Jack Lifton

Long only
Jack Lifton
Long only
Contributor since: 2009
Company: Technology Metals Research
Isn't this exactly what Oak Tree proposed right from the start of the bankruptcy that:
1. The mining and processing (through separation) at Mountain Pass, California be terminated, (DONE), and
2. That the former Neo be reconstituted and sold with the proceeds going to satisfy the senior debtholders [IN PROCESS] (i.e., Oak Tree)?
The open question is will the "buyers" of the Neo operations in China, Singapore, and nearby countries reinstate Constantine Karyannoupoulis as CEO or Chairman?
Time will tell
Molycorp will NOT be supplying its internally produced "rare earth oxides" from its Zibo or Silimae facilities. Both are solvent extraction based separation facilities with metal making capability. IF THEY CAN GET FEED STOCKS they will supply separated rare earth compounds/blends/metal... alloys (Zibo). Thus with the addition of the Estonian facility Neo Materials goes on as if Molycorp never happened! I doubt that this was the intended resolution but for Neo its a good one unless the US Bankruptcy Court screws over Neo's non-Chinese customer base.
Molycorp's success as a share price play was phenomenal. A failed business model was revived to generate stock price gains unrelated to any rational analysis of the markets that the company's products were supposed to serve. And it worked. The four original "investors" put in a total of $122 million ($80 million purchase price + $42 million development costs) and then took it public. The original investors took profits ("well deserved" declared the clueless blogosphere) of nearly $2 BILLION dollars from those apparently now to be seen as dumber than they were and of course from the usual day traders, widows, and orphans. The original investors were all funds, so that their own money wasn't ever at risk.
So now that BILLIONS of dollars have been wasted trying to re-start an industry that America originally developed through a business model that made no sense we are told by the Wall Street Journal that we should "never mind" and get on with our journey downward as a failing economic and innovative powerhouse.
This is nonsense. When the rubble clears from the Molycorp collapse smart investors and perhaps even clueless politicians will see that innovation has brought American industry back into the rare earths markets with newer processing technologies and much lower development costs than Molycorp's managers ever dreamed. There will be a total domestic American rare earth supply chain in place competing with any and all comers by 2020; it will not however include Molycorp.
The US federal government's involvement in commercial inventory subsidies ended with the cold war. The DLA today is tasked to support military production needs. The need by the US military for rare earth permanent magnets, rare earth enabled lasers, and specialty alloys for sonar and structural use is trivial. It is less than 200 tons per year, by the DoDs own admission. However it should be pointed out that the military uses magnets and alloys that need terbium, dysprosium, and yttrium to function. Molycorp produces none of these rare earths nor does its Mountain Pass deposit contain them in commercially recoverable quantities.
I know of no exponential increase in demand for consumer magnets. The demand is there and it is growing, and, in fact, neodymium/praseodymium... production is already straining to meet current demand, but Molycorp is certainly not among the best sources of any of these either now in production or planned.
Molycorp has been hyped to death by stock promoters, but in fact its deposit is not among the best for 21st century rare earth demand.
Shock,
At the very beginning of the late rare earth "boom," Molycorp and the rest were telling the financial community that "the more rare earths that are produced the higher the price will go." I called this the inverse law of supply and demand. So now we have the corollary to that law, which as Lynas states it is "the lower the price the higher the demand will be from those outside the lowest cost source."
The producers of light rare earths outside of China are still stuck on "The rare earths are to be treated in the same way financially as gold was before the California gold rush of the 1850s." I can sort of understand why Lynas, the all-in costs of which, are I believe less than those in China is adhering to the new line about pent-up demand, but for Molycorp, whose all-in costs seem to be higher than those of China, to say this is problematic to me.
At least 85% of the current global demand for the rare earths is in China. Are you agreeing that China will import "separated" light rare earths from Malaysia (shipping point) or California in place of domestic separated materials, or are you saying that the Chinese will import mixed concentrates and separate them there as the Zibo works of Molycorp has already done from California?
Something is very wrong with the market's logic here.
