Molycorp Inc. (MCP:US), owner of the largest rare-earth deposit outside China, missed its 2012 output target, saying revenue will be lower than forecast this year as the new chief executive officer changed the company’s ramp-up schedule.
The California mine complex failed to reach the annualized output target of 19,050 metric tons of rare-earth oxides by Dec. 31, Molycorp said today. Interim CEO Constantine Karayannopoulos set a new goal of “mid-year” for the first phase, and no date for a planned expansion to 40,000 tons. Molycorp is “evaluating its capital needs for 2013” as sales and cash will be lower than anticipated, it said in a statement, without elaborating.
“The targets of achieving full phase-1 run rate by the end of 2012 in my view were too aggressive,” Karayannopoulos said in a telephone interview. “The expectation that somehow we would have pushed a button and boom we would have gotten to phase-1 operating rates overnight was not realistic and it should not have been the expectation.”
Missing the production target at its only mine is the latest misstep for the company, whose shares slumped 61 percent in 2012. Greenwood Village, Colorado-based Molycorp said in November it had known since August of a probe by the U.S. Securities and Exchange Commission into its public disclosures. Molycorp fired CEO Mark Smith last month.
While individual elements of the California plant operate in isolation, workers at the Mountain Pass mine will ramp up the entire processing system incrementally over several weeks to ensure the company can refine rare earths there without bottlenecks, Karayannopoulos said.
“There’s no question that these individual units are working individually, but as a whole it’s a completely different ball game,” he said. “One perturbation of one remote unit affects everything downstream and everything upstream.”
Private-equity firms Resource Capital Funds of Denver and Pegasus Capital Advisors in New York bought Mountain Pass from Chevron Corp. (CVX:US) in 2008. Molycorp raised $394 million in a 2010 initial public offering to help fund the reopening of the mine in California’s Mojave Desert.
Prices for rare earths -- 17 chemically similar metallic elements used in applications including batteries for smartphones and magnets -- soared in the first half of 2011 after China, the world’s largest supplier, curbed exports. Prices subsequently tumbled as some users switched to cheaper alternative raw materials.
Molycorp last year acquired Canadian metals processor Neo Material Technologies Inc. for C$1.3 billion ($1.3 billion) to boost Chinese sales.
Molycorp probably lost 15 cents a share before one-time items in the fourth quarter, according to the average of seven analyst estimates (MCP:US) compiled by Bloomberg.
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