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  • Walmart Launches "Get on the Shelf" Contest to Uncover the Next Great Product [View article]
    If you like STAR WARS then you should check out our commercial for the Walmart "Get on the shelf" contest. Starting Wed you can vote for ICE Block Cooler to get on the shelf. Vote early and often.
    Mar 6 06:51 PM | Likes Like |Link to Comment
  • What Will Lower Rare Earth Prices Mean For Molycorp's Earnings In Q3? [View article]
    The current consensus was $.68 but looks like it has just been adjusted to $.70. As for REE and LYSCF, I have not focused much on REE due to the longer time frame to get their mining up and running. When this whole market started to get hot their was only a few companies that had already put in a lot of work and had more rational plans going forward. Lynas and Molycorp were the two that always stood out.
    It is probably very prudent to buy Lynas and Molycorp as a team. Each of these companies has only a few key components and if there was to be an engineering mistake, accident, or political issue then they could be quite hurt. The other company would then become even more profitable and hopefully average out. Personally I have always liked Molycorp better because they sought to get into this market because they believed that they could compete with the Chinese back when prices were low. If they thought they could beat them there and got people to throw in hundreds of millions in capital then they can easily make a fortune now. Lynas however recognized that the market was going to get hot and decided it was a great time to get in and be ready for the run up. Great business savvy, but we will see how they build and run a mine.
    Oct 26 08:30 AM | 1 Like Like |Link to Comment
  • Estimating the Value of Molycorp's Grace Rare Earth Contract [View article]
    The new Grace contract begins in 3Q, so there will be no effect in 2Q.
    Aug 9 10:38 AM | Likes Like |Link to Comment
  • Estimating the Value of Molycorp's Grace Rare Earth Contract [View article]
    Like so many great ideas it just looks so simple once somebody comes up with the solution. This is a new application for rare earth processing, but the chemistry of it is old hat. It is very easy to size the design based upon existing knowledge in the chemical industry.

    The disclosures state that he is not compensated by Great Western. The group he works for "Bryon securities company" was hired by GWMGF to help capitalize it. Bryon securites was paid for their services in GWMGF stock at approximarely $.52/share. They say to sell Lynas and Molycorp and buy their stock. Its fine to say what you want, but investors just need to understand peoples motivations. I fully disclosed that I own MCP, those disclosures seem to be accurate but very misleading. The real question is even if someone discloses their position, how can you believe them. The only answer that I have is data and stated assumptions. I try to post as much of my reasoning, data, and calculations as possible so that people can believe my opinions or change my assumptions and create their own opinions.
    His basic premise was that if Cerium and Lanthanum prices crashed that Molycorp and Lynas would be hit hard. I currently believe the Molycorp is accurate that their xsorbx product could have a large demand if priced right. They have estimated that Cerium at a price of $13/kg would allow them to use and sell all of their Cerium. So I have usually used this price as a back stop for cerium and lanthanum. I use it for lanthanum because there are some application where cerium and lanthanum are interchangeable thus they trade at close prices. Also lanthanum is predicted to have a higher future demand than cerium. But lets take this even further, lets reduce Molycorp's profits on all cerium and lanthanum to ZERO once they reach full production. Now if the other rarer elements grow in demand, but it gets offset by additional supply and we are at today's prices, then Molycorp would still be earning $25/share by my model. My guess is that he crashed some prices in his model, raised others that would benefit great western, used whatever operating costs that he wanted, and then forgot that Molycorp is also developing a supply chain and will reap higher margins for each processing step, then published his conclusions to try to support his companies position.
    Aug 3 09:02 AM | 3 Likes Like |Link to Comment
  • Estimating the Value of Molycorp's Grace Rare Earth Contract [View article]
    China's economy is on fire and even if it slows down it is still on fire. I think the more important thing to recognize is that this is a slow recovery after a recession. If in a few years the major economies start a fast pace recovery then the demand side of the ree equation will increase at an even faster pace. My true belief is that in the US things will improve slowly and then all of a sudden the unemployment rate will just drop off a cliff and companies will be scrambling for employees and raising wages to try and induce them. The baby boomer generation has just entered the retirement phase. With the economy looking bad and the markets unstable many of them are remaining in the workforce. Once the economy gets better there could be a wave of people retiring in a short span of time. Since their retirement balances have gone up and they feel good about the economy they will begin spending. As the older more senior people retire others who likely have lower wages will get promoted to replace them and then they will need their old position replaced. The whole job ladder then will shift up to replace them and new entry point jobs will be created. In short order a large portion of the population would have just been promoted or received a job. Now that these unemployed have jobs they too will begin spending. Demand for everything will grow and we will see rampant inflation finally hit as the result of the current economic policies. Right now a lot of people are holding money back and thus when the fed tries to add money to the system it does not cause much inflation here, but it is felt in other developing countries. Once people are in a better mood then all the money that is hidden away will come back and the inflation will hit the US.
    My belief is that only a social issue will unravel China. They are a blend of market forces and totalitarian rule. They can change their policies on a dime, but if the people revolt then they will enter a mega recession as people struggle to determine how things are done in the new social order. I do not think anything will happen to them any time soon.

