Thursday, August 7, 2014

An Exchange From the Molycorp Q2 2014 Conference Call $MCP

From this morning - this is telling:

Kevin Cohen - Imperial Capital
And then I guess in terms of the liquidity the capital raise of 250 committed, why do you think the company would need so much money if things are starting to turn around and then the correlated to that is why potential one have the additional 150 million if the company is confident it can hit operational and financial hurdles for future liquidity it would seem like if you hit those hurdles you won’t need that potential 150 or how should we be thinking about that?

Michael Doolan - EVP and CFO
Sure. We continue to believe that the liquidity requirements here it’s been 150 million to 200 million that’s what we’ve been stating and we continue to see that. But when we got into this process of the financing and we are looking at what could fit under the indenture and the assets that we’re going to finding as collateral, quite frankly it made sense that we make sure we get maximum value for those assets. So we thought it prudent to take the 400 million. The second tranche is at our discretion and it just in general gives us the options and flexibility that we otherwise didn’t have.
A correspondent says, "Translation, there is a new problem every quarter in this plant. We need a big contingency budget."


Anonymous said...

Short covering drove MCP up at the start and end of trading today. It's a good strattle. Volume is moving from August to the 2015 & 2016 options.

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whydibuy said...

Always the gloom and doom slant.
How about a simple reason like the one stated by mgt. Get cheap capital while you can. Mgt can never know when capital markets will turn tight and leave them scrambling for cash. Why not line it up and secure the money now? Is that so sinister?

Josh H said...

I'm hoping your comment was sarcasm whyidibuy.

That cheap financing is 7% cash interest and 5% PIK for a total of 12%. And don't forget that they also gave out warrants for 10% of the company.

I think this financing just delays the inevitable.

Anonymous said...

The company is a total POS which is why the shylock crew is lending at a rate high enough that a buy-here pay-here car lot (with remote engine kill) owner would nod in satisfaction.

The company can maybe, maybe carry its SG&A, capex, and interest burden IF both VOLUMES *and* PRICES rise - as though prices of rare earths would rise if (and it's a big if) the money pit (mine) began producing the oceans of REE that have been promised for years.

jHurt said...

At $50M cash burn a quarter they'll be at their $150-200M liquidity requirement by this fall. The $32.5M payment on the 10% notes due December 1 looks like a date to circle on the calendar (actually 30 days after with a grace period)