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Molycorp, Inc. Message Board

votingmachine 81 posts  |  Last Activity: Dec 12, 2014 9:47 AM Member since: May 12, 2004
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  • Reply to

    Q3 Estimate

    by votingmachine Oct 20, 2014 11:39 AM
    votingmachine votingmachine Oct 20, 2014 7:35 PM Flag

    FWIW, the Bloomberg's estimate is for a net of $504 million in revenues in 2014 and for $694 million revenues in 2015, based on 6 analyst estimates. Basically, they expect more volume.

  • Reply to

    Q3 Estimate

    by votingmachine Oct 20, 2014 11:39 AM
    votingmachine votingmachine Oct 20, 2014 7:20 PM Flag

    I think they are in the right range. My number was about the same. The problem has been that Molycorp has seen such low volumes and such low revenues in recent quarters. A year ago, Q3 2013, had revenues of $149 M. Revenues keep dropping and volume hasn't grown. They need to increase magnaquench sales volume. It has been sliding and it should be much higher. If they can increase that sales volume, that is a huge revenue generator.

    I think the expectations are basically for another quarter like Q2. Molycorp was producing at low levels in Q2, and they were limited by the leach process. That expansion of the leach process was not at all a factor in Q3. The announcement of the leach expansion tells us that they were not operating any higher than the Q2 production rates.

    Unless they surprise from another segment, the results will be similar to Q2. Slightly lower ASP's but they should be able to hod the revenues about the same. I increased Magnaquench in my estimate, but that is just a guess.

    Since there are about 225 million shares, a change of $2.25 million in the net moves the EPS by a penny. I could easily be off. If the consensus is about for a loss of $0.25, then the non-GAAP number has to net around ($56 M). I came up with ($47 M). But that is not that big a difference. And I might be a bit optimistic ...

  • Reply to

    Q3 Estimate

    by votingmachine Oct 20, 2014 11:39 AM
    votingmachine votingmachine Oct 20, 2014 2:11 PM Flag

    Obviously, the main news events from the quarter were positive. They closed on a financing line that insures they are adequately funded. They completed a leach system expansion that will handle more mass throughput at Mt Pass.

    The best scenario is that they report the leach expansion has allowed them to ramp much higher, much faster than expected, and that they now feel confident they will hit full production in December or January. They report that chlor-alkali wastewater recycling is behaving and will be phased in. They announce that chemicals will be bought for another quarter, but that the self-sourcing with Chlor-alkali is ramping, and will be at full acid production in Q1. Delayed relative to the rest of the plant, but not by much.

    And I hope that they once again confirm the target costs as realistic.

    It is a waiting game. MCP has to complete their production plan, and have the output and cost at the plant targets. And the RE market has to keep growing, to absorb the new production, and see some prices once again increase.

    I know they don't like to forecast on China and Lynas, but it would be interesting to hear any perspective on what they expect from those quarters in the next year.

  • Reply to

    Q3 Estimate

    by votingmachine Oct 20, 2014 11:39 AM
    votingmachine votingmachine Oct 20, 2014 2:02 PM Flag

    The big cash loser is the Mt Pass operations. It is definitely what they need to fix. But the fix is to get production rates up to the target, reducing the fixed cost per kg, and get the plant optimized to the target cost per kg.

    The expanded leach system was a big problem. It will be interesting to see what the early effects of that are. The announcement states:
    "... the expanded Leach system at its Mountain Pass, California Facility has been placed into service and is expected to mitigate a major production bottleneck at the facility and facilitate greater rare earth production once it is fully operational."

    That was announced September 30th. So this month, they are now getting that expansion into service and expanding production. It will be most interesting to hear the CC when they talk about the exact status of the ramp up. If they legitimately eliminated a major bottleneck, then they should be seeing the production increasing.

    I don't see a long slow death for MCP. I see that the Mt Pass operations will eventually make some money. If they can get that segment profitable, then the company should survive.

    I will believe in increased sales when they report increased sales. They usually have been cautiously optimistic about future business conditions. They frequently see an uptick in their order book at the CC. That is probably just ordinary quarterly fluctuations ... customers don't buy at the end of the prior quarter, to make their own books look good, and then the start of the next quarter has some extra orders.

  • Reply to

    Q3 Estimate

    by votingmachine Oct 20, 2014 11:39 AM
    votingmachine votingmachine Oct 20, 2014 11:52 AM Flag

    The report will probably be in early November. I'll re-visit my numbers and see if I can find some mistakes or where I find issues.

