Commodities & Metals

Is Molycorp Back?

Over the course of this week, shares of Molycorp Inc. (NYSE: MCP) have more than doubled. Monday shares increased 40%, and Tuesday shares grew by another 67%. This begs the question of whether this cult stock is back and if it can get past the New York Stock Exchange’s $1 rule — the stock has been under $1 since the end of November.

What drove shares up this time was a report that Molycorp’s Mountain Pass California facility increased its rare earth production in the fourth quarter to nearly double the previous quarter.

In the fourth quarter, Mountain Pass produced 1,328 metric tons (MT) of rare earth oxide equivalent production compared to 1,034 MT in the previous year. The full year production for 2014 was 4,785 MT compared to 3,473 MT in 2013.

The higher production volumes expected at Mountain Pass in 2015 should coincide with the relatively strong demand that Molycorp is seeing for products such as the magnetic rare earth material neodymium/praseodymium, lanthanum, and light rare earth concentrate.

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Geoff Bedford, president and CEO of Molycorp, said:

We were pleased to see our production increase in the fourth quarter relative to the preceding quarter and year-on-year. Optimization at Mountain Pass is ongoing, but our fourth quarter production demonstrates momentum in the right direction. Rare earth pricing softened in fourth quarter with market uncertainty surrounding release of final details of China’s ongoing reforms to rare earth mining, separation, and export regulatory policies. However, given the relatively strong internal and external demand we are seeing for many Mountain Pass products, continuing to boost production there is a top operational priority.

A recent analyst call for Molycorp came from DA Davidson. The firm downgraded Molycorp to a Neutral rating from Buy, and lowered its price target to $0.38 from $4.00, on January 23. This was the lowest call on the street and it implies downside of 52.5% from Tuesday’s close of $0.80.

Shares of Molycorp were down 7% at $0.74 in the second half of Wednesday’s trading. The stock has a consensus analyst price target of $1.12 and a 52-week trading range of $0.28 to $5.62. Molycorp hit a peak of roughly $75 in 2011.

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