Molycorp, Inc. (NYSE: MCP) will release financial results for the third quarter ended September 30, 2013 after the market closes onThursday, Nov. 7, 2013. The release of Molycorp's financial results will be followed by an investor conference call at 4:30 p.m. Eastern Time.
Molycorp makes custom engineered rare earth products to meet customer specifications. In addition to its current production of rare earth oxides at its flagship rare earth mine and processing facility at Mountain Pass, California, the company produces rare earth metals, rare earth alloys (such as neodymium-iron-boron and samarium-cobalt alloys) and rare metals such as niobium and tantalum.
Wall Street expects Molycorp to report a loss of 29 cents a share, according to analysts polled by Thomson Reuters. In the same period last year, the company reported a loss of 5 cents a share.
Molycorp's results (albeit losses) have managed to top Street view twice in the past four quarters. The analysts have gone bearish on the company prospects as the consensus loss estimate has widened by 8 cents over the past three months.
Quarterly revenues are also expected to fall 21.6 percent to $161.09 million from $205.60 million a year-ago. The weak pricing environment has hurt revenues during the quarter.
Molycorp is the largest existing supplier of rare earth oxides outside of China and these factors attracted investors to the stock, given strong demand for rare-earth metals from makers of consumer electronics and automobiles.
However, the commodity prices have fallen as the anticipated trade-squeeze from Chinese rare-earth exports has failed to materialize. Unfortunately, more than 50 percent of Molycorp's business is tied to pricing.
As a result, volumes and average selling price would be the key metrics. During the second quarter, the company sold 3,039 mt of product at an ASP of $45.04 per kilogram and generated a gross loss of $18.5 million as compared to volume sales of 3,274 mt and revenues of $146.4! million, resulting in a restated gross loss of $4.5 million during the first quarter of 2013.
Even Molycorp ramps the mine, it all comes down to demand. Investors might look for company comments on rare-earth end-market demand and color on some of the recent trends in customer behavior and how it would fare in 2014.
During the second quarter call, Molycorp said it is seeing increasingly bullish signals from customers across several segments for product demand, and increased demand will coincide nicely with increased production capacity at Mountain Pass and declining production costs.
As MCP continues to optimize operations at Mountain Pass, and bring up the chloralkali plant in the second half of 2013, it should be ready to adjust production to meet customer demand and be price competitive with any rare earth producer in the world.
Once again, the focus shifts to Mountain Pass mine. Although the Mountain Pass mine has the capacity to produce 19,050 metric tons (MT) of rare earth ore, it's only been able to achieve 15,000 mt of REO "for brief periods" as it keeps encountering mechanical problems that it needs to correct. As a result, it's been producing an estimated 10,600 mt on an annualized basis.
Early October, the company announced that chloralkali plant at Mountain Pass is now mechanically complete and that full-scale commissioning operations have commenced.
The chloralkali plant will recycle wastewater and produce hydrochloric acid and caustic soda used as part of the rare earth separations process. Company officials said that once fully operational and optimized, the chloralkali plant is expected to help the facility achieve its cash production cost targets, which the company believes will make it competitive with the lowest cost producers globally.
Investors also cheered the news, but the optimism was short lived as Molycorp faced liquidity issues and tapped the equity markets. Last month, the company raised $247.5 million in a stock offering, diluting s! hareholde! rs even as the stock falls to all-time lows.
In this scenario, the company may post negative cash flows for the third and fourth quarter. The company reported negative cash flows from operating activities of $74.0 million during the first half of 2013 and had $264.2 million in cash and cash equivalents as of June 30, 2013.
Meanwhile, the market may focus on an update in the capex outlook. During the six months ended June 30, 2013, Molycorp's capital expenditures were $264.7 million on a cash basis. For the remainder of 2013, the company estimates that its capital expenditures would total approximately $167.0 million.
During the quarter, Molycorp named Geoff Bedford, the company's current Executive Vice President and Chief Operating Officer, as its next President and Chief Executive Officer. Bedford would replace Constantine Karayannopoulos. Bedford would assume new positions, effective Dec. 2, 2013.
For the second quarter, Molycorp reported a loss attributable to common stockholders of over $70 million, or 44 cents a share. Adjusted loss per share was 36 cents. Revenue rose 31 percent to $136.9 million.
Shares of Molycorp have dropped 52 percent this year and traded between $4.70 and $11.81 during the past 52-weeks.
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