  • Reply to

    Q3 Estimate

    by votingmachine Oct 20, 2014 11:39 AM
    votingmachine votingmachine Oct 20, 2014 11:50 AM Flag

    Big picture: ...... GAAP ...... Non-GAAP
    Revenue ......... $130 M ...... $130 M
    Costs .............. $115 M ....... $115 M
    Dep+ .............. ($20 M) ....... $0

    Net Ops .......... ($5 M) ........ $15 M

    SG&A ............ ($22 M) ...... ($22 M)
    Dep+ .............. ($8 M) ......... $0
    R&D ............... ($5 M) ......... ($5 M)

    Op. Loss ....... ($40 M) ....... ($12 M)

    Interest ......... ($35 M) ........ ($35 M)
    Tax Credit ..... $7 M ............. $0

    NET ............. (-68 M) .......... ($47 M)
    225 M shares: ($0.30) ......... ($0.21)

    I see room for magnetics to be better than expected. But the general production levels should be similar to Q2 and prices will be slightly lower. Magnetics prices should be similar to Q2. Rare metals are always entirely dependent on the product mix.

    The biggest thing to me will be the CC and the discussion of the new leach systems and what the current Mt Pass production rate is, and when it will be at capacity. I want to hear the latest on the Chlor Alkali processing ... how it is working, and what needs to be accomplished.

    The cash situation will be better as they can access the new credit. Discussion of the Magnaquench market now that patents have expired will help guess at the future market dynamics there. Since they always seem to see signs of the market demand stabilizing, orders improving, etc, we can expect that again. At this point I need to see volume increases, not just the idea that magnet demand is expected to be solid and customer inventory, blah, blah, blah.

  • votingmachine by votingmachine Oct 20, 2014 11:39 AM Flag

    First, here are the analyst estimates as collected by different sites:
    Yahoo: ($0.25) per share, $124 M revenues
    Bloombergs: (($0.29) per share, $125 M revenues
    Nasdaq: ($0.23) per share
    Marketwatch: ($0.21) per share

    Here are Segment Q2 basics and a guess at Q3:
    Resource Segment: .... Q2 ............... Q3
    Amount ................... 974 mt ......... 1200 mt
    ASP ......................... $10 ................ $9
    Revenue ................ $10 M ........... $11 M
    Depreciation+ ........ ($17 M) ......... ($17 M)
    Net ........................ ($47.3 M) ....... ($45 M)
    OIBDA .................. ($30..3 M) ...... ($28 M)

    Chem&Ox Segment: .... Q2 ............... Q3
    Amount ................... 1582 mt ......... 1600 mt
    ASP ......................... $31 ................ $28
    Revenue ................ $48.6 M ........... $45 M
    Depreciation+ ........ ($3.9 M) ......... ($4 M)
    Net ........................... $0.9 M ............ $1 M
    OIBDA ...................... $4.8 M ............ $5 M

    Mag&Alloy Segment: .... Q2 ............... Q3
    Amount ................... 1383 mt ......... 1600 mt
    ASP ......................... $39 ................ $39
    Revenue ................ $54.3 M ........... $58.5 M
    Depreciation+ ........ ($4.3 M) ......... ($4.5 M)
    Net ........................... $7.6M ............ $8.5 M
    OIBDA ................... $11.8 M ........... $14 M

    Rare Met. Segment: .... Q2 ............... Q3
    Amount ....................... 79 mt ......... 90 mt
    ASP ........................... $202 ................ $200
    Revenue ................... $15.9 M ........... $18 M
    Depreciation+ ........... ($2.1 M) ......... ($2 M)
    Net ........................... ($1.4 M) ......... $1 M
    OIBDA ....................... $0.7 M ............ $3 M

  • Reply to

    Conference Call and Cerium Inventory

    by cagedbull79 Oct 16, 2014 6:11 PM
    votingmachine votingmachine Oct 19, 2014 11:55 PM Flag

    The phosphate removal is certainly dispensable. My impression is that it allows slightly less chlorine. You can have nutrients (including phosphate) and microbicide (generally chlorine) at high levels or you can lower nutrients and lower the chlorine.

    Phosphate treatment using lanthanum works, and cerium also should work, and is more abundant. I have read that people over treat, but the treatment is relatively cheap.

  • Reply to

    Conference Call and Cerium Inventory

    by cagedbull79 Oct 16, 2014 6:11 PM
    votingmachine votingmachine Oct 18, 2014 1:12 PM Flag

    I did not catch the "rather confidently" part. They are not "building up" inventory. They "can't sell" production.