    What many people fail to realize is that Lynas and Molycorp began their efforts to get back into the rare earth business many years ago. Lynas is led by Mr Curtis who just happened to be in the right place at the right time and could see what would happen to the market if the Chinese kept increasing demand and worrying about their reserves. As such he formed an investment group to begin building a plant. Because he believed in his market savvy, he just knew he could build any old plant and he would make a killing if it worked out like he thought. Now at Molycorp, individuals had been trying to come up with a better processing technique. Since environmental issues had caused their downfall in the past this group wanted to find a safer way to process the material. Through a stroke of real luck their safer method also happens to be much more cost effective. Normally safer just means that you have to perform even more processes at an additional cost. In their case safer meant regenerating the waste reactant streams back into the original chemicals added. Thus every time they process their waste it is like they are making the profit margin that they would have paid a chemical company for the chemicals and saved the disposal costs. The big thing to remember is that Molycorp fully believed that they could beat the Chinese back when REE prices were at there lowest. Lynas is a smart investment banker timing the market, and Molycorp is a smart engineering group that had no clue the market would turn super favorable. You can even see this in both the companies published information and literature. Lynas looks more polished and much more salesman like. They clearly state that they are using the best current technology, and hopefully have hire some great tech people to try and run it. All of the original Molycorp info was basically just text and a few small graphics. Not much polish, some good numbers and facts if they thought it was important enough and they could share it (patent issues). Stereotypical technical reports that had all the real boring details stripped out by their investment bankers.
    Both of these companies could be great and have a much further lead on some of the new rare earth companies than people believe. Now that the profitability is higher people will be pulling out all stops to bring their mine to market faster, but the time table and hurdles are great. My guess is that if you look back in 10 years you will find that the original mine supply estimate took quite a bit longer to come online than they originally estimated. So even if there is a bit of a slowdown we will be sheltered, and if the global economy gains traction then investors will be greatly rewarded.
    Aug 1 08:30 PM | 3 Likes Like |Link to Comment
  • Estimating the Value of Molycorp's Grace Rare Earth Contract [View article]

