Bloomberg News

Molycorp Sees Rare-Earth Demand Rise as China Targets Mines

August 08, 2013

Molycorp Inc. (MCP:US), the U.S. owner of the largest rare-earth deposit outside China, expects prices to rise as customers from automakers to robot builders increase their purchases and China expands enforcement efforts to control illegal production.

“You have this very large commitment on behalf of both the central and provincial governments to preserve the resource and clean up and protect the environment,” Constantine Karayannopoulos, Molycorp’s President and Chief Executive Officer, said in an interview today.

“All these illegal operations have effectively been thumbing their noses at the policy and, of course, that has to change,” he said. “It looks like the regulators are taking pretty serious steps to put an end to that.”

Molycorp produced at an annual rate of 15,000 metric tons in the second quarter, short of its goal to produce at the plant’s 19,050-ton-per-year capacity, the Greenwood Village, Colorado-based company said in a statement today. The company had already delayed that target from the fourth quarter.

“When we need to run at that level in terms of demand of our customers, we’ll run at that level,” Karayannopoulos said.

Molycorp’s second-quarter net loss narrowed to 44 cents a share from 71 cents a year earlier, the company said in the statement. The shares fell 13 percent to $6.42 at 5:46 p.m. after the close of regular trading in New York.

The loss excluding water removal, business expansion and other abnormal items was 36 cents, the company said, wider than the 24-cent average of seven analysts’ estimates compiled by Bloomberg. Sales rose 31 percent to $136.9 million, missing the $157.5 million average of six analysts’ estimates.

Accelerated Purchases

Molycorp’s customers have accelerated purchases of magnetic materials from the fourth quarter to the current quarter as they have seen more demand from automakers.

“The auto industry has been one of the highlights both in terms of rare earth demand for catalytic converters, rare-earth demand for refinery catalysts and magnetic material demand,” Karayannopoulos said. Builders of automated robots used on assembly lines increased purchases for the first time in two years, which “bodes well for all manufacturing,” he said.

Molycorp said in a separate filing that it will restate its first-quarter results and is assessing its finance and accounting controls after an error in its filings to the U.S. Securities and Exchange Commission for the first quarter.

In July, the SEC said it had ended an investigation into the accuracy of Molycorp’s public disclosures without recommending any enforcement action, according to a filing.

Molycorp paid C$1.3 billion ($1.3 billion) to acquire Canadian magnetic materials and rare-earths producer Neo Material Technologies in June 2012. The company replaced Mark Smith, who had been CEO since the company’s 2010 initial public offering, with former Neo CEO Karayannopoulos in December.

Mountain Pass mine, 60 miles (96 kilometers) southwest of Las Vegas in the Mojave desert, accounted for a majority of the world’s production from 1965 to 1985, according to an April 2011 report from the U.S. Government Accountability Office.

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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Companies Mentioned

  • MCP
    (Molycorp Inc)
    • $1.3 USD
    • -0.17
    • -13.08%
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