Commodities & Metals

Can Molycorp Be Saved?

Molycorp Inc. (NYSE: MCP) is supposed to be the only sizable rare earth element project on line in America. The problem is that rare earths are volatile in pricing, and it just seems more and more like Molycorp’s mix of rare earths are not exactly among the rare earths with the highest demand by industrial companies. Its sales declines in the Chemicals and Oxides outfit are persistent, and this stock is hitting a new all-time low. Many investors have to be worried (sorry, growing more worried) about Molycorp’s future.

Keep in mind that the stock drop is at a time when the Dow is within striking distance of its all-time high. Not a pretty picture, particularly when you consider that Molycorp has only been public since mid-2010, and it soared to as high as above $70 before reality started setting in.

Molycorp lost 40 cents per share, or some $86.1 million, much wider than the loss a year ago. Revenue was $118.5 million, down from more than $146 million a year ago and the lowest in at least five quarters. Do you even need to hear or care about what the consensus estimates are in the ugly picture? The revenue decline is from a shifting product mix, with higher sales volumes from its Chemicals and Oxides segment — not very comforting.

Volume was not the culprit as much as lower selling prices. The drop in Chemicals and Oxides was to $46.556 million in the first quarter of 2014, down from $55,415 in the fourth quarter of 2013 and down from $64,210 in the first quarter of 2013.

Molycorp shares were down 19% at $3.75 in the mid-afternoon trading session. Its new all-time low, also from Thursday, was $3.67.

Again, the broad market is still within striking distance of all-time highs. Molycorp shares just hit all-time lows. By our take, that and this company’s sketchy history bring up viability concerns for the long haul.

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