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Molycorp widens loss, sees a flicker of market improvement

8th November 2013

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – North America’s only rare earth elements producer Molycorp, which operates its flagship Mountain Pass mine, in California, has widened its third-quarter loss as revenue dwindled on lower sales and prices.

For the three months ended September 30, Molycorp reported a loss of $69.9-million, or $0.43 a share, compared with a loss of $18.9-million, or $0.19 a share, a year earlier.

On an adjusted basis, which excludes stock-based compensation, inventory write-downs and other items, the adjusted loss widened to $0.27 a share from $0.05 a share a year earlier. Revenue was down 27% year-on-year to $149.1-million, but up 9% quarter-on-quarter.

Wall Street analysts had on average expected a loss of $0.29 a share, on revenues of $161.09-million.

Molycorp reported sales of 3 620 metric tons of product across all business segments during the period, which was down 18% year-on-year. It was, however, a 19% improvement on the second quarter ended June 30.

The Greenwood Village, Colorado-based company reported an average selling price of $41.18/kg in the quarter, down 8.6% sequentially.

Costs, excluding depreciation and amortisation, dropped 18% to $150.4-million.

The company had $173.9-million in cash and cash equivalents on hand at September 30, and expected to spend about $60-million in capital expenditures for the rest of the year.

In an October US Securities and Exchange Commission filing, the company disclosed that after January, a number of developments had taken place that had reduced its cash cushion to a level below what it viewed as sufficient to ensure it would “have no substantial concern” about its ability to finance itself, prompting it to launch a $200-million financing.

Molycorp at that time also said that about 48.8% of its Mountain Pass deposit was now expected to contain cerium, which had over a number of quarters demonstrated that it was a lower-demand product, failing to attract premium pricing.

Molycorp, which had suffered a series of quarterly losses, also revealed a $100-million budget blowout in its $1.25-billion modernisation and expansion at its main mine, which it hopes would bring down unit costs.

MARKET IMPROVEMENT

Low rare earths prices had prevented the company lifting revenues and earnings in recent quarters, despite its year-ago acquisition of Neo Material Technologies, which had turned it into a fully integrated mining and production firm.

However, interim CEO Constantine Karayannopoulos told an analyst conference call on Thursday that global markets appeared to improve. “Global markets appear to be strengthening, albeit slowly.”

He said demand and prices for rare-earth products, which are commonly used in consumer technology such as mobile phones and computers, were recovering from the "worst quarter [second quarter] we have seen in recent memory”.

"A Chinese government crackdown on illegal mining and smuggling of rare earths had also helped return “a semblance of stability” to industry demand and prices,” Karayannopoulos said.

Molycorp said its magnetic materials and alloys segment business jumped 20% quarter-on-quarter, boosted by rare-earth-based magnetic powders, which are used in hard disk drives but also in home appliances and vehicles.

The company’s NYSE-listed stock fell 3.15% in after-market trading to $4.76-million. The company’s stock had fallen 53.61% from the start of the year.

Edited by Creamer Media Reporter

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