Molycorp was no doubt anxious to welcome the New Year. 2012 was not kind to the Company, whose market value dropped by more than 60%. In January 2012, investors had to pay USD$ 30 for one share Molycorp (NYSE: MCP). On New Year’s Eve 2012, that same share was worth less than USD$ 10. That last value does not even represent the bottom: far from it. The lowest value of the year for MCP was USD$ 5.75. If the stock prices were disappointing, MCP also had to confront higher than expected mine construction costs and SEC investigation and the ‘resignation’ of its highly visible CEO Mark Smith under unclear circumstances. Nevertheless, Molycorp is still operational and it has an opportunity to gain ground in the Chinese magnet market itself thanks to its control of the Magnequench patent, which enables it to use rare earths powder to produce neodymium-iron-boron magnets. Molycorp can therefore benefit from markets associated with downstream finished products used in hybrid vehicle motors and batteries, wind power generators, rocket guidance systems and several known and as yet unknown applications.
Molycorp, moreover, is still one of the principal rare earths players in the ‘West’. This alone makes it valuable and there are many companies interested in reducing their dependence on Chinese suppliers of rare earth materials. Accordingly, some analysts have suggested, notably in an article published on January 2 (click here), that Molycorp is ripe for a takeover. Wall Street appears to have considered this suggestion with interest, because Molycorp’s shares gained some ground on January 2, jumping to USD$ 11.35/share at opening and closing at USD$ 10.25. Molycorp detractors and Molycorp takeover skeptics might bring up the fact that Molycorp is not yet a ‘ripe’ enough fruit for the picking. Molycorp is still developing its mine; it has not proven being capable of producing heavy rare earths and it is still experimenting or refining a new rare earths processing technology. In other words, MCP might present more risk than opportunity.
The market, nevertheless, has spoken with its own voice, boosting the stock value, indicating that the takeover rumors should not be dismissed and that the suggestion has some merit. Indeed, problems and all, Molycorp has valuable assets that are worth more than its current market value thanks to the Mountain Pass mine in California and the former Neo Material Technologies processing facility that MCP bought at a price of over USD$ 1 billion. The buyer might consider the logic that at present stock market values, Molycorp is twice as sophisticated as it was two years ago, when its share price was six times the current one, at less than half the value that it was last year. Some big companies with revenues rivaling the GDP of a small European country might even consider Molycorp a bargain.
Among the companies seen as interested in taking over Molycorp are Nissan, Hyundai and Siemens. There have not been any rumors from Nissan on the matter, nor has Siemens commented; nevertheless, if Siemens were interested, why not General Electric or even one of the large defense contractor, especially those involved in manufacturing guided missiles such as Raytheon? Meanwhile, the dark horse might be Hyundai, the world’s fifth-biggest automobile manufacturer. The Company’s articles of incorporation state a deliberate goal to develop and build eco-friendly and fuel efficient vehicles. Hyundai has targeted weight reduction as one of its main approaches to achieve this goal and in 2011 it advised its intention to “vigorously secure rare earths and other rare resources”.
Hyundai sells hybrid models in the United States and is aiming to build and sell full electric vehicles in 2013, using its ‘BlueOn’ technology. Hyundai’s competitor Toyota (through its trading arm Toyota Tsusho Corp) has already partnered with the Indian government to build a rare earth processing plant in India, securing some 3,000 to 4,000 tons or REE’s a year, needed to make batteries and other components. Hyundai has a research facility in California, not 160 miles from Mountain Pass. A Hyundai – Molycorp union would make sense after all. Of course, this is all conjecture for the time being, but there is sufficient evidence to warrant the speculation, making Molycorp one of the big plays to watch this year.
Magnequench of Molycorp already lost their patent by reexamination in USPTO, the most of patent already expired in Magnequench, Magnequench bought the license of US5,645,651 patent from Hitachi at US$20 Mil. in 2007 but the Board of Appeal in USPTO made a final decision to reject all of its claim except the claim 5 on Dec. 21, 2012. The claim 5 can be avoid easily by putting a little bit of Cobalt which the most of magnet powder already use.
Most informative, but the Magnequench patrent is really just a minor bit of frosting over the large cake that potential large industrial rare earth asset hunters want. Consider the larger picture.
This is another attempt and milking current and potential shareholders by making them feel a merger is on its way. Molycorp should have been investigated by the FED long ago. It’s a nest of thieves.
Hello Aurelius
I appreciate your comment and your imperial Roman name. That aside, Molycorp isn’t going away; there are large assets involved and whether or not it’s a “nest”; it’s also a whole lot of assets that have strong industrial and market appeal. If it fails to develop on its own; someone else will step in to ‘adopt’ and lead it to maturity
Am looking at Molly Corp sp right now and it’s below $8 and heading down. Yes, someone will step in. When the price is down to $2.00 or less.
Constantine sure is a plain talker eh? Quite good for value analysis, not so good for current stockholders.
It would not surprise me if China Investment Corporation(CIC)
,going through a matrix of back channel manipulations,supports
a takeover of MCP.
China’s Sovereign Wealth Fund,operating out of its’ Toronto office,has been tromping all over the US and Canada buying up Natural Resources…including but not limited to….Mining Operations,Oil,Farmland,Timber,etc.,etc.etc.
