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Jack Lifton  

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  • Molycorp: Misconceptions And Reflexivity Present Opportunity [View article]
    Contrary Jay,

    As I see it the problem for Molycorp is a universal problem among REE miners and juniors: No such venture can be profitable if its product price point is a process leach derived "mixed concentrate." Giving Smith and Company the benefit of the doubt I think they may have seen this problem close to when they began their trek into the stock market to raise capital. Their mistake was to assume that their separation plant added enough value to make them profitable with a product price point set based on separated salts of lanthanum, cerium, and didymium.
    This pattern of moving downstream and then finding out they had not moved far enough was repeated many times after they had received the proceeds of their IPO-THEY SHOULD NOT HAVE GONE PUBLIC UNTIL THEY HAD DETERMINED HOW FAR DOWN THE SUPPLY CHAIN THEY NEEDED TO GO TO BECOME PROFITABLE! THE ORIGINAL PLAN, I WAS TOLD, WAS TO GO PUBLIC IN 2012. I ADMIT THAT IN LATE 2009 I COUNSELED ONE OF THEIR BACKERS TO GO PUBLIC RIGHT THEN, BECAUSE THE MARKET WAS READY. I WAS RIGHT AND WRONG. THE MARKET WAS READY, BUT THEY WEREN'T.
    The simultaneous error was a constant, perhaps dishonest, hyping of the total REE market as unthethered from the law of supply and demand. This came out as both demand and price would increase in lockstep.
    Mr Smith reacted to detailed criticism by, in my opinion, wildly overspending to acquire assets to mute the criticism with no thought as to how to integrate such assets into the Molycorp circus to make it into a smoothly operating system systematically reducing costs.
    The problem now being faced by Messers Bedford and Karyannoupoulis is how to restructure this mess while using Neo's business to carry the load. I don't think they can succeed, but I wish them the best. Mr Karyannoupoulis told some people I know earlier this year that he wishes that I would not try to be an expert at everything when I assess Molycorp. Nonetheless I will continue to analyze Molycorp's business model as I understand it from public records and my activity in the global rare earths community. I really do wish him the best, and I hope he rescues his former Neo business from the morass.
    Now you know what i think.

    Jack
    Nov 12, 2013. 10:52 AM | Likes Like |Link to Comment
  • The Current U.S. Economic Scenario: Where We're Headed [View article]
    In this morning's Wall Street Journal an author points to the tendency of government political appointees to fail ever upward in their career paths. I use to think that most government failures were due to ignorance by "leaders" and lack of specific expertise in their subordinates. I have come to believe now that this ignorance is mostly do to an overall lack of intelligence by a power-greed driven group that has taken over the national government. Hollywood on the Potomac is all smoke and mirrors and its moral decay is palpable.
    Nov 12, 2013. 09:29 AM | 10 Likes Like |Link to Comment
  • Advantages of Proprietary Processing Technology Validated in Pilot Plant Tests [View article]
    This announcement is a very positive indication that Rare Element Resources is actually making progress on its excellent business model. The company is thus separating itself from the majority of juniors who have either lost their way, or are far too early in the process to be worthy of much, if any, further consideration.

    I wish to re-state my position that RER is a survivor of the rare earth bubble, and is a key future component of a SECURE domestic North American total rare earth supply chain. Attention end-users: Paint a circle around this bright spot on your procurement radar screens.
    Nov 11, 2013. 10:06 AM | Likes Like |Link to Comment
  • Molycorp: Misconceptions And Reflexivity Present Opportunity [View article]
    Dear Contrary Jay,

    Thank your gentle criticism of me and your thoughtful review of the history of investing in Molycorp. You are right, mostly, on both accounts.

