Molycorp reports third-quarter loss

Mining company Molycorp plunged to a loss during the third quarter as prices for its rare-earth ores continued at a small fraction of their last year highs.

Because of the slump in rare-earth prices and higher expenses, the company posted a net loss of $15.5 million, or 19 cents per share, in the three months ended Sept. 30, compared with a profit of
$45.1 million, or 49 cents per share, a year earlier.

The loss this year would have been larger had it not been for a $29 million income tax credit.

The loss matched the average of four analysts polled by MarketWatch.

Quarterly revenues rose 49 percent from a year ago to $205.6 million, as the company completed most of the first phase of renovating its open-pit mine in Mountain Pass, Calif., about 15 miles south of Primm. All of the growth came from other minerals and processed ores produced at facilities elsewhere.

Molycorp shares fell 29 cents, or 3.23 percent, Thursday to close at $8.68 in regular trading on the New York Stock Exchange. The stock had hit an all-time low of $8.64 a share during the day.

But in after-hours trading, Molycorp's stock rose 59 cents, or 6.8 percent, to reach $9.27 at 6 p.m. PDT.

Investors saw hope in the statements by Molycorp CEO Mark Smith in a conference call with analysts. He suggested some companies had started buying fresh supplies of rare earth after months of using what they had stored.

"Several of our customers continue to work to deplete large volumes of stockpiles," Smith said. "We are seeing signs these companies are coming back into the market."

Rare earths, in tiny quantities, improve the performance of magnets critical to products ranging from cellphones to laser-guided bombs to windmills. Tightening exports from China, which accounts for 97 percent of the world's supply, led to a rare-earths bubble last year.

As the world economy slowed, demand for rare earths has dropped even as new production sources came on line. The average selling price for ores mined at Mountain Pass has plummeted to $25 per kilogram from $125 a year ago, leading to a corresponding 83 percent drop in revenues to $20.9 million from the location.

The stock price has suffered, too, falling from a peak of $79.16 in May 2011, the height of the bubble.

This led attorneys representing several shareholders to file a class action lawsuit against Molycorp early this year, contending that management had fraudulently hyped the company's prospects. The company has denied any misrepresentations to Wall Street.

The mine now has 365 full-time employees, triple the number a year ago during construction. The large majority of those people commute from Las Vegas.

Smith revealed that what has been dubbed Project Phoenix, a combination of new and refurbished facilities and expansion of the mine, would run about $150 million overbudget. The company has blamed the overrun on allegedly defective work by contractor M&K Chemical Engineering Consultants Inc., which was sued last week in federal court in Colorado.