I have little doubt that MCP will succeed as a mining company and it will be producing rare earths in the coming years. So maybe the stock price is justified. But this is a bet on the come. At a price of 50Xs trailing sales it makes it one of the most expensive stocks out there.
We know that RE aren’t rare. It’s extracting them that’s the problem. It’s a dirty business. We also know a thing or two about greed and money. That’s also a dirty business. When it is possible to raise $400mm and create a market value of $5b (MCP) on nothing more than a vague promise about future results one can expect that there will be many copycats.
I saw this article this morning. It made me feel a bit better about running for cover on MCP. Please don’t read this and conclude that MCP is a short. The stock could be up $10 in any given week. Calling the top is a fool’s game. Especially when the price is already at foolish levels. But taking profits can be ‘sweet’ too.
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I think you were right to sell your Molycorp. They kept promising a 2012 production rate and yesterday news came out of that they are buying a controlling stake in AS Silmet, a rare earth processor in Estonia, for $89 million. There is no doubt where they are getting the $89 million(dilution). The street loves this sending it to a new 52 week high. All the articles I read were the street having a love fest saying that it would double their processing capacity. But I think Molycorp's is taking a page from Lynas's playbook in Australia. They are mining their ore and concentrating it next to the mine but the dirty processing of it is being handled in Malaysia. Don't be surprised if a month or so from now you hear Molycorp make an announcement that California does not approve/delays plans for their processing facility on environmental grounds. At that point look for MolyCorp to be kneecapped. But the saving grace will be that they have a processing facility in Estonia. They will have to ship it pretty far away but at $114,000 a ton it might be worth it.
ReplyDeleteLynas has completed their concentration facility on March 30th and are just waiting for the AUSSIE version of the EPA to approve(any day now). The Malaysia processing will begin in in the 3rd quarter of 2011 with full production expected in the 1st quarter of 2012. I'm up 65% on Lynas to date and holding on.
DS
You can safely predict that individual stocks and sectors will soar, and sell off, faster and faster as the next years pass. The Fed' counterfeiting has forced us all to become trend-following speculators and the short-term hold will become increasingly short. I'm constantly selling early these days, making small profits on each trade. I don't manage to get out anywhere near the top, missing half or more of the profit, but I'm now very leery of both off-hours plunges and risk.
ReplyDeleteThere are no investors now. Only us gamblers. There's little money to be made - NONE, given currency devaluation - in sitting on dividend payers. I predict these will weaken over the next two or three years and themselves be subject to precipitous selloffs too...
So, well done! Take that profit...