Molycorp share price plummets to all-time low

Following a second-quarter report that contained several disappointments, the stock price of rare-earth miner Molycorp Inc. on Friday plunged by more than one-fourth to its all-time low.

Molycorp, which runs the huge open pit mine about 15 miles south of Primm at Mountain Pass, Calif., saw its shares fall 28.5 percent, to $11.49, after posting a loss in the quarter and raising the prospect of a cash flow crunch in the coming months. A highly volatile performer on Wall Street since it went public at $14 a share two years ago, Molycorp stock has experienced several short-term upward or downward spurts of more than $10 a share, cresting at $77.54 in May 2011 and closing at $34.83 as recently as April 3.

Molycorp is based in suburban Denver, but most of its 300-plus Mountain Pass workers commute from Las Vegas.

During the quarter, the company posted a $70.4 million loss, or 71 cents a share, attributable to common shareholders, after a profit of $50.1 million, or 53 cents a share, one year ago. Even after subtracting unusual charges, the loss of 3 cents a share fell short of the average estimate by four analysts of an 8 cent a share profit.

Revenues rose 5 percent, to $104.6 million, but that included $46 million from a recent acquisition of a Canadian mining company not counted in the 2011 results. Taking out Canada, revenues slumped 41 percent to $58.6 million, about half of the analysts' prediction.

With the forecast for rare-earth prices indicating trouble ahead, shrinking cash flow will force Molycorp to seek fresh outside financing, according to CEO Mark Smith, or slash the ongoing $289 million renovation and expansion of Mountain Pass.

Rising demand for rare earths and tightening exports from China, which accounts for more than 90 percent of world production, propelled much of the previous price surge. But the world economy has slowed, new mines came on line and manufacturers switched to cheaper ores. Prices plummeted.

Smith blamed the second quarter letdown on the 36 percent plunge in average prices and smaller shipments of rare earths, ores used in a wide range of high-tech applications. Conditions for the company have quit deteriorating, but no rebound is in sight, he said.

"We are committed to our strategy, we believe in our plan and we are delivering on our goals. ... Bottom line, we are on track," Smith said in a statement.

However, analyst Mark Gambardella of JPMorgan Chase & Co., said during a Thursday conference call, "I'm a bit shocked ... because it seems a total disconnection from what management is saying and what you put down in your outlook where you say cash flow will be less than expected."

Contact reporter Tim O'Reiley at toreiley@reviewjournal.com or 702-387-5290.