    This is a very hard quarter to predict with the two new acquisitions and all of the unknowns. I will provide you with my base number which should be very accurate for the pilot plant and Silmet production, but includes some assumptions as to Silmet costs and everything for the other business. I also do knot know how much stock based compensation would be included in this quarter, or if there are any other acquisition related charges that would lower the figure. The biggest Silmet assumption is that the Niobium and Tantalum business income is enough to cover their employee costs. This assumption came from watching a video interview with Silmets CEO that occurred before the merger. In that video and MCP's presentations it appears that Silmet was feed short on REE feedstock, but still surviving from the niobium and tantalum income. The selling general and admin expenses for Silmet were estimated using average 2008 Estonian metals workers published wages and listed personnel numbers. Even if these numbers are off it should not matter very much as they were being offset by the niobium and tantalum income.
    To the best of my knowledge with all the data that is public knowledge and and back calculations that I could perform to determine underlying cost or other factors, $.72 per share. Now subtract off and other charges which would be ??? Who knows how much but I would hope not more than 7 cents per share. I almost hate revealing my figures when they are so much above the analysts, but one thing to note is that none of the analysts have updated this quarters estimates since just after the last earnings release. If you look in my last article (link ), at that same time I had $.51 and again still did not have those other charges which would have lowered it too $.44 right in line with the average estimate. Prices rose the whole quarter, but jumped up at the beginning of June. This is especially true for Nd-Pr which jumped from ~$207 to $251/kg overnight. We may even see earnings estimates climb this next week or two going into earnings. With all the unknowns however I would think it would be hard for a paid analyst to put his real number on the line, versus playing it conservative and just letting the company beat estimates. Once more info is provided during this quarter they will be able to update many assumptions going forward. The great thing is that Molycorp is really a very simple company to model and predict from because they have limited operations. With a few good assumptions along with all the other data, it is almost like playing poker with a single deck and counting the cards. You do not really know what the next card will be, but you do know when the odds are highly in your favor.
    Jul 30 10:51 AM | 3 Likes Like |Link to Comment
  • Estimating the Value of Molycorp's Grace Rare Earth Contract [View article]
    Great comment.

    You are spot on, it becomes a question of economics or for consumer products a question of perceived value.

    Every refinery is different. They run different feeds, make different blends, have differently designed units, and sell to different markets. Each one will be evaluating their catalyst selection and determining if the cost is worth the benefits. If over time some do not decide to use as much rare earth, then the market will have more supply and the prices will ease. The great thing about most rare earth uses is that they are a very small percentage of the final products. This make the prices increases much easier to absorb. Most every rare earth product we could just decide not to use. You could give up your laptop computer that you wrote this on and just have sent a hand written note. You could give up your ear-bud headphones and go back to your 80's DJ style headphones or trade in your pocket sized cell phone for the Gordon Gekko version. Good luck trying to find a rare earth free TV. There are just so many products that we could do without that we are not going to choose to go without. Prices may keep people from buying quite as many, but buy we will. With the rest of the world developing at such a fast pace there are many more people everyday who also want to own these modern marvels. Demand in some form or another is here to stay.
    Jul 30 10:08 AM | 2 Likes Like |Link to Comment
  • Estimating the Value of Molycorp's Grace Rare Earth Contract [View article]
    Very good question. Light and heavy is just a coined phrase based upon their molecular weight, but it is true that the heavies are rarer and in general have significantly higher prices. I like to take it a bit further and add a medium category. Neodymium and Praseodymium are critical to a number of technologies and are in growing demand. This is why their prices are double that of other LREEs. In some ways, they are a mid-REE. Their critical nature brings them higher than LREE value, but their greater abundance keeps them below HREE value.

    Here is a link to a SA article about this:
    Truth be told, all REE production will be valuable to miners. While some substances may generate high margins, the others will be paying all the bills. This can be seen by comparing Molycorp and Lynas. For this example, both companies' phase 1 production rates were used, Molycorp at 19050 mt/yr and Lynas at 11000 mt/yr. A quick and dirty statistical analysis would show Molycorp with 16.2% and Lynas with 24.5% of total magnet critical and heavy rare earths.

    Once an investor looks at the total volumes produced, the story becomes clearer. Molycorp would produce 3086 mt/yr of critical and heavy rare earths, and Lynas will produce 2690 mt/yr of critical and heavy rare earths. Not only will Molycorp produce 15% more critical and heavy rare earths, but they will be able to produce all of their production for 1/2 the cost of Lynas.

    The above section was cut from the link I provided above.

    Now lets go a bit further and look at what could happen to future pricing. Lets assume that the mid and heavy REEs keep rising in price and then fall back to today's levels once some additional production comes on. Lets also assume the the light REEs fall to 10% of thier current price with Ce and La going to $13/kg. Molycorp believes that at $13/kg the can use all their Cerium in their xsorbx product. This would in effect provide a floor to the whole market and their are some application where Ce and La can be substituted so it is a good assumption to believe that they could be near the same price. Using these assumptions, MCP would have earnings per share of greater than $30 once they reach full production.

    I believe that one of the reason that analysts are much more bullish than the average investor is that they have created these models. They can plug in numbers that just crash some of the prices and yet the stock still seems like a strong buy.