    I last visited Mountain Pass in the summer, I believe, of 2009. At that time Brock O'Kelly, who I had met in Hong Kong at a Metal-Pages event at which I spoke, gave me the grand tour of the (original) SX plant, which he said had then been brought back to operation up to the production of mixtures of praseodymium-neodymium (didymium). He told me then that their next goal was the separation of samarium and europium which was hoped to be accomplished by summer, 2010.
    The plant was mild steel, the equipment was leaking-there were spots of kerosene on the floor, but it looked good to my managerial eyes (I retired in 1999 as the CEO of an automotive production chemical manufacturer).
    Mark Smith gave me a presentation of where the company was and what it hoped to achieve. I was the oldest man in the room, and I could have been the grandfather of the lab manager. This to me was very positive, and I said so to Brock who responded that he was then the only employee left from the previous regime.
    I was impressed by the mine's size and ease of access.
    But I remember that I said to Mark Smith, after he told me of their future plans, that I thought that they should bring the original plant into operation and hope that REE prices in the meantime firmed. This would enable them, I thought, to produce enough revenue to make a nice profit. Mark told me that Molycorp was going to be a billion dollar global corporation not just a nice little profit-maker. The gap between the thinking of a small businessman and a Wall Street driven big company (Chevron in Mark's case) guy could never have been clearer. I still think the way I thought then, and Mark still thinks the way he thought then.
    Mark was and is a big company guy; they don't solve problems they delegate their solutions to those lower on the food chain. They populate the food chain with those who think they belong there-usually former acquaintances from Big company days. This is the way, typically that Wall Street and Harvard Business School think that the development of a company should be done.
    I had then just met Gary Billingsley who first made me aware of the mine to market strategy. He, Gary, had probably not yet met Mark nor had Mark then ever heard of or thought of mine to market. That happened later.
    I have no ax to grind with Molycorp. I think it took the wrong direction. Those who made money on Molycorp share trading look upon me as a sour graper. The truth is that i don't care about Molycorp. It's time as "the" potential savior of the REE supply market is long past. The Molycorp bubble is over, but the problem of a secure supply of the critical rare earths looms larger every day.
    I know I didn't answer your questions, but I wanted to say the above first. I will answer your questions in another forum. I do not wish to submit articles to SA, because I have found its editors and I do not agree on the importance of key topics and themes.
    Thanks for reading,
    Jack
    Nov 11, 2013. 09:37 AM | 2 Likes Like |Link to Comment
  • Molycorp: Misconceptions And Reflexivity Present Opportunity [View article]
    Ladies and gentlemen,

    My SOLE interest is in assessing the probability of the commercial success of a natural resource production venture. That assessment is a factor in the determination of LONG TERM investors' interests. The greed circus of the hype market is not a factor in my calculations. I cannot predict stock prices, but I understand that my conclusions as to a venture's probability of commercial (profit making) success may be taken into account by those who make early and short term investments.
    The volume of trades in a company's shares and the mechanics and outcomes of short term market manipulation mechanisms can help a developing company only if it allows it to sell its equity. Once the company is in production it can self finance through debt and by issuing bonds (if it is profitable and has good management).
    The volume of discourse(MOSTLY BULLS**T) here about puts, calls, shorts, insider trading, etc is about the making of money by those buying and selling STOCK not by those who make and sell PRODUCTS.
    Nov 10, 2013. 11:05 AM | 4 Likes Like |Link to Comment
  • Molycorp: Misconceptions And Reflexivity Present Opportunity [View article]
    Ausheds,

    I had a similar conversation with CK in 2009 at a Research Capital event at which we both spoke in Toronto. I asked him why Neo did not get into mining. He said that there were two reasons: 1. The Chinese would look unfavorably on Neo seeking alternate sources and could put pressure on his then current sources, and 2. The were no resources of feed stock in the USA or Canada, so why would he risk his company's existence.
    Like you I believe that he would like to return to his pre-Molycorp existence, but he cannot do it without a storm of shareholder lawsuits describing the Neo purchase by Molycorp as a "looting" or at best a parasitical attempt to fund Neo by draining Molycorp. Obviously the MCP board would also have to approve the "deconstruction." of course if CK were the chairman and his former CFO the CEO of MCP it might be easier just to move MCP incrementally back to an extended version of Neo. But of course that's just speculation.
    If MCP goes bankrupt I want to try to buy the subsidiary of Neo that was formerly "Recapture Metals." I admired CK's vision when he bought that company, as Neo, from its brilliant founder. Look at the facts: Neo was and is the only REE company that has made profits all along. The 2011 bubble maximized its shareholder value and the sale of the company to MCP at that value made CK a true champion of his shareholders and a rich(er) man. CK is a very smart businessman. MCP is not at all a good story. CK must have a plan, but it can't possibly be to bring into production a producer of materials already in oversupply from lower-cost producers. What is his plan?
    Jack
    Nov 10, 2013. 10:48 AM | 3 Likes Like |Link to Comment
  • Molycorp: Misconceptions And Reflexivity Present Opportunity [View article]
    Sarcastic Processor,

