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#4 - The Top 10 REEsons To Buy Molycorp

|Includes:REE

 4. Favorable Production Contract Terms

FACT:

First, only their smallest contract has a floor & ceiling clause, but even it is based mostly on market prices. Their newest larger contracts only have a floor clause.

From the 1/24/11 MCP Form S-1 page 11:

http://phx.corporate-ir.net/phoenix.zhtml?c=236277&p=irol-SECText&TEXT=aHR0cDovL2lyLmludC53ZXN0bGF3YnVzaW5lc3MuY29tL2RvY3VtZW50L3YxLzAwMDA5NTAxMjMtMTEtMDA0NjcyL3htbA%3d%3d

OPINION:

Because of market demand they were able to aggressively negotiate and protect themselves without giving up on the upside. That's a strong market. Also, none of their new doubled production has a contract at this point. When future contracts get announced one can expect the same market based prices, a protective floor clause, and no limiting ceiling.  This means that Molycorp will be able to profit from rising spot prices, and still be protected on the downside.

Stocks: IQ, REE