* Q2 EPS $0.52 vs estimate $0.40
* Revenue at $99.6 million, sales volume quadruples
* CEO says rare earth prices stable, could rise
* Financing talks with Sumitomo on-going
(In U.S. dollars)
By Julie Gordon
TORONTO, Aug 11 Molycorp MCP.N rose to a
profit on Thursday as the company, which is modernizing its
Mountain Pass mine in California, sold more rare earth products
at higher prices, a trend it expects to continue.
Molycorp chief executive Mark Smith told Reuters that he
believes rare earth prices will stay strong in 2011, despite
recent reports of lower prices for certain of the metals and
declining demand out of Japan.
"If you take a look at that fundamental supply-demand
problem that we have right now, I find it hard to believe that
prices will not be stable or increasing between now and the end
of the year," said Smith.
China produces some 95 percent of the world's supply of
rare earths -- used in high-tech electronics such as
smartphones and wind turbines -- and has repeatedly clamped
down on exports, creating a supply deficit in the rest of the
world, sending prices skyrocketing.
Smith said that while a downturn in the global economy
could have an impact on demand for rare earths, it would take a
big decrease for Molycorp to feel the crunch.
"We certainly have not seen any problem whatsoever selling
everything that we're making into the market today," said
Smith. "And we don't see any relaxation in that demand through
the rest of this year."
Molycorp reported a net income of $43.5 million, or 52
cents a share, in the quarter ended June 30, compared with a
year-ago loss of $23.3 million, or 47 cents a share.
Analysts, on average, had expected earnings of 40 cents a
share, according to Thomson Reuters I/B/E/S.
Revenue soared to $99.6 million from $1.9 million in the
same period of 2010, as sales volume quadrupled.
The average realized sales price rose to $72.10 per
kilogram of rare earth oxide (REO) equivalent, compared with
$7.16 per kilogram in the year-ago quarter.
Molycorp plans to produce about 5,000 tonnes of rare earth
products this year, primarily from stockpiled material.
The company is on track to bring Mountain Pass back into
production by late 2012, with annual output of 19,050 tonnes.
The project can be ramped up to 40,000 tonnes a year based on
Shares of Molycorp closed at $54.14 on Thursday on the New
York Stock Exchange. The shares have more than quadrupled in
value since the company listed at $13.25 in late July last
The Colorado-based rare earth producer also said on
Thursday it would meet with Japan's Sumitomo Corp (8053.T)
later this month to try to work out a delayed $130 million
"The market has changed a lot since we originally talked to
them and signed a letter of intent last December," said Smith.
"The parties are either going to reach an agreement, or not, by
the end of September."
The financing, which was originally expected to close in
February, will see Sumitomo buy $100 million of Molycorp's
common stock and provide $30 million in debt financing.
In June, sources told Reuters that Sumitomo was struggling
to find customers for Molycorp's rare earth products as
Japanese demand for light rare earths has plunged and prices
were seen as too high. [ID:nT9E7H2010]
At the time, Smith said he was certain the deal would go
"There's changed circumstances," Smith said on Thursday.
"But I still think the best thing to do, for both parties, is
to move forward with the deal."
He added that even without the Sumitomo deal, the $781
million Mountain Pass expansion project is fully funded.
"It's kind of a nice position to be in, because it gives us
a bit better leverage to hold these negotiations," he said.
(Reporting by Julie Gordon; editing by Rob Wilson)