Molycorp posts loss on writedown, to cut jobs
(Reuters) - Molycorp Inc (MCP.N) said on Thursday it planned to cut an unspecified number of jobs as it reported a fourth-quarter loss and booked an impairment charge related to its 2012 takeover of rare earth processer Neo Material Technologies.
The miner, hit by lower rare earth prices and higher costs, said it will take a goodwill impairment charge of $258.3 million in the fourth quarter related to the $1.3 billion takeover.
The company also warned performance in the first half of 2013 would be slightly weaker than the second half of 2012, mainly due to seasonal variation. Things should improve in the second half of the year, as a output ramps up at a new processing plant at the Mountain Pass mine in California.
Molycorp expects to hit commercial production at the historic project, which is undergoing a $1.25 billion revitalization, in mid-2013.
The Denver-area company, which has operations in North America, Europe and Asia, expects to save $7 million to $10 million a year in salaries, bonuses and associated expenses through a reorganization that is likely to wrap up this month.
"That entails staff reductions and a reorganization of the company along business units, with a much leaner top management group," interim Chief Executive Constantine Karayannopoulos told Reuters. "It's all overhead. It's the corporate group."
Karayannopoulos did not say how many jobs the company would eliminate, but made it clear the mine was not affected.
Shares closed up 0.33 percent at $5.99 on Thursday on the New York Stock Exchange. The stock has dropped more than 75 percent over the last 12 months, slipping below its original listing price of $13.25 in July 2010.
Rare earths, mainly produced in China, are essential for making high-tech items like smartphones, tablets and hybrid vehicles, and are also used in automotive catalysts.
The price of the group of 17 metals and oxides skyrocketed through 2010 and early 2011 as China clamped down on exports, prompting a rush to develop new global supply sources. Prices have dropped sharply since as China eased export controls.
A surge in metal prices following the 2008-09 economic crisis spurred mining companies across the globe to make costly acquisitions and develop mammoth projects. Capital expenditure costs have soared in the past year and metals prices have stagnated, forcing many of the world's largest miners to record major writedowns.
Indeed, the Neo Material deal was touted as a game changer in the rare earth industry as it transformed Molycorp into a one-stop rare earth shop.
The acquisition gave Molycorp access to Neo's rare earth-processing capabilities and patents, making it the only major North American player with the ability to both mine and process the metals used in magnets and others applications.
The company on Thursday reported a loss of $359.6 million, or $2.91 a share, in the quarter ended December 31. That compared with net income of $26.6 million, or 26 cents a share, in the year-ago period.
Excluding the impairment charge and other items, the loss was $52.7 million, or 45 cents a share, compared with an adjusted profit of $35.9 million, or 41 cents a share.
Revenue rose 1 percent to $134.3 million.
LOW COST PRODUCER
Karayannopoulos, who was previously CEO of Neo Materials and took over the top job at Molycorp in December, said he expected cash costs at Mountain Pass to be around $7 per kilogram.
"We're still pretty comfortable with our expectation that Mountain Pass will be the lowest cost producer," he said. "At that cost Molycorp will be profitable, comfortably so, provided we hit the volumes, which I am pretty confident we will do."
The company expects a healthy balance between supply and demand in 2013, which will keep rare earth prices relatively stable. Molycorp's average sale price was $43.28 per kg in the fourth quarter on some 3,102 tonnes of product.
The Mountain Pass project is expected to hit its full Phase 1 run rate of 19,050 tonnes a year by mid year.
(Additional reporting by Allison Martell in Toronto; editing by Carol Bishopric, Frank McGurty and Bernard Orr)
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