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Low prices, high charges hit Molycorp

Keywords: Tags  Molycorp, rare earths, earnings report, Constantine Karayannopoulos, Mark SMith


NEW YORK — Vertically integrated rare earths producer Molycorp Inc. reported a 2012 net loss of $449.6 million in contrast to a $117.5-million profit the previous year as lower sales prices, rising costs and significant asset impairment charges were only partially offset by increased output.

Greenwood Village, Colo.-based Molycorp, which had postponed the release of its earnings report to determine the amount of its "substantial" 2012 non-cash goodwill impairment charge (amm.com, Feb. 28), on March 14 reported a total goodwill impairment charge of $258.3 million and an impairment charge of other long-lived assets of $11.9 million.

Contributing to the impairment charges were a "longer-than-anticipated soft pricing environment for rare earths and certain rare metals; loss of some end markets due to high rare earths prices in 2011 not returning to lower levels as quickly as anticipated; stalled growth for some new bonded magnet applications due to a peak in neodymium prices in 2011; and delays in ramping up its Mountain Pass facility in California that deferred the company’s ability to enter into longer-term contracts," Molycorp said.

The charges more than offset a 33.3-percent jump in sales to $528.9 million from $396.8 million in 2011.

In the fourth quarter, Molycorp logged a net loss of $359.6 million vs. net income of $26.6 million in a year earlier on sales that rose 1 percent to $134.3 million from $132.9 million.

Molycorp said it expects further financial weakness in the first half of 2013 due to typical seasonality and the expectation that its Mountain Pass operation won’t achieve full-scale production until mid-2013, but after that the outlook improves.

"The company expects global supply and demand for rare earth oxides will approach a healthier balance during 2013, and pricing within many key applications of rare earths will be beneficial to both customers and suppliers," Molycorp said, citing forecast strength in a number of end-use sectors, including automotive catalysts, fluid cracking catalysts and the automotive and small battery sectors.

"We must complete our current production ramp at Mountain Pass and bring it to full-scale commercial run rates; instill greater discipline and accountability across the company; improve performance across all business units; and make sure we achieve our cost savings and capital reduction goals," Molycorp president and chief executive officer Constantine Karayannopoulos said in a statement.

Molycorp’s former president and chief executive officer, Mark A. Smith, stepped down in December, although the company didn’t give a reason for his exit (amm.com, Dec. 12).


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