Seeking Alpha

Jack Lifton

View as an RSS Feed
View Jack Lifton's Comments BY TICKER:
Latest  |  Highest rated
  • Molycorp Is Worth $2.21 [View article]
    You gentlemen do realize, right?, that Molycorp or any other business has to produce goods/services for less than the selling price in THEIR market. Notwithstanding your playful banter about how YOU will make or lose money through puts, calls, intangible good will valuations, and professionally written press releases this "making it for less and selling it for more" is exactly what Molycorp has not yet achieved on a consistent basis. You also seem to think that the marketplace is just waiting for Molycorp and no other competitor exists that can challenge Molycorp if and only if it becomes profitable.

    The stock market plays with itself most of the time, and share valuations are less and less intrinsic as the time from the IPO lengthens.

    I wish all of you luck in making money in the casino, but I think in the near term that you will make it from the game not from the intrinsic value of this company or of its products.

    The rare earth end user market is highly specialized. Product specifications are driven by customer's requirements. Building an inventory can mean that the customer has changed his requirement or simply cannot afford to buy as much as you are producing, or, is out of business. How do you mark to market an out-of-spec material? At first the same way you value last year's model car, then the way you value old meat after you cannot afford to refrigerate it.

    All of you are using the de Beer's model for inventory. I would use the American Beef Association's model, personally. First, dog food, then doo-doo (composting material)

    I think that the rare earth juniors (exploration companies) went into the market ass-backwards. First they should have all looked at the market to see what was needed, and then to see HOW THAT NEEDED PRODUCT WAS PRODUCED. Then they needed to survey the market and see what the customers would pay for these products, and if there were a premium to be gained from better quality, reliability, and security of supply. Then they needed to determine EXACTLY where they needed to enter the market to make a profit and to provide enough return to their early investors and creditors.

    As far as I can determine they all used only the field of dreams' model: "If I dig up this stuff they will buy it. (This model is also used by all junior gold miners)".

    Molycorp to me was a classic of the above type. It first hyped a USA "military NEED," which has turned out to be, with almost no fanfare, just 150 tons a year of rare earth permanent magnets. Then when that actual demand itself turned out to require and critically need 7 tons a year of dysprosium Molycorp simply ramped up its projected production to 50,000 tons per year, in which, with 100% recovery (impossible, of course) it would produce (surprise) exactly 7 tons of dysprosium per year. Then when the 50,000 ton level's absurdity filtered down to the puts/calls trade Molycorp changed its business model to one of a total supply chain , and purchased Neo materials for twice the value it would have just 6 months later.

    I note that there is no Chinese competitor YET to the total supply chain model. But there will be one if Chinese rare earth businessmen determine that they can cut costs and make money in this fashion. So far, to the best of my knowledge, THEY HAVE NOT SO DETERMINED as of this writing!

    I wish you sincere good luck. The founders of Molycorp made at least two billion dollars playing the market game. I actually hope the company survives, but I know that in its present state survival is perilous.

    Good luck to Molycorp and to you guys in the stock market. You are NOT playing on the same field.
    I note here, to avoid, bulletin board controversy. That the Great Western model of creating a supplier of magnetic materials within the limits of in-house capability of raw materials' production is a very good one, but the volatility of the end-product pricing is not matched by a resonance in the mining and processing costs. I am concerned for their break-even point. I have never met Marc LaViere, but he looks, on paper, to have the right-stuff at this time for GW. I wish them luck also.
    Running a public company is a bitch; you have to answer questions with sound bites that can take a life-time to understand.
    I would leave Consatntine Karyannoupoulos now of MCP alone. If he can't make the colossus work then no one can. He's the best man, and he knows what to do, if it can be done.
    Enough rambling. Gentlemen man your checkbooks (or EFT stations).
    Shockwave: Please keep analyzing I really think your ideas are good.
    Apr 8 01:25 PM | 5 Likes Like |Link to Comment
  • Molycorp: There Will Be Blood [View article]
    I note that Molycorp had no problem promoting Dr Burbs's patents on processing as ones that would improve the efficiencies and costs of their operation. I am mystified by why my simple question is avoided and an ad hominem attack is mounted. Actually I admit that I am not mystified at all.

