they certainly don't communicate that understanding. But the CEO and management need to be responsible for the business strategy, not the details. They need to evaluate the high level plan. I think that the most important skill we need in a CEO right now is a product salesman. Customer schmoozing, etc.
I'm not happy with the delays and the lack of communication from management. I am more unhappy that the market moved wildly against me.
I still click thru to this MB most days, but don't click thru to threads very often. Maybe one or two. There is not a lot of content that is worth reading. I used to like the Yahoo MB's but they are easily rendered useless by the useless posts. The threads with the cut-and-paste repetition are easily identified and ignored, but they defeat communication, simply the volume prevents any real discussion from happening. These boards ALWAYS have a high percent of useless posts, but that percentage is now above my own tolerance level.
MCP's business is fairly simple. The path to success is easy to understand: they have to move Mt Pass to a profitable operation. They plan to do that by operating at a higher run rate with lower costs. If they can move Mt Pass operations to profitable, the company will be profitable. I still think that the most probable outcome is to achieve that Mt Pass transition to profitable, without any further access of capital for burning in startup.
Q2 won't be any great quarter. April was 520 mt of Mt Pass production. If the average per month grows, they will still be under the 1000 mt per month that they have identified as nearing the economic break even, for the entire quarter. The magnet sales have been so much weaker these last 2 quarters that you have to assume they are losing customers, rather than acquiring customers. They made money, but not with the growth we want to see.
The market is pricing in the expectations of more quarters with more cash burn, and a higher chance at needing more cash to fund the cash burn during ramp up. I still add up the numbers that they should have enough cash on hand to fund the burn.
No. That is not correct. Many brokerages do not allow accounts to short stocks below certain thresholds. But the market does not have that as a rule. If you can borrow shares, you can sell them short.
"The WTO decision does not change the strategy, just the means at China's disposal," said David Abraham, an independent resource analyst.
"The tools of the day are now taxes, exchanges and regulations to consolidate companies into a few champions."
"So I think they're looking at what they need to do in the long-term to take what was once an export tariff and turn it into a resource tax so the net result is positive."
That is what I consider likely. They can abide by the decision, and still have achieve the same policy objectives, just using different tax tools, along with the control they can exert over producers and consumers of RE's in China.
As an example ... China cannot have a 100 ton supply and a 10 ton export quota. But they can limit the operating license of the supplier to 100 tons, and they can order a 90 ton per year contract with a few internal consumers. Th net effect is that there are still only 10 tons free for export. They can impose a uniform $10 resource tax on all 100 tons. And then give an unrelated tax break equal to $10 per ton, to the Chinese companies consuming RE's. The de facto tax is $10 on exports.
Remember that the Chinese government has authoritarian power (25 years from 1989 Tiananman Square crackdown). They allow capitalism, as a compromise, but can still impose on the companies in the economy. The communist party had driven China to abject poverty, and they realized they needed to allow economic freedom, but they retain absolute political power. It is a weird system. And it needs to be considered in evaluating the effects of the WTO decision.
There is a new SEC filing on Molycorp's investor page. The RCF shares have been selling at a fast pace and they are down to a 4.4% of the company. I haven't looked at the numbers well enough to know if they are at their target share holding or not. But FYI, it is there ...
IMO your confusion is a result of the situation being confusing. There is no real info on the objectives of the Carlyle/Bacon acquisition, or what they plan to do in the future. It could all be a bunch of rearranging of shares across different shell companies that are also rearranging. That sort of thing is intended to be opaque. This new SEC filing showed up, and it really doesn't tell me anything, and it looks like almost everyone has more questions.
The simplest explanation is that the shares were sold into the market because they prefer to have cash money instead of an investment in MCP. That hurts our feelings as long investors, but that is also what makes a market. But it also could be some shares were sold by an arrangement, and not in the market. That still represents a preference on the part of the seller for cash money over an investment in MCP, but then at least we have a sense that there were equally interested "big money" interests that think like us.
