* Delays commercial production at Mountain Pass to mid-2013
* Sees lower revenue due to delay, sagging prices
* Interim CEO to stay on for "months, perhaps quarters"
* Phase 2 expansion on hold until market demand supports
* Shares fall 21.8 percent
(Adds interim CEO comment, updates shares)
By Julie Gordon
Jan 10 Shares of Molycorp Inc tumbled on
Thursday after the rare earth producer said 2013 revenue would
come below estimates due to lower selling prices and a delay in
achieving full production at its California processing plant.
The company now expects its Mountain Pass plant to achieve
its Phase 1 commercial production rate of 19,050 tonnes of rare
earth products a year by mid-2013, having failed to meet its
2012 year-end deadline.
The delay comes after a review of the planned start-up by
interim Chief Executive Constantine Karayannopoulos, who stepped
into the top job in December, replacing Mark Smith.
"My conclusion was if we were going to be successful ramping
up Mountain Pass to full commercial production, we needed to do
it in a rational way," said Karayannopoulos.
With all key production components at the new manufacturing
complex now running, the company will increase throughput in
small increments to allow for troubleshooting as it moves toward
its full Phase 1 run rate.
"We want to hit the run rate by mid-year," said
Karayannopoulos. "Can we do it sooner? I would hope so and
frankly I think we should, but I'm not going to make any
Molycorp is also evaluating its capital needs for 2013 as it
completes its $1.25 billion revitalization of the historic rare
earth mine and processing plant.
The project was part of a global push to develop new sources
of rare earths, an key ingredient in an array of consumer items
like smartphones and hybrid vehicles.
The price of individual rare earth metals and alloys soared
in 2010 and 2011 as China, the world's primary producer, clamped
down on exports. But prices tumbled last year as new sources
came online and as some customers turned to alternatives.
Karayannopoulos, who ran Neo Material Technologies until it
was taken over by Molycorp last year, told Reuters he plans to
stay on as interim CEO for "months, perhaps quarters, but not
years" as he deals with the operational issues.
"What I'd like to do is hand the company to whoever comes in
after me without any baggage," he said. "There are a few
problems, like all companies have, and I'll deal with them."
He had previously hoped to hand over the reins in the first
quarter of 2013.
Molycorp shares were down 21.8 percent at $8.44 late
Thursday afternoon on the New York Stock Exchange. The volatile
stock is down more than 65 percent in the last 12 months.
The market reaction may be a bit overblown, said Byron
Capital Markets analyst Jon Hykawy, noting the company had
previously announced engineering issues at Mountain Pass.
"The ramp being delayed to this point is not particularly
shocking," he said. "Most of the stuff there is in place. The
one thing that was slow was the solvent extraction area, and
that was down to the engineering issues they had."
Molycorp filed a claim against an engineering contractor in
November and warned that defective services at the project would
likely have an impact on development costs.
The Colorado-based company has been plagued with uncertainty
in recent months, including an investigation by U.S. securities
regulators over the accuracy of its disclosures and worries over
the health of markets for its rare earth products.
Molycorp, which has operations in North America, Europe and
Asia, said it would postpone a decision to expand Mountain Pass
to its Phase 2 capacity of 40,000 tonnes a year until market
demand and pricing justify higher output.
(Additional reporting by Sandhya Vijayan in Bangalore; Editing
by Frank McGurty, Tim Dobbyn and Richard Chang)