The debate, so far, in this article between its author and Dr Reed Izzat, who is certainly the senior working scientist in the commercialization of MRT arena, is one of the best discussions I have ever seen between an "informed" observer and a recognized expert.
Metaphorically as I look at the clock in the faculty lounge and realize we all have classes to teach and laboratories to direct I am going to "call" the debate for Dr Izzat. But I urge investors who are not experienced, trained, or peer-reviewed not to dismiss out-of-hand Mr Kramer-Miller's well reasoned arguments. Dr Izzat holds that
Mr Kramer-Miller has some key facts wrong. Dr Reed does not say that Mr Lramer-Miller's logic's flawed. A reasonable man would not go to Mr Kramer-Miller (or to me) to discuss the potential for or the successful application of MRT to the separation of the rare earths. This is Dr Izzat's bailiwick.
Mr Kramer-Miller, however, represents I think the opinions (and is an opinion maker) of intelligent investors who need an interpreter of technology to assess the risk of the application of the technology to the question at hand (The increased probability of the success of Ucore's business model through adopting and using MRT).
I am satisfied that Dr Izzat's discussions and his previous peer-reviwed work, much of which I have seen or read, show that Ucore's technology risk has been minimized by adopting MRT instead of SX. SX has failed so far outside of Asia due to lack of experience in process management. Dr Reed is also correct that capitalizing pollution controls and process management learning time makes SX too expensive for junior mining unless the SX plant is delivered turn-key by an experienced end-user (not just by an engineering company!)
I think that IBC AT is vertically integrated as an R&D, Process development, and Engineering company, so I have a good level of confidence that their scale up protocol will succeed.
But such a project will be expensive and there is no scale-up without "surprises," so the financing of this project will have devils in the details.
In any case I learned from this comment stream more than I knew before both about the application of the technology and the attitude of serious investors.
Jack Lifton
Shouldn't your second sentence be something like:
For this reason, the US' Democrat party is focused on restoring economic growth to a level as high as it has been on average in the past four decades.
Rockstone,
In the last week I have been called a "lightweight," a "shill," and a "guru." I proudly add "flamboyant" to my list of appellations.
Note that I now refer to those rare earths from a particular deposit/processing plant that are actually of value in the market as:
"market critical rare earths, MCREs" Thus in a typical light rare earth distribution such as that at Mountain Pass I would value only Neodymium and Praseodymium in computing an absurd "basket price." My calculation would be the total revenues of the Nd and Pr and/or the Nd/Pr in the form sold by the company minus the total cost of separating all of the rare earths contained in the original mixed concentrate minus the cost of storing or disposing of the unsale-able Ce and La. The idea of calling Ce and La produced at above the market price for which they can be sold "inventory" is almost as absurd as using the undefined term "basket price" as a general term.
Thanks for the reference,
Flamboyant Jack
Professor,
Not only that but for the Nickel metal hydride (lanthanum is the other metal in the hydride blend) batteries that Panasonic does make it is sourcing lanthanum either in China or from Lynas-Molycorp is not a factor). Tesla does not use rare earth permanent magnet drive-train motors, but of course rare earth permanent magnets are used in a large variety of motors and sensors in the vehicles. These REPMs are of the sintered variety not the bonded type made by Molycorp China, so Molycorp really has no advantage there either.
Jack
Michael,
I am intrigued to discover why Molymet has made such a large investment. It, Molymet, is a relatively new very well run venture. Why it got involved in such a poorly run venture as Molycorp it will need to explain to its shareholders.
Demand is not going to grow fast enough to help Molycorp, because demand is geographically sited and the fastest growing sites are in Asia and Africa. Those markets are saturated by Chinese entrepreneurs and they are confronted by local businessmen with local resources. Molycorp is not a raw material player in those markets. Not at all.
Jack
Patrick
I believe that you are correct about one thing: The addition of an HRE separation unit to the existing operation at Mountain Pass would not at all need large CAPEX. The problem will be how to restructure the beast to cut the huge fixed overhead of full production of money losing amounts of LREs. You are wrong about the strength of Molycorp's vertical integration, which is today geographically and politically incoherent. Molycorp needs a lot of thought before all the kings' horses and all the kings capital can put Humpty Molycorp back together again so as to become competitive.