I wish there was more transparency, but these are shell companies ... "Cayman Islands exempted limited partnership" etc. They are moving money and shares around and I have no idea how or why. Expect to be confused. That is the intent.
I have no idea what form 13D filing vs forms 3 or 4 means or indicates.
Wikipedia: Schedule 13D is an SEC filing that must be submitted to the US Securities and Exchange Commission within 10 days, by anyone who acquires beneficial ownership of more than 5% of any class of publicly traded securities in a public company. A filer must promptly update its Schedule 13D filing to reflect any material change in the facts disclosed, including, among other things, the acquisition or disposition of 1% or more of the class of securities that are the subject of the filing.
They changed by disposition of more than 1%. How they did so remains a mystery to me. If the 13D tells you something ... share it. I posted that the filing was there and that it was opaque to me. Given that lack of info, I proposed simple explanations. Certainly I am more comfortable with the parts of my posts that are "I don't know" than the parts that are "maybe" ... you seem to know something, so share it.
I'm just reading the filing for what RCF did. As you say "for the record Ross Bhappu is in fact a key insider on MCP he also was a founding member of RCF" ... oh hey, that is what I sad on the SA MB
I have no idea about these forms ... I merely saw a new SEC filing on Molycorp's website. I can see that n form 4 has been filed ... so what? There is a form 13D filed by a company with a key insider as part of the group.
And there is no "trenches". Nor am I in one with you. I'm just a guy with some stock who likes to talk about the company. And for someone whose advice is for me to do my due diligence ... cut the #$%$. If you know something post it. Otherwise I and everyone else can see clearly you are just making stuff up.
I've said several times that I don't have facts on this. You've said several times that it is clear. So: Who sold? What did they sell? Who did they sell to? How did they sell it?
And remember your answer cannot involve an open market, individual insiders obligated to file different forms ... and of course your answer has to support your long position (because everything that happens, is a supporting argument ... there has not been a thing that didn't make you love MCP more).
I don't expect an answer BTW. You can just post another personal attack and I'll let you have that last post.
I agree with you. There are many reasons to sell. They didn't provide one.
It is always better to have buying rather than selling. Other than that I don't have any reason to have an opinion. I think they want money to invest in some other venture more than they want to invest in MCP. I hope they are wrong. No one is always right (even though many anonymous posters claim to always be right).
The only correction I would offer is that I think they DID sell some at the lockup expiration. You would have to go back to that time and read the filings, but my recollection is that they sold some. That was at $50 per share.
I would have to look at that set of notes again, but my recollection is that to pay them early, you pay the unpaid interest. That information is out there ... read thru the filings. Generally the terms of early repayment are not left out of the contract.
On the other hand though, the notes are currently trading in the secondary market. It might be that there is a way to buy them and then that effectively pays them early. They are trading at a slight discount IIRC.
The lower interest rate debt that is in secondary position on default was trading at under 75-cents on the dollar after it rose (putatively due to Lynas) recently.
I think selling stock for the purpose of paying debt is not smart right now. While I think they are close to turing the corner operationally, that is still the hurdle they have to clear. Any delays, any unexpected RE market swings, any emergency ... those need cash reserves. And the cash reserves are adequate, but not so great that you would take $300 million cash and pay debt. Currently, I think they are intent on not issuing more stock, but are keeping it as an option.
Things to consider:
Q1 results were terrible, but Q1 has been the worst volume every year, which has always been attributed to the Chinese holiday schedule.
April production volume at the new Mt Pass processor was 520 mt.
They've pointed to 1000 mt per month as being about a break even volume. The costs at that volume should be near the price.
The ultimate phase 1 output target is about 2000 mt per month, which is higher than the original design, but includes concentrates sent abroad (internal sales).
RE prices for neodymium and praseodymium are increasing. There is considerable speculation that prices have generally bottomed. China is currently floating different export quota/tax replacement options.
Wind power installation dropped in 2013 in the US, although globally increased (by 35,467 MW). That increase looks like it was lower than prior years, and it looks like installations will pick up again. The magnets in wind turbines are lage, and wind is a significant predictor of neodymium. Politics of Mid East oil get worse all the time. All-of-the-above, including fracking and wind power is important.
