Molycorp expected to file for bankruptcy after missing payment

1st June 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America


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TORONTO ( – US rare earths producer Molycorp’s NYSE-listed stock fell by as much as 21% after the embattled company announced that it would miss a $32.5-million twice-yearly interest payment owed on Monday on its 10% senior secured notes due 2020.

The nonpayment triggered a 30-day grace period, which certain industry observers saw as the timeline for the eventual demise of the company.

The Wall Street Journal reported that analysts expected the company to file for bankruptcy protection before the end of the month.

Molycorp, which operated the Mountain Pass rare earths mine and processing facility, in California, the largest rare earths mine outside of China, said its nonpayment would not trigger any cross-default provisions in other outstanding company debt before the end of the grace period and should not affect current operations.

Last month, the company advised that its cash balances fell to $133.6-million as of March 31, down from $211.7-million in December, which represented its primary source of liquidity to fund capital expenditure, debt service and net operating cash requirements. The company’s Mountain Pass operation had been struggling to ramp up output to the 20 000 t target, as processing issues were exacerbated by delays and process chemical shortages.

Rare earths producers, such as Molycorp and Australia's Lynas, had been weighed down by concerns about how fast they were burning through cash, low prices and the possibility that they might need to issue shares to raise more funds.

Greenwood Village, Colorado-based Molycorp had already retained financial and legal advisers to assist it in restructuring its debt and was in discussions with its creditors. The company had in March warned that it might not have enough money to continue as a viable entity if its debt restructuring efforts failed.

The US Geological Survey in a recent report found that despite increased global demand for rare earths in the permanent magnet and catalyst industries, prices for most rare-earth compounds declined in 2014, owing to excess inventory in the market.

A Chinese export clampdown prompted a rapid spike in prices in 2010/11. However, the global economic crisis and a flood of new supplies resulted in the subsequent collapse of prices in 2013. Prices had now again stabilised and were expected to remain low in the long term.

Although, small operators such as Molycorp, which reported a loss for the thirteenth consecutive quarter last month, were hard-pressed to squeeze profit from their operations.

Molycorp’s NYSE-listed stock on Monday fell to $0.42 apiece in early trading, a far cry from the lofty heights of $74.22 a share recorded in April 2011.

Edited by Creamer Media Reporter


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