Rare-earth miner Molycorp reports loss for quarter

Slumping operations and a major write-off contributed to the $362.4 million fourth-quarter net loss for mining company Molycorp, the company reported Thursday.

Most of the results stemmed from a $266.4 million balance sheet reduction in the value of goodwill and certain other assets, much of which came with last year’s $1.3 billion purchase of Canada’s Neo Material Technologies. The company also felt the sting of slumping prices for the rare earths extracted from its mine at Mountain Pass, Calif., about 15 miles south of Primm.

A year ago, the company reported net income of $26.6 million during the 2011 fourth quarter.

The revenues of $134.3 million during the most recent quarter marked a 1 percent gain from a year ago but a 35 percent plunge from the third quarter.

Molycorp shares rose 2 cents, or 0.37 percent, Thursday to close at $5.99 on the New York Stock Exchange. However, the stock price hit a record low of $5.60 per share two weeks ago after Moly­corp delayed the earnings announcement to calculate the losses.

Two years ago, Molycorp’s stock price crested at $77.74 as prices soared for rare earths, elements with properties that can increase the strength and reduce the weight of magnets critical to a wide variety of high-tech products from cellphones to smart bombs.

Fears that China, which produces more than 90 percent of rare earths, was tightening exports helped fuel the price spike and hoarding. But with new supplies, a changing market and industrial companies living off their inventories, prices have plunged.

For example, Molycorp CEO Constantine Karayannopoulos said, industrial companies started redesigning motors two years ago to remove rare-earth magnets where they could to reduce the costs.

“Our fundamental strategy going forward is to return confidence to rare-earth customers through supply security and price visibility,” he said.

During a conference call with analysts, he mentioned the possibility of cost and job cuts as sales during the first half of this year could continue to slip. But he did not give specifics.

The Mountain Pass mine employs 365 people, most of whom commute from Las Vegas.

For the year, the $528.9 million in revenues marked a 33 percent gain from 2011, but that includes six months of Neo Materials. The net loss of $444.7 million, or $4.31 per share, reversed the $109.9 million, or $1.29 a share, profit from 2011.

Despite the difficult outlook for the coming months, “The long-term fundamentals have not changed since Molycorp was launched as a public company” in July 2010, Karayannopoulos said.

In particular, he said Molycorp would eventually become a low-cost producer of rare earths once the $1.05 billion re­novation of Mountain Pass is fully finished, something expected by midyear. The company also has cobbled together not only mining but production sub­sidiaries.

However, his predecessor Mark Smith, frequently issued similarly optimistic predictions. Smith resigned in December as problems mounted, including cost overruns and delays on Mountain Pass construction.

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