Not really. The offering of stock at $5 was what pushed the price down "20%. over the past month". The analyst estimates are just changing to reflect the cerium outlook and the Q3 projections with the offering.
I see the failure to mention the offering as an indication of sloppiness and inaccuracy.
Just short it now. If you think $4.09 is coming, don't wait for some imaginary long position. Play your prediction and short.
What I find funny is the new commitment to team names. The Cincinnati Reds thought nothing of changing names during the McCarthy era. Better dead than red. Teams changing names is hardly critical. They currently are the Washington Redskins. I think there is ample evidence that that is offensive at some level. Just change it.
Personally I like the Washington Generals, but that might be taken.
I want to point out that you are taking the name of a sports team far too seriously. If it offends, change it. You clearly think it is insignificant offense. But if it is an offense, what does it matter about changing the name. I'm a Colts fan, and if they were to change today to the Dragons, I would still watch them, and root for the same team. It seems to b very important to the conservative crowd in particular, that the name not be changed. Somehow they have taken any cultural shift (even something as innocuous as a football team name) as a sign of the end times.
I'm not sure why the pending earnings disaster is not already priced in. They already announced the bad news. They are selling no cerium. They still see small demand in other elements. Prices suck. Q4 won't even be break even, but will be a loss.
They have to confirm that disaster with the actual details of the disaster, but I find the prediction of disaster as market news to be a bit puzzling. That news is already out there.
Bankruptcy will come if they lose every bit of money and can't pay their debts. I sill see it that they will turn the corner and make money.
The line of credit is a tough one for banks. It would not be in a primary position for recovery, but would be secondary, or even tertiary ... down the list. And the reason that the company would access it would be because they burned thru all their cash. You really have to have a high recovery scenario ... either you run the numbers and see a no-fail operation coming along, or you run the numbers and see that failure leads to a recoverable debt at a reasonable rate. But f you look at the debt and a conservative liquidation plan and see a max of 50-cents on the dollar recovery ... you almost need a 50% interest rate.
It is a catch-22 ... When they do hit a profit for a quarter they are worth lending money to, and they don't need the loan ... when they are losing money, they need a loan, but aren't worth lending to. The banks would rather buy a treasury and loan to the US government ...
I thought they would announce a fairly ridiculously high interest rate, but get a line of credit. Apparently it just didn't work that way.
The earnings are Thursday. I'm not sure how the stock could go to $6 by then. And earnings are not really as significant an event, as the preliminary range of results (very disappointing) was put in the stock offering prospectus. If you are thinking the Q3 was some great news and therefore people should be grooving up for the report ... not going to happen.
But the earnings report will have some news. There is always stuff that gets asked, stuff that gets explained, details that get clarified. There just isn't anything positive in the financial results for Q3 though.
The funny thing about that is that they appear to know absolutely nothing about the situation. The stock price has fallen. Perhaps they should have noticed the new share offering. No. They take note the price has fallen and therefore the stock is not in the same groove as the market ... ergo more downside.
The range of revenues from those projections:
730 mt at $16 ...... $117 million
1360 mt at $39 .... $53 million
1480 mt at $38 .... $56.2 million
90 mt at $213 .... $19.2 million
$140 million total
890 mt at $16 ...... $14.2 million
1660 mt at $39 .... $67.4 million
1810 mt at $38 .... $68.8 million
110 mt at $213 .... $23.4 million
$171 million total
We should expect that they announce the Chlor-Alkali commissioning is complete. Hopefully they can speak about the operational results with the fully digested reports on the validation of the facility. It would be nice if they have run another throughput test with the new cracking stage on-line, and hit the rated throughput (with store-bought chemicals, not with the chlor-alkali).
I expect they will get picked over in Q&A about what happened with the line of credit. I expect they will get more questions on cerium and SorbX.
I'm guessing they should be strong in Magnetics and Alloys. The price has been steady and it seems that the economies have been decent ... it just seems reasonable that magnets would start to see demand growth ahead of other segments.
They need to address what their sales group is doing. They certainly need to move toward the operational targets they have given (operational costs less than $10 by 2014 start), but they also need a sales force that is developing customer relations and is creating demand. I get the sense that prior CEO's have only looked for large customers. I want them to recognize that no customer is too small. I've seen in my own experience that some of those small customers will grow ... this years $100,000 customer is 2016's $2 million customer.
They need to produce the amounts of RE's they have targeted and at the costs they have targeted, and they need to develop customers for the RE's. Project Phoenix phase 1 is constructed and they should have commissioned and validated the entire facility. That is good, but it is a good beginning.
The Lynas annual report is released and available on their website. Page 20-21 have some details about the RE market prices.
This sentence struck me, as it echoes thoughts I have had:
Environmentally sustainable rare earths production involves significant capital and operating expenditure to safely manage waste gases, process water and solid residues. Such investment requires large-scale operations to justify the cost, well beyond the economical scale of many small operators.
They have a quarterly report released, that can be found on the the investor relations section of the website. That is for the quarter ending Sept 30.
They produced 253 mt in that quarter.
I'm still holding. I think the price shouldn't go down that low. They need to have positive earnings news, and that is not going to happen this quarter. The reality is that thye are probably going to look VERY well funded, even cash rich, at the end of this next Q4. They have a bad quarter to report, that will drop the cash on hand.
