Thursday, March 3, 2011

Molycorp Inc. (NYSE: MCP): Q4 Earnings Preview 2010

Molycorp Inc. (NYSE: MCP) owner of the world's largest rare-earth deposit outside of China, is scheduled to release its fourth-quarter earnings after the closing bell on Wednesday, March 9, 2011. Analysts, on average, expect the company to post a loss of 7 cents per share on revenue of $13.47 million.

Molycorp, Inc., a development stage company, focuses on the production and sale of rare earth oxides from stockpiled feedstocks. It operates the Mountain Pass mine, a non-Chinese rare earth deposit. Molycorp says it is currently the only rare earth oxides producer in the Western Hemisphere, producing about 3,000 metric tons per year.

In the preceding third-quarter, the Greenwood Village, Colorado-based company's net loss was $10.1 million, or 14 cents per share, compared to a loss of $6.9 million, or 18 cents per share, in the prior-year quarter. Revenue jumped to $8.4 million from $2.0 million. Analysts, on average, expected the company to post a loss of 10 cents per share on revenue of $13.57 million.

Prices for rare-earth minerals, a group of 17 elements used in renewable energy, magnets, electric cars and weapons, have surged since the world's leading supplier, China, slashed its export quotas by more than 70 percent. China produced about 97 percent of the world's supply in 2009, according to the U.S. Government Accountability Office. Rare earth elements are special due to their properties. They are found in many consumer products, including iPods, flat screen televisions, computers, tablet PCs, smart phones and electric hybrid vehicles, as well as industrial products ranging from oil-refining equipment to the high-strength magnets found in wind turbines. Also of importance are their military applications (missile guidance/propulsion systems) and their applications for other military gear, such as night vision goggles and their uses on aircraft.

Molycorp plans to expand output as demand for rare-earths rises.The company's board of directors approved a $250 million, phase 2 plan to increase production at its Mountain Pass facility in California to 40,000 metric tons per year by the end of 2013. Molycorp said "strong industry fundamentals" drove the decision. The company, which bills itself as the only rare earth producer in the Western Hemisphere, also filed to raise up to $173 million in convertible stock. Existing shareholders of the company also filed plans to sell up to $500 million in common stock. In December, the company agreed to form joint ventures with Japan's Hitachi Metals Ltd. to manufacture rare earth alloys and magnets in the U.S. The two said that the partnerships will focus on the manufacture of neodymium-iron-boron (NdFeB) alloys and magnets that are vital to many clean energy, automotive, computer, health care, communications and other technologies. Earlier in December, Molycorp arranged a $130 million financing deal with Sumitomo Corp. in exchange for substantial quantities of several rare-earth products over the next seven years.

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