    There is not any reason to sugar coat the lack of cerium sales. It is what it is. If you can't accept that as a cost side, then you should make a stock decision based on that. It isn't that the cerium has a fantastic future. If cerium based magnets came along, then neodymium would no longer be somewhat scarce relative to demand. Instead, cerium would still remain plentiful relative to demand. Cerium would still sell for low prices, simply because there is so much of it.

    New uses will help. A high volume new use would be great. Permanent magnets are somewhat high volume, but the obvious fact is that there is 4 to 5-times more cerium produced than neodymium (and it may be dysprosium limiting the true output anyway).

    SorbX is much more likely to be a high volume use with a decent enough return. It won't be a product that sells for high prices, but it should still have a nice sized market, at a decent enough price. The main use that offers a technical advantage is phosphate removal from swimming pools. It doesn't take much to do that, but it is a simple treatment and is an effective one for maintaining clean pools. I've calculated it before that if about a quarter of all pools used a Phosfix (SorbX' pool name) treatment once per year, it would use the entire Mt Pass production.

    10 million USA swimming pools
    20,000 gallons per pool average
    8 pounds Phosfix per 20,000 gallons
    Thats: 80 million pounds Phosfix to treat every pool.

    I don't know how I arrived at the number, but I calculated 3.6 kg of cerium oxide in that treatment.

    So thats: 36 million kg of cerium
    or 36,000 mt of cerium.
    Which is about 4-times the amount from Mt Pass per year.

    Long term, there is a market for phosphate removal in swimming pools. The pool owners will pay the $15 per year for the Phosfix chemicals. And that is about $8 per kg of cerium oxide. That may be break even.

  • votingmachine votingmachine Oct 17, 2014 10:48 AM Flag

    Sorry, Muons, have a half life of microseconds not seconds.

  • votingmachine votingmachine Oct 17, 2014 10:40 AM Flag

    I suppose that they could be claiming a type of fusion, in which the material they have is a catalyst that in the rotating electrodes allows hydrogen to fuse to helium. That would release energy from the hydrogen-to-helium fusion, with the hydrogen from the water.

    I have a lot of confidence in predicting that is not what is happening. Direct hydrogen fusion is extremely difficult. Fusion research focuses on "heavy" hydrogen, deuterium and tritium, where the neutrons are already present. There is a muon catalyzed fusion that gets frequently revisited, but has never been close to the necessary catalytic efficiency. And muons are not just a thing you can leave lying around to add water to. They have a half-life of 2.2 seconds.

    The "cold fusion" discovery a while back turned out to be some kind of artifact that has not been repeatable.

  • votingmachine votingmachine Oct 17, 2014 12:05 AM Flag

    That fails the laws of thermodynamics.

    "After the powder is detonated, it is recycled and rehydrated, then sent back through the system to explode once again. This means the system only consumes water ..."

    Nope. If it gives off energy in the initial step then it takes energy to recycle it back to the high energy state.

    I would also point out that their estimate of power consumption is wildly off. Generally, 1 megawatt is sufficient for 200 households. So 10 megawatts would be sufficient for a grouping of 2000 households. At 4 people per household, that is a very small town of 8000.

  • Reply to

    next quarterly disaster report getting close

    by jeff_gorab Oct 15, 2014 10:45 AM
    votingmachine votingmachine Oct 15, 2014 7:47 PM Flag

    Interesting opinion:
    "There is simply nothing good happening for MCP and ..."

    I see some good. The Q3 report will be terrible, but the new leach and the potential that there is some goo to speak about is there. Who knows, maybe they are finally making progress on the ramp ...

  • Reply to

    Q Report 2043 tonnes, $31.06m sales

    by stockdude13 Oct 14, 2014 6:50 PM
    votingmachine votingmachine Oct 15, 2014 7:44 PM Flag

    I just copied a sentence from your first post into google. I tend to expect announcements on the company website ... that is where I started and didn't find it.

    If you go to the Investor Relations section of the Lynas site, and look at the "quarterly reports" tab, you can find a letter about the Q results.

    Interestingly, they paid the $10 million (US) to Sojitz on October 2nd.

    I'm not at all familiar with the ASX. But it did occur to me that you had direct quotes, and google could find it.

  • Reply to

    Q Report 2043 tonnes, $31.06m sales

    by stockdude13 Oct 14, 2014 6:50 PM
    votingmachine votingmachine Oct 15, 2014 6:57 PM Flag

    The cash on hand on on September 30th was $16.9 M. The $12 M was to hit on October 1st, so the net on October 1st would be about $28.9 M (less fees). They will pay the $10 M to Sojitz (really $12 M due to $A?) as of the 15th. That gets them back to under $20 M cash on hand.