At the end of Q2 they had about $264 million. They probably spent $85 million on CapEx, and lost $55 million from operations. They had $124 million at the end of Q3. That was the number that along with no available debt financing sent them to another offering. That added another $247 million. So call that $370 million.
Q4 was hinted to be breakeven before debt servicing. Q4 will also finish the big CapEx (Yay Chlor-alkali completion). So call it $80 million CapEx and $20 million for debt (too large but whatever). That brings them to year end with $270 million cash on hand.
They really have to dial back any spending until they hit a profit. If they can hit a profit before burning the remaining cash then they will survive and succeed, and the current $5 is a huge bargain. If they can't then they will fail.
I see that as worth more than $5 today, but it is certainly only an opinion. The market price is nowhere close to $3.25, and that seems a bit far-fetched to me.
Yep. There are substitution stories in commodities. Natural gas goes up and coal gets used. Corn goes up and wheat and potatoes get substituted. But there is not really much substitution of wheat for NG. And the rare earth metals are wildly different from pork bellies and gas. If someone has a Pork-Belly-Magnet I haven't heard about it (oddly, I have heard of a Chick magnet, so maybe there is some substitution I don't know of).
The problem all these junior exploration companies have is that they won't be able to raise the financial resources necessary. They can finance the drilling and delineation of the ore body. But they can't raise $2.5 billion for a project that won't begin paying off for 5 years, and has many product demand and price questions.
Molycorp had lucky timing in going public when the rare earth crisis between Japan and Chiina was hitting. The venture capital involved was large. The IPO on MCP was July 29, 2010. The stock price went higher and they were able to sell more. Even the recent offering was $5 per share. And Molycorp is basically done with the capital expenditures of Project Phoenix phase 1 ... and that was a 3 year construction, and twice the output of QRM's plan.
The value of the QRM in ground resource is just the acquisition value. They just won't be able to get the financing necessary.
$2.565 billion initial capital costs. They need this as an absolute necessity.
$0.432 annual operating costs. They need this to be sure that they can produce while getting product approved and accepted by customers, and find markets.
Plus they need additional margin for any delays, and inevitable cost over-runs. They need $3 billion, to move forward on a plan that begins to see output (and sales to follow) in 2018. Presumably half would be stock and half would be debt.
I don't expect QRM to deliver. What they can do, is move forward on permits, plans, and exploration. A fully permitted mine, with well-delineated, high-quality, ore body, and an open pit mine plan ... that has value.
I haven't found that article, but I always get less interested when I see an "index of commodities" as a basis for across the board recommendations. Natural gas has been very weak. Oil has been moderately weak. Corn is getting hammered, as is sugar. Copper and Aluminum show signs of turning up. Those are all commodities. I can't really justify lumping them together though and drawing conclusions about coffee beans or rare earth metals.
I would have to see the index. And I am not convinced that technical analysis is a useful investment tool.
Their plan calls for product to be made in 2018. The output would be about 10,000 mt per year of REO's along with 3200 mt niobium and 25,000 mt zirconium.
Here are the prices and average amounts they project:
Metal . . . . mt . . . . . Price
y . . . . . 4250 . . . . . 30
ce . . . . . 3850 . . . . . 8
nd . . . . . 1400 . . . . . 80
la . . . . . 1350 . . . . . 9
dy . . . . . 600 . . . . . 650
pr . . . . . 460 . . . . . 85
er . . . . . 410 . . . . . 70
yb . . . . . 400 . . . . . 50
gd . . . . . 360 . . . . . 40
sm . . . . . 200 . . . . . 9
ho . . . . . 130 . . . . . 55
tb . . . . . 80 . . . . . 950
tm . . . . . 60 . . . . . 1000
lu . . . . . 60 . . . . . 1100
eu . . . . . 13 . . . . . 1000
nb . . . . . 3200 . . . . . 40
zr . . . . . 25000 . . . . . 7
I've said many times that they can achieve the exact same controls using legal methods. So even if they end up losing the case, they just comply, but institute different controls.
QRM released a pre-feasibility study for Strange Lake. You can find it on their website. Here are some numbers:
$2.565 billion initial capital costs
$0.432 billion per year operating costs
$1.047 billion per year revenues
By my math that is a $600 million per year possible profit.
The plan is to build a mine, and concentrate facility, then to ship to procesing built in Quebec. The costs of building the mine, road, and port facilities is:
The annual operating for that part of the plan is:
The remainder of their construction would of course duplicate the Project Phoenix facilities. Considering those are only a part of Molycorp, and the entire market cap for Molycorp is under $1 billion, that suggests QRM would be better off buying Project Phoenix facilities for $2 billion.
Of course a $55 million market cap company is never going to acquire a $2 billion facility. The much more likely scenario is that eventually, if Strange Lake is desirable, Molycorp buys QRM at a 50% premium ... say $80 million for the company. The economics of Strange Lake work much better for an already existing international rare earth miner
A World Trade Organization dispute settlement panel has basically upheld a joint claim by Japan, the United States and the European Union that China’s export duties on rare earth metals violate WTO rules, it was learned Friday.
The article I took this from is poorly written, and I am not sure how reliable. Since I have argued for taking the Molycorp rare earths to China, even against the export tax price gradient, any news of a single world market price is good news.
Yahoo makes money on ads. They could care less what is said. As long as the eyeballs see the targeted ads they are making money.
The targeted ads can be creepy. I googled to see trailer prices quite a while ago, and still get ads for trailers for sale. And they always get confused and think I am an old man ... LOL.