    So, now that you brought it up I ask again why was Dr Burba separated?? Did he offend the gods, or was the job he did deemed insufficient for his pay grade? (Which was the same as that of the President of the U.S.)
    Apr 5 09:54 AM | 1 Like Like |Link to Comment
  • Molycorp: There Will Be Blood [View article]
    Shock Exchange,

    The blood bath seems to be of the Friends of Mark Smith, FOMS, and that is understandable in terms of changing management and directions, but I am surprised by the fact that, even though he may have been a FOMS, John Burba's dismissal has raised such a small wave. I thought, and perhaps I am wrong, that Dr Burba was in charge of the technical aspects of Project Phoenix. Does his dismissal mean that Molycorp's Project Phoenix is not functional?

    If, as you say, the COGS is more than the selling price in the market can surpass then the company is in trouble. I do not believe that MCP has any more borrowing capacity, so it may, desperately at this point,need a new business model. I have suggested before and I do so again now: Shut the mine down and recast the American part of the company as a processing center. Focus the efforts on cracking ores by contract and tolling LREEs in California and HREEs in Neo facilities. I admit that any processing done in China will be subject to Chinese controls, but I think that China would like to have outside supplies of HREEs to relive the political pressure in China now building rapidly against monster heap leaching operations such as those in southern China at the so-called absorption clay deposits, the principal source of China's and the world's HREEs today.
    Ucore and Rare Element Resources can pick up the domestic supply slack and do not have the overhang of billions of misdirected dollars. In addition both of them will have significant HREEs in their output. HREEs are more than ever what is needed.
    Apr 4 10:06 AM | 2 Likes Like |Link to Comment
  • Are EV Dreams Going Up In Smoke? [View article]
    John,

    The key word here is "validate" A technology. In my working life in high-tech, 51 years, I have never seen such a common-senseless approach to a technology. I cannot any longer understand why anyone would buy anything at all from a company like Yuasa/Boeing that says, essentially, "we don't know what happened on the 787, but we have fixed it." Isn't it obvious that it's the manufacturing technology that is the problem. Li-ion battery development has reached a plateau or perhaps a brick wall. No one is born to be a battery engineer or an electrochemist. We cannot create experts who master these technologies by simply throwing money at promoters, or, worse, at scientists with little knowledge of business, economics, or politics. A scientists's only goal is to increase knowledge, but in our society we value money and its accumulation more than knowledge, so we get promoters in charge not scientists and engineers.
    I will fly on a 787 using a new improved Yuasa li-ion battery only when the CEOs of both Yuasa and Boeing are on the same flight. Boeing should buy simple, reliable, Duracell flashlight batteries by the ton, TEST EACH ONE, and replace them after each flight.
    I visualize Yuasa and Boeing engineers with screw drivers on each flight while company executives and so-called regulators sit in their plush safe offices and fret about their jobs and their share prices. Is that any way to run an airline( automotive company)??
    Mar 28 06:46 PM | 19 Likes Like |Link to Comment
  • Russia and South Africa, which together hold ~80% of the world’s platinum-group metal reserves, reportedly plan to create an OPEC-type cartel to coordinate exports. Like OPEC, the two countries would want to be able to create a floor under platinum prices, which would help their important domestic mining industries in terms of profitability and allow them to pay poor and increasingly militant miners better wages. [View news story]
    Canada's PGM bearing deposits are years and billions of dollars away. The issue is, as always, processing. Canada's biggest PGM related asset is Ressources Miniere Pro-Or (POI.V) which can not only recycle catalysts but also recover PGMs from low grade and even from chromite ores, both at very low costs.
    Mar 28 12:28 AM | 1 Like Like |Link to Comment
  • Molycorp Hits 52 Week Low - 'The Pain' Is Real [View article]
    Shock exchange,

    Your commentariat is trying to have it both ways. On the one hand some of them are treating the rare earths as commodities where the lowest cost producer wins. Some of these commentators also think that since downstream rare earth products are based on commodities then they are also all interchangeable. Please take account of the fact that rare earths are commodities last when they enter the separation plant. The separation plant products are CUSTOMER SPECIFIED. It is the next step in the process, the manufacturing of the next stage intermediate product from the customer specified separation plant product where the boys and men are separated. Molycorp Canada has been producing bonded magnet precursor powders and bonded magnets for a relatively long time. The value to Molycorp Canada of the Mountain Pass mining/refining operation is to make Molycorp Canada independent of China as a neodymium-praseodymium supplier. Molycorp Canada's sales will not magically rise nor will its market share until and unless its overall costs and supply insecurities go down.