    I have no direct knowledge of Mr Karyannoupoulis' "elevation." It is an industry rumor that I believe.

    Jack
    Nov 10, 2013. 10:27 AM | Likes Like |Link to Comment
  • Molycorp: Misconceptions And Reflexivity Present Opportunity [View article]
    Ausheds,

    Thanks for the list! When it's put down in black and white the hopeless careening from one "fix" for a bad business model to another fix for a bad business model becomes obvious. I think you left off "Jacobs Engineering," which was accused by Molycorp of "bad (mechanical) engineering as yet another reason to not take any blame for their excess capital burn last year.
    Your succinct analysis is correct.
    Until the non-Chinese rare earth industry can wean itself from the influence of the Molycorp(s ) of the world, which have over-inflated the size of the global REE markets and undervalued the key REEs while completely ignoring the complexity of the processes for refining REEs from their sources it, the industry, will be unable to get additional funding from institutional investors.
    I am always hoping that the market will decouple the Molycorp share circus from the share trading of the very few struggling real groups trying to bring non-Chinese critical REEs and their downstream processing into operation.
    A total American rare earth supply chain could have been assembled for less than one billion dollars. Now that Molycorp alone has wasted as much as 5 times, perhaps, 7 times that much I am very disappointed in Wall Street. The "sreet" either does not understand how to bring an industry forward or it does understand and just prefers to loot suckers and use other people's money for its own gain.
    I will have a lot more to say about this topic on http://bit.ly/HH51IF and on InvestorIntel.com in the near term.
    When Molycorp goes bankrupt everyone will say "I knew it was a bad idea, but it made me some money." This is the requiem for the American dream.
    Jack
    Nov 10, 2013. 08:34 AM | 1 Like Like |Link to Comment
  • Molycorp: Misconceptions And Reflexivity Present Opportunity [View article]
    Bhappu bought $25.000,000 woth of MCP at $10 during on eof the previous hype cycles.

    I'm not jealous of any MCP "insiders." I don't count other peoples' money. I just note to where and to whom the "profits" are going.

    A scalpel is a much better tool to grind than an axe.
    Nov 9, 2013. 08:54 PM | 2 Likes Like |Link to Comment
  • Molycorp: Misconceptions And Reflexivity Present Opportunity [View article]
    Mr Roat,

    A question and some comments.

    Can you detail, please, the insider trading in this stock since the holding period on the original issue expired?

