Molycorp cash could get tight in H2, Morgan Stanley says in downgrade


Molycorp (MCP +0.7%) is downgraded to Underweight from Equal Weight with a price target of $2.50 at Morgan Stanley, which says cash could become tight in H2 for the rare earths miner.

The firm cuts its 2015-16 revenue estimates by ~40% on weaker than anticipated volumes due to slow ramp-up and sales mix on lower sales of neodymium and praseodymium; management is working to address both, but investor confidence is low given past shortfalls.

Stanley does not anticipate a material improvement in Mountain Pass production during Q2 from the April run rate because commissioning and ramping up of tanks could take one to two months; also, there is risk that new bottlenecks might emerge in the process after leach tank capacity is raised.

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Comments (5)
  • tiger8896
    , contributor
    Comments (743) | Send Message
     
    Mining for rare earths reminds me of that old movie Madame Curie where it took 2 tons of pitchblend and 4 years to extract .0000001 gram of radium. Not a great business to be in.
    21 May 2014, 11:54 AM Reply Like
  • jzut
    , contributor
    Comments (148) | Send Message
     
    $5 down to $2.76 and now downgrade. Where were you at $75. PURE BRILLIANCE!
    21 May 2014, 12:09 PM Reply Like
  • giefmoney
    , contributor
    Comments (155) | Send Message
     
    You made me laugh, tanks and so true!
    21 May 2014, 07:58 PM Reply Like
  • Jack Lifton
    , contributor
    Comments (431) | Send Message
     
    I am intrigued by the "in the know" attitude of MS's analysts with such statements as "...because commissioning and ramping up of tanks could take one to two months; also, there is risk that new bottlenecks might emerge in the process after leach tank capacity is raised." It's clear that these analysts have never built anything not put any chemical engineering facilities into operation, since those of us who have done so know well that nothing ever goes according to plan and the risk is always that the system won't work until tweaked, if at all.
    It was obvious from the beginning that MS viewed Molycorp's plan, as they perceived it, as an outcome to be expected once enough money had been thrown at it. Now that reality has set in things don't seem so rosy. "Reality" by the way is the fact that the lowest cost producer will have as much market share as it can produce. Does MS believe that just by stating that its production costs will be lower than that of its Chinese competitors Molycorp can actually do that? Apparently so.
    21 May 2014, 12:12 PM Reply Like
  • Tomstocks
    , contributor
    Comments (3) | Send Message
     
    Molycorp did announce in the conference call that they have $236 million cash & cash equivalents on hand and anticipate capital expenditures will be $61 million across the entire organization for the remainder of 2014.

     

    Conference Call transcript quote:
    On Slide 11, in terms of our balance sheet and statement of cash flows, we used $46 million in cash for operations during the quarter. We also spent $30 million in Q1 for cash capital expenditures, which is now indicative of the significantly lower slowing capital spend at Mountain Pass, and there have been no changes to the overall Mountain Pass project budget. For the remainder of the year, we anticipate capital expenditures will be $61 million across the entire organization. And as of March 31, we maintained $236 million of cash and cash equivalents on the balance sheet, a quarter of which was held in China.
    21 May 2014, 06:32 PM Reply Like
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