    Announcements that low dysprosium or no dysprosium bonded magnets are being offered to the appliance and automotive industries doesn't mean that those industries are BUYING them. In fact those industries, even in China, are simply hedging their bets. If dysprosium is available they will use sintered magnets as they have been doing. The issue is availability and PRICE. Dysprosium below $1500/kg, if available, will remain the basis of the magnet of choice.

    It takes YEARS for new suppliers of critical components to be QUALIFIED and even then PRICE and AVAILABILITY of products that meet CUSTOMER SPECIFICATIONS are the deciding factors.

    In the rare earth business you don't mine and refine and then sell; you find out the customer needs and specifications first and then you design your system to produce the correct raw materials. Neo could always do far more for Molycorp than Molycorp could do for Neo. Keep that in mind along with the fact that Molycorp Canada is not by any means the biggest magnet producer in China; it is in the top 10 or 5. To break out of the pack without going into sintered magnets it needs a non-Chinese security of supply at a competitive price. this is the hope of Mountain Pass..I do doubt, however, that China will allow Neo to import California produced LREEs. But Neo can produce magnets outside of China; the problem will be selling those magnets in China, the world's largest market for rare earth permanent magnets.

    Mr Karyannoupoulos has a long road to hoe, but he is perhaps the only man for the job. Its really too bad that Neo didn't buy Molycorp in the first place. But you dance with the girl you brought to the party, so I wish Mr K good luck. He and the board are off to a good start in cleaning up the mess caused by marketing inexperience.
    Mar 27 10:20 AM | 5 Likes Like |Link to Comment
  • Avoid Molycorp: Inventory Overstated By $134MM [View article]
    You've hit on a key issue with rare earth junior planning. I have never liked the term "basket price," because it assumes that all of the rare earths from a deposit are equally sale-able when produced. This is not true unless a strong and credible and SUCCESSFUL marketing plan is in place before production commences! I have found to my dismay that most of the juniors were lost in a field of dreams on this issue. They assumed that they would produce ore concentrates and that would be that. As some of them learned why that wasn't going to be true they began to fantasize that hydrometallurgy consisted of only extracting the rare earths from the ore, and that any further processing to sale-able end products was easy. Then they found out that not only wasn't it easy it was very expensive. Then they found out the market was not for just any rare earth but really just for the critical ones. Then they found out that end users don't switch suppliers unless the new supplier is less expensive and extensively experienced in meeting schedules and quality requirements....and so on and so forth.

    Very few junior rare earth projects are going to survive.

    This author is absolutely correct. Business is about making profits not building inventory.
    Mar 22 11:14 PM | 1 Like Like |Link to Comment
  • Avoid Molycorp: Inventory Overstated By $134MM [View article]
    Thank you for finding the $36/kg figure.

    Now

    Note that Michael Doolan says in reference to slide 9 "our chemicals and oxides segment sold 4,631,000 metric tons"

    No matter how you measure products this is a physical impossibility. Note that just to get 20,000 metric tons of throughput at Mountain Pass they would have to move and process 250,000-350,000 tons of ore. This is a major undertaking by itself. I cannot imagine what they would have to process to get nearly 5,000,000 metric tons of PRODUCTS! This is a mis-statement clearly that no one bothered to challenge. I am now quite skeptical about this call. what is it that I am overlooking, please?
    Mar 22 09:43 PM | 1 Like Like |Link to Comment
  • Avoid Molycorp: Inventory Overstated By $134MM [View article]
    OK. I don't see any statement of current cost per kg. I see only the current target has been moved from Mark Smith's often stated $2.75/kg to Mr Karyannoupoulos' $6/kg, which, in fact, if achieved, would still make Molycorp probably the lowest cost producer of its light rare earth product line.