They have Billions to invest and this would be to their Strategic
Advantage to lock up this Property and assets.
Does China have similar physical offices for their South America and Africa buying efforts?
Robit
Toronto was CIC’s first foreign office.
Set up in 2011 to aggressively accumulate
North American Natural Resource Assets.
They specifically targeted Canada for obvious reasons(Large amounts of natural resources.)
In 2012 China/Canada set up a trade agreement that is very favourable to China.
China is pushing Canada for an FTA(Free Trade Agreement).I think that will happen.
I do not think that they have set up any “stand alone offices” in other Countries.
Probably just an attache in Chinese Embassies and Consulates.
Didn’t the Canadian Govt. just say “enough is enough” after the last big China purchase was OK’d?
“Molycorp can therefore benefit from markets associated with downstream finished products used in hybrid vehicle motors and batteries, wind power generators, rocket guidance systems and several known and as yet unknown applications.”
“it has not proven being capable of producing heavy rare earths and it is still experimenting or refining a new rare earths processing technology.”
Moly will never produce any meaningful Heavy Rare Earths because it’s grades are simply too tiny relative to the bulk commodity Ce & La at 0.11% Tb & Dy to 82% Ce & La. Allowing for recoveries it needs to produce 16,600t of Ce/La to produce 16t of Dy/Tb and the economics on their Ce/La are looking marginal at best, let alone funding the HRE separation process.
I’d suggest that is why the DoD (whose total RE requirement is only 150tpa) quickly shifted their interest from Moly to Ucore and Hitachi backed away much earlier. Same economics would apply to Nissan & Hyundai and can someone please explain to me why Siemans would stump up the cash for Molymess and 10tpa Dy when they’ve signed a cashless JV with Lynas based on material supply??????
The only TO of Moly will be a reverse TO by Neo as the only profitable segment in their grab bag of “assets”. Next Q’s from the very well regarded former CEO of Neo will be very interesting to say the least. I’m guessing he got 4 hrs with his family Xmas Day.
Given the supply/demand of LREE in the coming 5 years, why would any company rush to purchase Moly? There are plenty of Light REE so there is little point in any down stream manufacturer purchasing Moly. Most of the downstream manufacturers have most likely secured their future supplies of lights and heavies and are waiting for these projects to come on line. Moly wanted Neo for the heavies. They understand this is where the value is.
Lynas has already secured many (about 8 ) JV’s and letters of intent. From my limited recollection, I can not recall any announcement from Moly regarding Letters of Intent or JV’s of any substance.
Moly would hold absolutely no interest for the Chinese. As Tim has stated – it is about the heavies and Moly comes up short. China has no shortage of lights. I suspect the Chinese might be happy to see Moly struggle as it is then one less competitor. So I can not understand why they would want to buy it.
Again it is about economics and the make-up of the deposit and Moly’s economics and deposit do not stack up. If it did it would have been a lot further down the track and quite frankly, if it was that important someone would have grabbed it. It is not like it is that expensive – a billion or so.
Alessandro – you seem to take your cue from stock prices. You state that “the market spoke boosting its value”. So what was the market saying when it was at $70? Should investors have paid attention to the market then? In comparison to that price, the market seems to now consider this company a disaster since it has dropped to $10!
If your response is “the market was wrong then”, why do you think they are right now? If you think it was too expensive at $70 and too cheap at $10 then the question you need to answer is the same one that all investors (and companies ask). What is the most realistic and accurate value of the company. What is it’s value-add?
With respect, your suggestion that because Hyundai is “not 160 miles from Mountain Pass” and “therefore making sense after all” I dont think is in the bounds of sensible speculation, but more like a desperate grab for something.
Steve, Tim I agree.
You just need to have a look at Moly’s latest balance sheet to see the trouble they’re in.
From Jan to Sept 2012 it’s has been loaded up with some very questionable numbers.
The best example is ‘goodwill and intangibles’ which soared from $6m to $980m with over half of that goodwill.
Given their recent SP history, management turnover and current investigations for misleading the market I’ve no doubt the company’s goodwill has exploded!!
There will be some IP from recent aquisitions particularly Neo but really…….is it worth $500m?? I really doubt it.
It’s also worth noting that their inventory has more than doubled to $281m. Is that number based on the current basket price or the price when produced? Why are they having trouble selling their product?
The financial of Moly are, as I see them, dreadful.
MCP is and always been a “PUMP&DUMP” operation from its latest operation.
The “insiders” repeatedly give themselves HUGE dividends and the expense of the common share holders. MCP in being investigated by the USA DEDs now, butthey will be self serving and do nothing just as with the banks. MCP has HUGE tentacles and will suck the life and $$$ out of all those who practice “blind faith” in stead of facts and research. Their game plan is only PUMP&DUMP.
They get manipulative help by the blogs and message boards and banks and funds. IMO.
MCP HAS NO HREE’s nor CREE’s. DYOR.
I sold out at $72. when they published their first true financial statement. I repeatedly warned shareholders. People in USA refuse to listen and allow all this manipulation. Will the US FED do anything? Fat Chance !!! BTL500K in LYNAS.
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