Molycorp shelves second stage of mine plan; share price pummeled
Rare-earth producer Molycorp said Thursday that it would shelve the second stage of its plan to renovate and enlarge its open-pit mine in Mountain Pass, Calif.
The company also projected that revenues and cash flow would run "lower than expected" this year, although it divulged no specifics. As a result, the stock fell $2.45, or 22.71 percent, Thursday to close at $8.34 on the New York Stock Exchange.
When announced two years ago, Phase 2 was touted as doubling the mine's annual production from 19,500 metric tons of ores to 40,000 tons, at a cost of about $250 million. Both that and the Phase 1, that restarted production and replaced or renovated the processing machinery, were estimated to cost $781 million.
Although most of the equipment for Phase 2 is on site, work on it will stop until market demand and profitability justify completion. As recently as two months ago, former CEO Mark Smith said that the company was "seeing demand that will move us into Phase 2 production relatively quickly."
Molycorp said it would hit its Phase 1 target by midyear.
This is the latest setback for Molycorp, a Wall Street darling just two years ago. The company announced losses in the third quarter as rare-earth prices fell, while the cost overruns on the mine renovation were predicted to run about $150 million. The Securities and Exchange Commission has also opened an investigation into the company's financial reporting practices.
Contact reporter Tim O'Reiley at
toreiley@reviewjournal.com or 702-387-5290.