    The summary says they estimate an increase in cash outflows in this quarter that will be offset by increased sales from the increased production.

    The net was not bad. The critical thing is raising cash by the stock offering. For the quarter they had about $10 million flow out as operational losses, and about $10 million flow out as interest expenses. They need cash soon to make it thru.

  • Reply to

    Q Report 2043 tonnes, $31.06m sales

    by stockdude13 Oct 14, 2014 6:50 PM
    votingmachine votingmachine Oct 15, 2014 9:41 AM Flag

    Where do you see the numbers ... be specific. I looked at the Lynas website and the LYC.ax ... I don't see anything.

    I did not know the $12M offering was placed already. I thought the rights offering and placement were simultaneous.

  • Reply to

    Q Report 2043 tonnes, $31.06m sales

    by stockdude13 Oct 14, 2014 6:50 PM
    votingmachine votingmachine Oct 14, 2014 7:27 PM Flag

    I was confused at first ... thought this was the results for the quarter ending on Sept 30. That should be out in the next few weeks.

    Tomorrow is the deadline to pay $10 million to Sojitz. It seems like they might or might not have that on hand. Presumably they have prioritized that cash and it is ready to be paid. The stock offering seems critical to getting more cash for operational burn. The timing is slower than they need.

  • Reply to

    Lynas raises $12m at A$.08 150m shares

    by stockdude13 Sep 28, 2014 9:44 PM
    votingmachine votingmachine Oct 14, 2014 9:27 AM Flag

    I just looked for news on Lynas ... what is the current situation with the share placement? Was it sold already? I didn't see anything.

  • Reply to

    Has anybody the full paper ??

    by papabearrhf Oct 2, 2014 11:22 AM
    votingmachine votingmachine Oct 2, 2014 12:14 PM Flag

    I can't find any old posts with the math in them. But the "Happy Meal" bond offering math did work.

    Here are the debt offerings:
    $650 million at 10%, secured ... May 2012
    $360 million convertible notes at 6% ... August 2012
    $230 million convertible notes at 3.25% ... June 2011
    $150 million convertible notes at 5.5% ... Jan 2013

    The $150 million notes convert at approximately $7.20 per share. At the time of the bond offering the share pirce was between $7.50 and $8. If you took the Molycorp loaned shares and sold 133 shares at $7.50 for every $1000 note, you essentially had loaned money for free. You either collect interest, and get back the $1000, and then cover the short for additional profit, or you convert the bond to 139 shares, use 133 to cover the short, and sell 5 for additional profit.

    They aren't called "Happy Meals" for nothing.

    If you wanted to take profits on the short position right now, you would still be ahead, even if you sold the bond in the secondary at a steep discount.

    It's just math. I make no statement/judgement about what has or has not happened. I see the value of hedging, and there was a hedge offered. It got MCP lower interest rates. It hurt long equity investors.

    I haven't read the paper you cite, I just thought about it.

  • Reply to

    Has anybody the full paper ??

    by papabearrhf Oct 2, 2014 11:22 AM
    votingmachine votingmachine Oct 2, 2014 11:49 AM Flag

    Everytime I've suggested this CB accuses me of being a short bug.

    If they set up an easy hedge position, then they get lower interest rates. There are good and bad sides to that. The big $600 million loan they borrowed was at 10%. And that was a conventional secured loan to a (assumed risky) startup. These later loans were unsecured, and at lower interest rates. You don't get lenders to buy in ... better to buy some of the 10% bonds open market than buy unsecured bonds at 5.5% (or what ever it was). So Molycorp added a stock conversion option, and loaned stock for a hedge.

    If you lend money to a company, and the company prospects get worse ... say the commodity market gets worse, then the loan is higher risk and drops in value in the secondary market, and has a higher chance of default. But if you also hedge that with a short stock position, then the drop in secondary bond market value is offset by short position profit. And the conversion feature of the bond keeps you from getting a bad haircut if the equity increases in value.

    I've gone thru the math before. You can look at the stock prices at the bond issues, and figure out how many shares to sell to hedge risk. In general, I've posted my approval of the investment decision to hedge with a large short position. That is not a popular analysis with longs.

    I'll see if I can search an old post and bump it ... at least it won't have the CB comments anymore. But any responses to those deleted comments will be lost. I'll try a search though ...

MCP
0.7726+0.0512(+7.10%)Dec 26 4:01 PMEST

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