    It seems to me that the takeover of Molycorp by the management of the former Neo Materials Technologies is now complete. I think that the fantastic price that Molycorp paid for Neo was either a "pre-nup" or a complete breakdown of common sense by the soon-to-be-former Molycorp board. In any case the man who often referred to himself as the "only businessman" in the non-Chinese rare earth industry will soon be the chairman and his former CFO is already the new CEO of Molycorp. These gentlemen have a monumental task, the unwinding of the arbitrary construction of a "globalized (?)" Molycorp that occurred before they joined the edifice. They will need a lot of luck, a lot of money, and time to avert Chapter 11. But fortunately for them they have no risk to their personal fortunes, which were assured when NEO was sold to MCP.
    When the original Bhappu rangers took nearly $2,000,000,000 in profits from their original total investment of $122,000,000 we were told that they deserved the payday for their "hard" work and "risk" taking.
    How much exactly are the Bhappu rangers putting back to "make it work??" They still have a lot of stock, so why wouldn't they want to take the "risk." Isn't it a sure thing?? I recall that Mer Bhappu bought 25,000,000 of $10 MCP. I'll bet that he shorted it or sold it not long after. Am I right?
    The other day some 8,000,000 shares of MCP traded with a net move of +0.09. The brokers were paid at least $5 to $9 for each trade. I know that individual share trades pay only .06/trade, but there were a lot of small lot trades here. Who made more the brokers or the shareholders?
    It is the clients of Morgan who take the risk. The "bank" simply charges them for allowing them to participate by assessing overall fees against the raise and brokerage fees on each trade.
    Nov 9, 2013. 08:31 PM | 6 Likes Like |Link to Comment
  • Tesla's Painful Journey Into The Valley Of Death [View article]
    Note that manufacturing engineering is always the problem. Scale-up is the main issue in bringing technologies to the MASSES. The probability that a laboratory demonstration can become an economical mass produced safe to use device is the major factor in risk assessing new technologies. Financiers bring such projects forward every day in order to distribute or eliminate THEIR risk and recapture their capital. Once the company has gone public the original venture financial engineers have solved THEIR problem. It is then up to the manufacturing engineers to principally determine whether or not the venture succeeds.
    Nov 8, 2013. 10:45 AM | 3 Likes Like |Link to Comment
  • Tesla's Painful Journey Into The Valley Of Death [View article]
    John,

    I think you're absolutely right on this. Chevron poured a relative fortune into COBASYS (Chevron Ovonic Battery Systems). The money went mostly to Energy Conversion Devices, Chevron's partner, for battery manufacturing R&D. General Motors was comforted by Chevron's strong support of the technology so it built some 8000 HEVs with the COBASYS batteries. All 8000 cars were recalled for a defect caused by a bad choice of battery "case" plastic, which cracked and lost the electrolyte. Daimler, also a "customer" because of Chevron's involvement canceled its contract and sued for civil fraud as well as non performance.

    The cells were made at the end by Sanyo in Japan. Assembly was done at COBASYS and R&D by Ovonic Battery Systems and Ovonic Materials, to where Chevron's capital flowed to disappear in research programs unconnected to manufacturing technology problems that were being encountered.
    There were endless "breakthroughs" in the lab.
    Chevron pulled the plug on the sugar after it was out more than 300 million dollars. It told Energy Conversion that it would not put any more into the "partnership" until ECD came up even in the financing. It invited ECD to find financing or a buyout partner.
    No one came forward because Stan Ovshinsky made emotional not financial decisions and his model of announcements and press releases had run its course in the stock market. There was no more money to be made by trading shares, which is the only way anyone dealing with a dream factory can ever make money.
    Tesla's demise, like Solyndra's and that of COBASYS, is foreseeable as soon as you see that the real world doesn't allow technologies to succeed that are not in lock step with the actual and near term supplies of their enabling raw materials and cannot be mass produced at the levels required for contemporary manufacturing engineering to make competitive products.
    The Tesla WORKS, the NiMH battery WORKS, and the Solyndra CdTe cells WORK. None of them are economic. Each product cannot be mass produced, because it would then be unsustainable economically.
    The amazing thing about innovation finance is that it allows so many dreams a chance. The market, however, always chooses the winners.
    Nov 8, 2013. 10:15 AM | 2 Likes Like |Link to Comment
  • Molycorp Won't Close Gap In Low China Rare Earth Metal Export Quota [View article]
    Lynas and Molycorp are both struggling with engineering "learning curves." They are both trying to master the problems of what I think, and what I have said from the first day for both, are the wrong output volume targets for either to be considered as "the right size."

    This is what happens when spreadsheet warriors take command waving computer printouts against the other guys' shovels, engineers with experience, and marketing guys who "know " the market.

    There is room in the nonChinese market for both Lynas and Molycorp only if they can deliver the quantities and qualities required by the non Chinese customers on time and at agreed prices. So far that has not seemed to happen at least for Lynas.

    The spreadsheet warriors do not want investors to realize that the Chinese domestic rare earths markets, the largest in the world, do not want and will never want or need to import light rare earths. The Chinese markets want heavy rare earths, and because China today is the only producer of them, outsiders will have to be very good at marketing and have clearly first class deposits to get into the game at all.