    I would not hold your breath on this part, but Molycorp also states in their prospectus that they have multiple type of ore on site. Given the high prices they will be performing test drilling to determine the best mining locations. They may one day surprise the market and say they are going to start mining from a different area of their property and that the area has a much better distribution than their currently defined mine site. It is nice to know that there is a good potential for this upside kicker.

    And finally your question about buying other player. So far Molycorp has done a superb job of adding acquisitions. The two companies that they bought were running out of feed and thus at risk of going under. Molycorp was able to pick them up for almost nothing. I would imagine that if they go to buy a mine that it would be one that had some big issue and thus the premium for it would fall. Right now a lot of mines may not even make it, but have very high pricing. Say a management team at a mine had an industrial accident during start-up. Molycorp might believe that they had the resources to rebuild the plant right and then run it soundly. In a case like this I could see them swoop in to buy.
    Jul 30 09:12 AM | 2 Likes Like |Link to Comment
  • Estimating the Value of Molycorp's Grace Rare Earth Contract [View article]
    Lanthanum is used for many applications. For Grace I believe that the primary application is in hydrocarbon catalysts. There are many different catalysts on the market today and most all of them use various metal and precious metals in order to facilitate different hydrocarbon reactions. In fluidized catalytic cracking units at oil refineries (FCC's), one of the primary catalysts used contains Lanthanum. While they can substitute for less lanthanum or other catalysts, this produces a yield shift. Basically it means that the oil gets broken up in a slightly different manner and the refinery ends up making more or less of a certain product like gasoline, diesel, or natural gas products. Each product has a different value and making the wrong ones costs big money. While they hate having to pay such high prices for catalyst, these costs are usually a drop in the bucket versus making more of an undesired product.
    Jul 29 06:08 PM | 2 Likes Like |Link to Comment
  • Molycorp - Unlock, Relocked and REE-Loaded [View article]
    The selling now caused pain, but will reduce future unlock pressures as there will be less shares to unlock. In effect it was less painful to sell them now than in the future.
    Jun 14 02:58 PM | 1 Like Like |Link to Comment
  • Molycorp - Unlock, Relocked and REE-Loaded [View article]
    Completely sticking to my view. Right after the article MCP decided to unlock more shares and complete their financing. This put more pressure on the stock and should add to the amount of shares available to short. Since there were people who could not get shares to short this released pent up short demand and then caused the stock to drop even more. But.... the fundamental story has not changed one bit in the last two weeks. REE prices have even begun to accelerate inside China in the last month and soon REE stocks will be all over the news and there will be a lot of shorts to cover. Buy now and buy for the long term. Also, please remember that unlike other analysts that just keep updating there targets every three months, I was putting out a true long distance view based upon my model and assumptions and hope to not have to update it very much if at all. Good luck.
    Jun 14 02:54 PM | 1 Like Like |Link to Comment
  • Molycorp - Unlock, Relocked and REE-Loaded [View article]
    High prices are the cure for high prices. The only issue is that REE mines and REE refiners can take 5-10 years to get online. So the price spike will take along time to correct.
    Jun 1 08:49 AM | 1 Like Like |Link to Comment
  • The Long and Short of the Molycorp Unlock [View article]
    Sell in the short term. If you believe in the long term fundamentals then buy back after the unlock at potentially much lower prices.
    Apr 24 10:54 PM | Likes Like |Link to Comment
  • Molycorp's Pain Is Grace's Mega Million Dollar Gain [View article]
    Agreed, the deal was a good and balanced deal when it was made. For the record I am very much a long term Molycorp bull. But as a short term investment idea, Grace may have an ace in the hole and be better short term. In the next few weeks Grace will likely have an earnings surprise and Molycorp will have a massive share unlock. One could try to grow their money in Grace and then reinvest in Molycorp at a lower price once the unlock is complete.
    Apr 24 10:46 PM | 1 Like Like |Link to Comment
  • The Long and Short of the Molycorp Unlock [View article]
    The date mistype has been corrected in the article. Thank you for the comment.
    Apr 20 09:45 PM | Likes Like |Link to Comment