Thursday, November 6, 2014

"Molycorp Bonds Drop to All-Time Low as Quarterly Loss Widens" $MCP

BB article:

"Bonds of Molycorp dropped to a record low as the rare-earths producer posted a third-quarter loss that was wider than analysts had forecast. The company’s $650 million of 10 percent, first-lien notes maturing June 2020 fell 4.8 cents to 66.99 cents on the dollar to yield 20.2 percent...

Molycorp yesterday reported an adjusted net loss of 40 cents a share for the three months ended Sept. 30, greater than the 27-cent loss estimated by five analysts polled by Bloomberg. Revenue declined 17 percent to $123.9 million from the same period a year earlier, according to a company filing"
A correspondent observes,
"The chlor alkali unit is still not fixed. This is a paraphrase of the key comment on that topic: 'Have ordered an entire second set of cells for Chlor alkali unit – have gotten very good at taking this thing down and putting it back up again.' Refused to give an guidance on volumes. I suspect they have a product quality issue as well."


Stagflationary Mark said...

Refused to give an guidance on volumes.


In 2004, Barrons ran an article on Newmont Mining. It was just full of interesting reasons why people should own the stock.

At the time, I was trying to choose between owning the miners or owning the actual physical gold and silver. I opted for the latter.

Why? I was reminded of Mark Twain's joke.

'A mine is a hole in the ground with a liar standing over it.'

Seriously. Since my former company experienced a massive accounting scandal and I was looking for safety in an uncertain world, I opted to follow Mark Twain's advice. In 2006, I sold for a 50% profit.

Newmont Mining traded at about $45 in 2004. As I write this, it trades at $18.20. 60% loss (not counting meager dividends)!

That's what could have happened if I had chosen a different path.

Funny how the seemingly smallest little details can make such a huge difference over time. Whew!

And don't even get me started on those who bought silver @ $45 an ounce. They call it commodity "speculation" for a reason.

CP said...

Yes, not many resource companies are able to generate good shareholder returns over time. They seem to fall in love with a commodity when it's at peak price (WLT), and they buy expensive properties when they should be selling.

CP said...

Horizon Kinetics wrote an essay on this exact topic:

"we would pose the following question: Should you have bought
Newmont Mining, a gold mining company, in 1970, knowing with certainty the impending inflation?"

Stagflationary Mark said...



the heuristic, “gold company=inflation hedge” did not provide the returns that Newmont Mining shareholders may have expected during that period.

This brings me to yet another Mark Twain quote.

History doesn't repeat itself but it often rhymes.

Further, both songs (commodity bull markets) lasted about a decade. While it is possible that the commodity bull market could reignite shortly, the odds seem low to me.

And when it comes to silver in particular, that fat lady left the stage @ $48.70 per ounce. It's going to take a great deal of effort to get her to sing an encore @ $50 any time soon. Possible (nearly anything is possible), but extremely unlikely.

CP said...

The commodity supercycle looks oooover. Done!!!{%22range%22%3A%22max%22%2C%22scale%22%3A%22linear%22}

This was great:

One of the things I remember about 2006 was how flush everyone seemed, especially the proles.

At an exurban Home Depot today, the place was packed. And they even had oodles of employees. Not the usual condition where you can't find an employee to cut your lumber.