    I am now confused by the statement that the company sold more than 4 million tons of products of all kinds last year. What was the breakdown of that??

    Global production of all rare earths last year was officially between 90,000 and 125,000 metric tons. I don't know how much niobium, tantalum, rhenium, and gallium came out of Molycorp globally, but the total global production of all of those metals combined was less than 70,000 metric tons from all producers. Even though Molycorp's acquisition of Recapture Metals, Ltd two years ago gave it, Molycorp, as much as half of the global gallium refining capacity this capacity is around 125 metric tons per year. Where did Molycorp's CFO get his number? Am I missing something?

    Thanks again.
    Mar 22 08:20 PM | 1 Like Like |Link to Comment
  • Avoid Molycorp: Inventory Overstated By $134MM [View article]
    I didn't listen to the MCP earnings call last week, and I don't have a transcript at hand. Can you or a reader tell me what cost of processing Mountain Pass material was quoted by Mr Karyannoupoulos? I was told it was a number conistent with the current basket price, but I do not believe that, so if it was mentioned please tell me what that figure was.

    I also noted in the 10k that Silimae produced or sold some 75+ million dollars of "rare metals." Are the details of Silimae's production broken out anywhere? Particularly I'd like to know what percentage of that production/sales was what: Niobium, tantalum, and rare earths (and which rare earths and in what forms and purities).


    Thanks, by the way, for this analysis of the Molycorp inventory position.
    Mar 22 07:22 PM | 1 Like Like |Link to Comment
  • Molycorp's (MCP) deal to distribute its cerium-based water treatment product to municipal and industrial wastewater treatment plants may have eased some investor concerns about MCP's cerium capacity, Goldman Sachs says (also). Jefferies starts coverage at Neutral but could turn more positive if customer trials on the product end well and upon a better understanding of the deal's margin profile. [View news story]
    I wonder if anyone at Goldman-Sachs has ever marketed wastewater treatment. I was once the technical sales manager of a small company that produced, among other products, wastewater treatment Chemicals. Municipal and industrial wastewater treatment chemicals are only sourced from approved and qualified vendors. Such approvals can take a very long time especially for large systems. The idea that every customer will just roll over and accept a new vendor with a new technology is literally a pipe-dream. If SorbX is cheaper and better then it will find a market, but NOT IF IT'S ONLY SOURCED FROM ONE VENDOR! It will take time and a licensing program for any new technology to gain a foothold against the existing vendors. I'm not criticizing Molycorp for promoting a technology that may be an improvement. I am criticizing the absolutely uniformed people at Goldman-Sachs who have decided that he world glut of cerium won't affect Molycorp, because they have a purported new use for cerium. This is beyond silly. New products and new technologies no matter how good they are mostly fail in the marketplace, because the vendor or inventor cannot wait and cannot endure the trials necessary for product acceptance in the marketplace.
    Mar 16 12:08 AM | 4 Likes Like |Link to Comment
  • Molycorp: Is CEO Constantine Karayannopoulos In It For The Long Haul? [View article]
    Raymedo1,

    There is no first to market advantage for Molycorp. The L(ynas)A(dvanced)M(ate... in Malaysia is now running and will begin to deliver commercial (to SPECIFICATION) materials to AAA customers early in the next quarter. It looks like it will then ramp up to full production (11000 to 22000 MTA) by the end of the year. The mechanically beneficiated ore for more than a year's production is already prepared at Mt Weld and is being shipped to the LAMP as needed. Note that the LAMP process chemistry was designed by Rhodia and is being brought up to speed with EXPERIENCED Chinese supervisors training Malay workers to take their places. Also the marketing has been done in the form of long term supply contracts (10 years).

    Molycorp's problem is credibility: Will it be able to supply, on time, to specification? Note that both Molycorp and LYnas have to prove their ability to deliver TO SPECIFICATION, ON-TIME, THE QUANTITIES AGREED, and AT THE NEGOTIATED PRICE. Both are NEW suppliers and as such get a SMALL percentage (10-20) of the demand until the end-user is satisfied that they are RELIABLE. The market today does not need both of them, and the market will decide which one survives.