    Please Read my series running this week on Investorintel.com for a very detailed discussion of the global rare earths markets in this decade.
    Oct 2, 2013. 08:56 AM | 2 Likes Like |Link to Comment
  • Why Tesla Had To Repay Its DOE Loan [View article]
    John,

    Your critics have it in common that they only care about the share price and that only in the short term. Your analyses are meant for those with a different outlook, the long term. Companies that produce items that people want to buy for more than the cost of the goods sold are here as long as, and only as long as, their products are in demand at those prices and with those costs that allow them to make a profit. In the share casino in the short term it's always the greater fool theory that prevails. Screw your critics from the casino. You're a first class analyst with a razor sharp eye for details. Mr Musk's brother is probably an avid reader of your analyses.
    Sep 2, 2013. 11:42 AM | 6 Likes Like |Link to Comment
  • U.S. Rare Earths Inc: A Rare Combination Of Assets And Management [View article]
    The concept of "critical rare earths' was devised by the editor/publishers of Technology Metals Research, LLC (http://bit.ly/uy2hnD). I chose neodymium (and reluctantly praseodymium), terbium, dysprosium, and yttrium as the five CREOs. My co-founding publisher, Dr Gareth Hatch, indeed added europium to his list.

    The miniscule amounts of erbium, holmium, thulium, and ytterbium that can be produced in a full spectrum separation plant such as Solvay's (the successor in interest to Rhone -Poulenc's Rhodia) or the many such Chinese plants have few uses and no business can be based on just those elements individually or even in concert.

    Europium is not in short supply. Molycorp was perhaps the first company to put europium into mass production, but it was by no means ever the industrial world's major resource of europium. Europium for the USA in early color tv picture tube display screens came from Steenkampskraal, then an Anglo-American property. It was refined by a unit of St Louis Chemical, which I recall as being in West Chicago, Illinois. Rhone-Poulenc in France was the first company to build a solvent extraction plant that separated ALL of the rare earths from each other. Molycorp had decided to focus on getting the 0.1% europium separated from its TREEs in its bastnaesite, and even at that, the concentrates were sent to West Chicago where they were purified for use using ion exchange.

    Molycorp made a wrong bet in 1964. It bet that europium demand would skyrocket. By 1967 when Molycorp was ready to deliver europium bearing concentrates to refiners the color tv industry had advanced its technology to use just a fraction (1/8) of the europium it had projected in 1964 that it would need in 1967
    Molycorp then found that it could not compete in finished REE products with Rhone-Poulenc, so it began sending concentrates to China for low cost refining in the 1970s..

    By the time the next rare earths boom came along in the early 1980s when the rare earth permanent magnet went into mass production Molycorp was in a death spiral. Its Chinese subcontractors had learned the separation game and how to market the material. They now opened up their immense bastnaesite resource in Inner Mongolia and soon discovered how to recover heavy rare earths from their large very low grade ionic adsorption clays produced almost uniquely in the former rain forests of Sichuan and Jiangxi provinces of China.

    Molycorp with its relatively high cost and no heavy rare earths was doomed as the use of the heavy rare earths became "critical" to the performance of rare earth permanent magnets.

    China has the world's largest total supply chain for all of the rare earths. It is getting leaner and meaner by the day. The million dollar salary paid to the CEO and some officers of Molycorp is not based on performance. It is based on hope. In the light rare earth sector the Chinese are once again breathing on the Molycorp and Lynas necks. The now occurring and ongoing shake out of the total rare earth supply chain within China will determine the future of both Molycorp and Lynas.

    The remaining non Chinese rare earth junior contenders need to focus on the production of the heavy rare earths terbium, dysprosium, and yttrium and the light rare earths neodymium
    and lanthanum. Production in this case means downstream all the way to high purity chemical salts that can be turned into high purity metals and alloys for end-use product fabrication. The USA, Canada, and Australia have immense deposits of heavy rare earth rich hard rock minerals. These deposits are the hope of the REE industry globally.
    Aug 31, 2013. 10:09 AM | 3 Likes Like |Link to Comment
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