Molycorp is the only rare earth metal mining company in USA and it's shares are plummeting to new lows. The huge debt this company owns and fierce competition from China is eliminating USA chances for independence in this market sector. Raytheon will now depend on China for its missiles...if Molycorp will go bankrupt. Can USA afford Molycorp to go bankrupt? Will Molycorp get a bailout? A list of past bailouts by the government, is here and it does not show any companies in resource sector: http://projects.propublica.org/bailout/list And as Dr. Stephen (Leeb Investor) here says, http://seekingalpha.com/article/2066543-is-the-pentagon-handing-china-the-keys-to-u-s-defense So I ask, Can USA afford to have Molycorp go bankrupt? Why ask now, because starting today Molycorp has only six months left to improve its situation otherwise it will be delisted on NYSE. http://seekingalpha.com/article/2870476-will-molycorp-be-delisted
Nil, it will not happen. First, the rare earth metals don't vanish with the company. The metals don't magically extract themselves and move to China or Russia. IF, the company fails, it will go into receivership. It's assets will either be sold, or the company will be reorganized through bankruptcy proceedings and stockholders may lose all or some portion of their ownership rights in exchange for debt relief. In a reorganization (i.e. Chapter 11 Bankruptcy) the company continues to operate. So when the company emerges from bankruptcy it is a viable company. Two, rare earth metals are a fading technology and will soon be replaced with carbon based batteries. Three, there are no macro economic reasons for bailing out Molycorp as Molycorp only employs 2,400 people in 10 countries and we are no longer in a recession. Molycorp isn't strategically important to the US. So there is no - absolutely NO - reason for the US government to bailout Molycorp. And given that Molycorp has recently secured a 400 billion dollar credit facility and has a current ratio of 4. I don't think Molycorp will be going bankrupt in the immediate future. Delisting, doesn't mean the company is doomed to fail. It just means the stock will not trade on an exchange because it doesn't meet the trading requirements for that exchange. Instead its stock will be traded Over the Counter (OTC) on the "pink sheets". So if Molycorp is delisted, it will still be in business. http://www.21stcentech.com/buy-electric-vehicle-sport-dual-carbon-battery/
Your link's comment: "{rare earth} permanent magnets-unlike those made from more common metals like iron and cobalt-which don't quickly lose their charge and in turn, are critical to most alternative energies, including wind turbines and hybrid cars, and for key advanced defense technologies." May be true for applications without a cooling air steam available, but when it is (EVs and wind generators) it is false and fact that the rare earth magnets are 2 to 3 times more powerful for same weight, makes them the preferred choice: Fig. 1 Please Register or Log in to view the hidden image! See: http://www.technologyreview.com/featuredstory/423730/the-rare-earth-crisis/ To learn a still unsolved problem (release of radioactive water) closed the mine down years ago. Also note there that Molycorp, lacks the technology to refine the ores (separate the rare earths) so must export all its ore to those who can do that. Further more even for applications without cooling air flow the rare earths will be best for temperature up to 200C:
No need for government bailout: WSJ on 2 June 2015 reported Molycorp missed a 32million dollar bond interest payment due and said it plans to file for Chapter 11 "soon." For reason I've noted in prior post they can not separate the rare earths (lack both technology and have no solution the radioactive thorium disposal problem). Very unlikely some other company will be foolish enough to try to re-open their mine to just stock pile unsaleable ore.
Companies often threaten to file for bankruptcy in order to gain concessions from creditors. It will be another 30 days before Molycorp is actually in default, and I expect its management will try to postpone bankruptcy for as long as possible. But given the magnitude of Molycorp's problems, I think bankruptcy is probably the best thing which could happen to the company. Radioactive thorium is just one of Molycorp's problems and it isn't even the biggest problem. Molycorp's biggest problem is its management. It has been ineptly managed from the very beginning. It is now mired in debt and shareholder law suits and it still isn't profitable. Molycorp needs a clean slate which a bankruptcy would provide. Molycorp received a huge loan $400 million loan in Q4 of last year which has sustained it thus far, but that money is running out and its losses appear to have accelerated. Molycorp desperately needs new management and a fresh start, a bankruptcy could provide both. And I have to think, that the people who loaned Molycorp that 400 million last year were savvy enough to know that. After all, that is what they do, make high risk loans and they have been very good at it. But to the OP, the government isn't going to bail Molycorp out. There just isn't any reason to do so as previously stated. Molycorp's debt holders will become equity holders and probably better managers. When new management has a profitable operation, I expect Molycorp's new owners will likely sell a portion of their equity and make a tidy profit. It's what they do.
I have not looked at them for years. They are the only company I have ever shorted at about $50/sh as I recall. I took my profits too soon, so sold quite a few puts as they declined further. I did this as was sure (and still am) that that ore will NEVER be the basis of any profit. Why do you think better management will turn a profit? Iceland wants to buy it independence from Denmark and got a big boost a few years ago when world's richest rare earth deposit was discovered on the SW coast. China will need to sell even cheaper before the decade is out if it wants to dominate the supply.
It's not the management of Molycorp I am betting on, but the necessity of Molycorp for the sake of national security of USA. The Ch.11 news is of course not much of an inspiration, however there are talks on restructuring...