    My guess, and it is, in the end, just that, is that Lynas will win the race due to its much lower operating costs and the experience of its operating team.Lynas' also seesm to have done an excellent marketing job IN ITS OPERATING REGION, Southest Asia.

    I think that America's domestic self-sufficiency in all of the critical rare earths is in the hands of Rare Element Resources and Ucore. Both may well be successful, because they are the right size and have the right mix of products. Follow the details coming out of those companies carefully and pay strict attention to the fact that the critical rare earths are much, much, more important than the light rare earths in a balance sheet. The less a supplier has to depend on lanthanum and cerium for revenue the more likely that supplier will be a strong contender and/or the ultimate survivor and a regular supplier.
    Feb 22 11:59 AM | 3 Likes Like |Link to Comment
  • Tesla's Obscenely Expensive Cure For Range Anxiety [View article]
    John,

    My father told me that in 1923 in Detroit he kept the boiler (kerosine fueled like the lamps on the Manitoba farm where he was raised) flame on low during the night and went out when he woke to turn it up to operating level on his Stanley Steamer. Then after breakfast he would drive to his job at a Ford dealer where he among other jobs poured new babbit metal into bearing races.

    He told me that he loved to race IC powered cars from stop signs because his Steamer beat them all to hell on start-up torque. He told me that he always thought that the Steamer would survive, but that Henry Ford was too aggressive for them. He also said that a Steamer could beat any electric vehicle he ever saw both in range and performance and PRICE.

    Mr Musk and most of your readers still don't understand cost economics. The Tesla is a performance focused rich man's toy. Batteries that give such performance are too expensive and still too cranky (excuse the pun) and temperature sensitive.

    You're the one that says "I can explain things to you, but I can't understand them for you." Amen.
    Feb 16 11:29 AM | 6 Likes Like |Link to Comment
  • Are Molycorp's $1 Billion Intangible Assets Impaired? [View article]
    May I point out that Neo Materials was never a "mine to market" organization. Neo, to the best of my knowledge and memory has never been in the mining business as a producer. Neo tried for several years to develop a process technology to recover dysprosium from the cassiterite (tin ore) residues at the Pitinga site in Brazil, but that was not "mining." That was metallurgical research, and as far as I know, Neo was unsuccessful.

    It was Molycorp, the mining venture, that bought Neo, the processing and downstream-product company. To the best of my knowledge Neo never offered to buy Molycorp or any other mining venture.

    The first time I ever met Constantine Karryannoupolous in late 2007 I asked him why he didn't build a separation plant in North America. he said that it was because there was no feed stock in North America for such a plant. Further, he said, the Chinese might react negatively to such a venture, since it would mean a purposeful lessening of Neo's dependence on the Chinese rare earth supply chain.

    Be very cautious when you talk about intangibles and good will when the Chinese domestic market may the source of a big piece of that valuation.
    Feb 1 03:11 PM | 2 Likes Like |Link to Comment
  • Molycorp (MCP +0.8%) is initiated with a Neutral rating at Goldman Sachs, which says its positive view on growing leverage to higher-value, downstream products and potential share gains in China is balanced by management uncertainty and execution risk ahead of a big capacity ramp in 2013. [View news story]
    The Goldman analysts have a nice view of the world from their climate controlled offices at the foot of Wall Street. They watch data displays created by algorithms on devices the construction of which they do not understand nor have they ever been involved with manufacturing or chemical engineering or end-user marketing. Yet as their voices change over the seasons and hair begins to grow in formerly barren places they pontificate on data generated by talking to each other. One cannot smell roses in a filtered climate controlled atmosphere. However the odor of mendacity does pervade those halls.
    Goldman's Molycorp is not the same as the Molycorp that actual end-users of products enabled by the rare earths see.
    Dec 18 11:10 AM | 2 Likes Like |Link to Comment
COMMENTS STATS
374 Comments
1,382 Likes