Jack
The rare earths' infinite sized markets fantasists have always viewed Molycorp as inevitable and a mine whose time has come (back). Even as the ocean of reality washes over the decks of this Titanic of American mining mistakes they will insist that a new captain can right the ship after just (yet) one more set of repairs to its balance sheet. Thus according to their own arguments Constantine Karyannopoulos and his chosen successor, Geoff Bedford, must be failures since the idea of the mine and of Molycorp is sound, right?
The rare earths' infinite sized markets fantasists have always viewed Molycorp as inevitable and a mine whose time has come (back). Even as the ocean of reality washes over the decks of this Titanic of American mining mistakes they will insist that a new captain can right the ship after just (yet) one more set of repairs to its balance sheet. Thus according to their own arguments Constantine Karyannopoulos and his chosen successor, Geoff Bedford, must be failures since the idea of the mine and of Molycorp is sound, right?
MolyTacoWagon,
You are correct, but I hope that the magnitude of this scam will soon be the subject of a Harvard Case Study of a Wall Street focused on greed in an America that has lost its way. Jobs for Americans, domestic self sufficiency in raw materials; and the maintenance of America's leads in high tech industries don't seem to matter to those who run scams like this one.
Molycorp was a story of greed; it had nothing to do with changing the dynamic of the global or American rare earths markets.
The development of a total American rare earth supply chain is still an imperative. Forget Molycorp.
Jack Lifton
I believe that Eric Noyrez is the most experienced and most knowledgeable person in both the operations of the rare earths markets and of the rare earths supply chain in the non-Chinese world. I welcome his vote of confidence in the quality of the Texas Rare Earth Resources project and in the probability of its commercial success.
Jack Lifton
TRER Member of the Board
Ben,
Your comment:
"So investors have come to two primary realizations during the cyclical bear market in the REE junior mining space: a winner in the REE space is going to have a deposit that generates most of its value from heavy REEs, and it is going to develop (or partner with a company that will develop) a technology that can economically separate these REEs in an environmentally friendly manner."
is EXACTLY CORRECT. I just hope that investors have in fact reached that conclusion.
Jack Lifton
How are you calculating your market cap figure? SA shows it as under USD19 million.
LCM as a stand alone venture might be a ble to grow enough to survive, but with the Albatross of the current GWMG management I doubt it.
Thank you. I really had blocked out that MCP is a NYSE listed company.
Ausheds,
I noted this aspect of the powder market in Ningbo last March when many presenters held themselves out as powder makers in direct competition with Magnequench. I even reported it on InvestorIntel, but it didn't seem to have any traction.
Can someone tell me when MCP will be delisted on the AMEX? It has been below $4 for just over 6 months without a single day in that period being above $4.
Just wondering.
There's a rumor today that one of the well-known Canadian rare earth juniors is exiting the rare earth sector and will develop other technology metal deposits. This is more likely to have caused the after hours decline than the ongoing and routine and boring dismal Molycorp news.
John,
Some thoughts:
You are right about HREs. The Chinese are or believe they are in danger of exhausting their domestic supplies of HREs, which are critical for maximizing the efficiency of consumer as well as military electronics. As China shifts from an export led to a domestic consumption led economy it is increasingly important to its central planners to conserve a resource such as HREs, which, as of now, ONLY China has bothered to produce at all.
It may in fact be critical for the industrialized world that HREs be produced outside of China for two reasons: 1. A best case scenario where China continues to export HRE enabled consumer electronics will mean that China has access to sufficient HREs so that it can satisfy its domestic needs and also have, or have access to, a surplus for export, or 2. China decides to conserve HREs and its export of HREs ceases, so that the non Chinese world has to produce its own HREs if it wishes to produce rare earth enabled devices, . Neither scenario seems possible without new non Chinese production of HREs.