Unfortunately Molycorp is incredibly opaque about the progress at Mt Pass. I can make a compelling argument that magnet demand increasing, leads to neodymium and praseodymium demand increasing, leading to higher prices and financial success. But it all depends on the actual operational performance of the new processing facility. And that was over budget and behind schedule and they don't like to talk about it (even in planned facility tours).
Currently you have to assume they are expecting to hit capacity production in December. That number is between 1650 and 2000 mt per month depending on concentrate. 520 mt in April to 1650 mt in December is an increase of 1130 mt over 7 months ... about 160 mt per month ramp. That means 680 in May, 840 in June, 1000 in July. A purely linear ramp would get them to near break even within Q3 or Q4. Unfortunately, we probably won't hear anything until early July when they report Q2.
I've emailed and asked for the release of the May operation/production level ... no response of course. I'll email again when June passes. It can't hurt to do that.
If they can increase the facility output in a timely manner, and the prices remain solid (and they have been rock solid for a while now), then they should be able to make it without any more stock offerings. Of course the track record for Molycorp's timeliness is rather bad, but at some point even the slowest turtle finishes the race.
The other reason is that they already had one SEC investigation for their information flow practices ... probably unpleasant. The legal advice that follows is always that you can't be held responsible for what you don't say. I think they've gotten more opaque since then.
Is there something in the news? I remember Molycorp had a $150 million claim against an engineering company ... not billions by any stretch, but still if there was a judgement to award 60% ... that would be real money ... $90 million.
I've googled and see nothing.
The RE price will obviously respond to the RE supply and demand. If wind power installations move from the 35k MW of 2013 back to the 45k MW of 2012 (and projections are they will, then the additional supply from Molycorp is dwarfed by the additional demand from wind turbine manufacturers. You have to take the market they sell into as an important factor in any financial pseudo-analysis. You rare include any demand growth, and over estimate the supply growth issues.
Obviously the relative in-elasticity or elasticity of the demand curve is a critically important factor that is unknown. Merely pointing to the increase in supply does not actually tell anything. If the demand curve is HIGHLY elastic (ie nearly flat) then the new price equilibrium after introducing new supply is barely changed. If the demand curve is highly inelastic (ie nearly vertical) then a small change in supply will wildly change the price.
Your analysis has the benefit of sounding like common sense, but it leaves out so much as to be relatively useless. Yes, common sense tells us increased supply generally leads to lower prices (although nothing of the magnitude of the response). Common sense also tells us that decreased demand leads to a lower price (what we've seen last year). Market forces are important, but don't neglect the general market force of an improving world economy, and the specifics of the RE demand markets.
The funny thing is that it took Moody's this long since the dismal Q1 report to add up the numbers and listen to the CC about delays, and to conclude the situation was a little worse. The stock market figures that out in a day, and the bond market (I don't know) probably had the same speed.
Moody's is telling us what we already know: Molycorp lost money in Q1 and made it clear that progress was slower than the had previously stated.
Since the news of a settlement with M&K Engineering caused me to look at the 11-5-2012 PR, I will excerpt the most painful sentence:
"Those defects will not impact the timing of the Company’s plans to ramp up production at its Mountain Pass facility, Mr. Ashburn said, and the Company still expects to achieve full Phase 1 production rates by the end of the current quarter as previously announced."
You can't spin the failure to meet the schedule. It is the failure that is behind every other bit of bad news. Over budget and behind schedule. Moody's seems determined to show that they can move with the same glacial pace with their ratings.
Looks like Moody's now has an understanding of the Q1 report and CC. You know, the one that caused the market to drop the stock price 30% in after hours trading a few minutes later. I'm guessing bond prices on the Molycorp notes dropped in the same time frame.
We knew as soon as they said that they are having trouble with the ramp up that it was bad news. As soon as they reported low, low revenues, we knew that the financial situation was now incrementally worse.
Anyone looking at this rating change and thinking it is news is missing the glacial pace of bond ratings agencies.