* Rare earth miner posts loss on writedown, costs
* Seasonal weakness expected in first half 2013
* CEO undertaking reorganization, cutting jobs
* Still expects Mountain Pass mine to be lowest cost
By Julie Gordon
March 14 Molycorp Inc 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
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
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 Dec. 31. That compared
with net income of $26.6 million, or 26 cents a share, in the
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.