I'm betting on the lowest CAPEX, HRE producing, projects in North America to be developed in the near term. These would be Rare Element Resources, Ucore Rare Metals, and Texas Rare Earth Resources. In Australia I agree with you that Northern Minerals looks very good although its CAPEX is higher than the rest. In Africa I think the best choice is Namibia. Tasman Metals in Europe (Sweden) is another choice, because without its production of HREs the EU as a high tech manufacturing center becomes totally dependent on the good will of China. With Tasman's deposit as an anchor Europe would have a totally integrated domestic rare earth magnet and phosphor industry
The next problem will be refining capacity. Without it any HREs produced outside of China would need to use only Solvay's LaRochelle, France, solvent extraction facility, but it has only a limited capacity.
I think we will see new HRE focused toll refineries both in North America and in Europe before 2020, and they will be fed by one, several, or all of the above deposits. There is also a distinct probability that some of the North American deposits will be vertically integrated with newly developed accelerated solvent extraction technologies or other technologies newly applied to the separation of the rare earths.
We have been living in a world of increasing metal mining driven by Chinese demand. Chinese demand will not simply evaporate, but it has been reduced.
It is time we enumerated critical resource "deposits," which are not the same as deposits of critical resources. Critical resource deposits are those the development of which are necessary for the world's economy to grow and to be maintained.
It is also time that the pricing of critical materials becomes transparent.
I think you are one of the most astute of the resource analysts today, and I pay close attention to your work.
Jack Lifton
Ben,
This is a good review, because it zeros in on what this book is not. It is not a guide for investors. The review is well written.
I do take exception to the denigration of generalists as when this reviewer says:
"On the plus side, you have an expert writing on the subject and not some generalist dabbling into way too many categories"
Specialists tend to be myopic. They very often miss the synergies of, for example, the adaptability for a wide variety of separations of a refining process, such as the separation of the rare earths, or of uranium and vanadium, or zirconium and hafnium, or cobalt and nickel by solvent extraction. I have been in many conversations in the last decade with solvent extraction process engineers who are mystified by the fact that so many rare earth juniors were not only unaware of the process but thought it arcane.
I find that generalists (such as myself) tend to examine the trees holistically as the components of the forest rather than the other way around as this reviewer might be suggesting.
Academics, such as the authors of the sections of this book, are almost always specialists or even when not are frequently beholden to governmental grants and industrial special interests.
Critical materials can only be defined in a specified frame of reference of time and space. This definition must include both a political and a moral space. Many "critical " materials are, in fact, strategic for lifestyle enhancement and not necessary for health, safety, or welfare.
Investors need to be aware of 'fashions" in critical materials' studies.
I will have much more to say about this in the coming months on the web sites of Investor Intel and of Technology Metals Research. I think investors can learn much more from general discussions of the concept of critical materials than from "expert" analyses of subjectively chosen materials.
Jack Lifton
Polecat0,
If a Chinese "geopolitical event" occurred then the market would lose not only 95% of the world's light rare earth production but also 80% of its DEMAND.
After that it would take years for significant downstream capacity in high purity separation (not currently offered by MCP, California), metal and alloy making, and magnet making to replace the Chinese production. I suspect that in the case of a Chinese "event" the world rare earth industry would melt down and the wreckage would wash away MCP>
Can any of you imagine how long it could take to bring Chinese mining environmental issues under control? Do any of you understand that the purpose of the governmental moves to regulate Chinese rare earth mining and refining is to minimize pollution, maximize efficiency, ensure the continuation of the downstream value adding rare earth enabled components manufacturing industry IN CHINA, and maximize tax collections! In the short term as the vast imbalances in the Chinese rare earths industry among which are vast overcapacity and huge above ground inventories of the least valuable rare earths are eliminated and worked through how, pray tell, will this LONG term program help a Molycorp running through other people's money very rapidly?
I note my colleague's, Dr Gareth Hatch's, optimism above, and I want to state my pessimism and some of my reasons for it clearly:
The author of this article says that:
"Bloomberg, citing Kevin Starke, an analyst at CRT Capital Group Inc., reported that if Mountain Pass mining facility becomes fully operational then Molycorp's severe cash crunch problem will be solved."
But if Molycorp becomes "fully operational" then it will only be "profitable" if it can go beyond break-even by SELLING most of its Mountain Pass production in direct competition with Chinese pricing. If Molycorp achieves its target costs then this could happen for its neodymium and praseodymium production, but I doubt very much if it will ever achieve competitive costing on cerium or lanthanum, both of which are today in surplus and therefore sell for very low prices with an ominous inventory overhang looming in China. Molycorp's best bet would be to try to convert 100% of its Nd/Pr into magnets or magnet alloys outside of China, but I note that these products would only sell outside of China if they were cheaper than their Chinese competition and just as good as Japanese magnets.
It is the same for Lynas with the addition of the fact that 5% of its production consists of an SEG/HREE concentrate that can add significant profit to its bottom line.
I honestly believe that the best solution for both companies would be to add to their business models toll chemical processing to remove Ce and La from consigned concentrates followed by toll refining to produce didymium and/or Nd and Pr products for the magnet and alloy industries.
In any case this is the last hurrah for Molycorp. It will not be able to borrow again, so this latest plan has to work. I don't know what the status of Lynas is in this regard, but it cannot be too different.
All of the strategies to raise money by these two companies must be viewed in the harsh light of the global demand for ALL of their products now and in the near future. Unless both companies can be profitable by 2016 there will be no future for either of them.
Shock,
Your detailed analysis of the financial operations of Molycorp and the responses of the more thoughtful of the commentators leads me to ask a question: What happened to Neo Materials?
Prior to its "takeover" by Molycorp it, Neo. was the most profitable and well run rare earths based company outside of China (NOTE that I am not saying that there were better run Chinese companies, because we have no way of knowing that since the murky, at best, balance sheets of the Chinese companies were not comparable to those of western entities in the same or similar businesses). As recently as 2011 I asked Neo's then CEO, Mr Karyannoupoulos, why he didn't vertically integrate by buying or taking control of a mine or mining project(s). His answer was the same one he gave me in 2007 when I first had asked him that same question: "Why would I want to get into such a volatile business. Let others take the risks of raw material pricing." I am paraphrasing a bit, but, in essence this is what I recall from my conversations with him.
I can understand why NEO allowed itself to be acquired by MOlycorp; it was a fabulously overpriced deal for Neo's shareholders, and I can understand why, after looking at Molycorp from the inside, Mr Karyannoupoulos, took or was given control by the board. But I cannot understand why the former Neo management has not moved to unwind the original acquisition and reverse it. I think that the best hope for Molycorp is that the mining and light rare earth separation facilities in the USA and Estonia become a stand-alone profit center of a new Neo. I think I understand how and even why the small investors might feel betrayed by such a move, but Neo was, and perhaps, stiil is, a state-of-the-art operation in separation, metal making, and magnet manufacturing. The global rare earth industry can get along with less or even no more production from Mountain Pass, but the loss of Neo's skills and products would be a severe set-back for the global supply chain.
Perhaps it is time to bite the bullet on the mining operation.
Since when does LCM, or Great Western, make rare earth permanent magnets? The relevant output of LCM is the neodymium-iron-boron ALLOY, and the samarium-cobalt ALLOY used to make rare earth permanent magnets by those with the skills, technology, and in many cases, licenses from Hitachi to do so.
LCM with an output of less than 300 tons of magnet alloy per year is so far a VERY SMALL player in a market that produces 75,000 to 80,000 tons per year of this type of rare earth permanent magnet. Japan's Santoku, for example, has TWENTY TIMES the revenue of LCM, and it is profitable.
If LCM is to be self-sufficient based on SKK production then its production of alloy from domestic resources will be approximately 3 1/3 times the tonnage of neodymium produced at SKK. If it can be profitable at this level then it should go forward. I am not including samarium-cobalt in this caluclation, but if SKK produces samarium and cobalt can be bought at market price then LCM could also be competitive in that market using in-house (NYSEARCA:SKK) feed stock.
The best business model for GWMG would be to partner with both a separation provider and with other juniors outside of China with significant dysprosium, neodymium, and samarium. In the event that one of these juniors creates an in-house separation facility then it would be the ideal partner for GWMG. Such a partnership would then be very enticing for a magnet maker as a further "partner." Thus a vertically integrated, though transnational, but non-Chinese rare earth permanent magnet group could be created.
Where is everyone getting MCP's "production costs?" And where does the $12/kg for cerium come from???
The last time I priced cerium in China it was 3 Euros/kg, which is at best $4/kg. If you add an export tax of 50% (it is today 25%, I believe) you get a Chinese export price of $6/kg. Thus the Chinese SELLING PRICE delivered outside of China is LESS THAN MOLYCORP's PROJECTED TARGET COST!!!
China's cerium demand is 80% of the world's total. I heard the General manager of Baotou say last summer in Ganzhou that he is producing a surplus of 30,000 tons a year of cerium!
I think that Molycorp as currently structured can only be successful in this cerium/lanthanum price and supply environment if it shuts down the mine, the Silimae operation, and Boulder Wind, and proceeds with the revenues from the operations of the old Neo Materials.
I came across this comment today from a rare earth markets analyst in Hong Kong replying to a post of his on the Investor Intel web site:
Hongpo on August 15, 2014 at 1:01 PM said:
Thank you Andrew
"The surplus of La & Ce are mainly caused by the serious imbalance of China’s rare earth consumption structure and the rampant illegal rare earth production.
For example,in China’s 2014 rare earth annual quota of 105,000 tons,lanthanum and cerium account for approximately 70.57%,
Praseodymium neodymium oxide account for approximately 20.08%.( China increased its light rare earth production quota in order to meet the rapid growing demand for neodymium and praseodymium in the application of rare earth magnets sector,
In fact,according to people familiar with the situation, the la & ce inventory of the Inner Mongolia Baotou Steel Rare-Earth Group has exceeded 150,000 tons by far."
- See more at: http://bit.ly/1oBEaRZ
Note that if this is correct then the "real" current price of both Ce and La in China is zero or less. This would explain why both are being sold internally today for $/kg; that could be the cost of carrying the inventory.
So if in fact MCP can get its COGS to $6-7/kg this, it would seem, will be the figure to be charged against the production tonnage as a loss.
Of course. if MCP's operations outside of China cannot get Chinese raw materials then transferring some of this material to them will cut the overall losses, but if Chinese material is available at a lower price outside of China then it might be considered malfeasance to buy at a higher price.
I do not understand how it is that the Neo management could not know about the Chinese oversupply of Ce and La. Perhaps it isn't true. I hope that Molycorp will make a statement about the comment by Hongpo.
SE,
1. Hitachi's patent is a "process patent" for a technology of manufacturing neodymium-iron-boron powder from which NdFeB magnets are made by bonding with organic resins (magnequench) and sintering (90% of the NdFeB). The patent is and was an absurd grant in any country, since it patented an obvious process used during the manufacturing of the ALLOY powder. There is no way it could have been renewed by the US Patent Court (for example).
As I mentioned before when I was in Ningbo, China, this last March, I found that many Chinese producers were already offering ALLOY powder against Neo, and that Neo had begun dropping its prices LAST YEAR in anticipation of the strong increase in competition!
Bonded rare earth permanent magnets are made from purified neodymium powder; THIS IS NOT WHAT MOLYCORP PRODUCES IN CALIFORNIA. Sintered REPMs are made very often from neodymium/praseodymium natural mixes (THE "DIDYMIUM" of the TRADE). Neo China most likely does not use Mountain Pass produced didymium oxide to manufacture FURTHER PROCESSED neodymium for conversion into NdFEB alloy powder, because China makes it almost impossible to import light rare earths (But see a recent article by HongPo on http://bit.ly/1lVQOoG).
2. Lynas is leaner and more smartly run than Molycorp, but it still faces a grim future. Lynas though seems to have broader support in Australia than Molycorp now has in the USA.
Jack
Sheer hype. Molycorp's mantra is in fact that it's ore contains very little thorium!
Lynas, LAMP, was set up for poducing and selling cerium carbonate, lanthanum-cerium carbonate (for FCC), and praseodymium-neodymium carbonate (didymium) for magnet making. It sends its SEG/HREE residues to Solvay, la Rochelle, for toll refining.
It's model is indeed based on 2009 pricing.
Its grasp is within its reach!