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Molycorp (NYSE: MCP ) isn't quite ready to take over the rare earth elements game from China just yet. But we are a little closer to its Mountain Pass modernization project paying real dividends after the company announced third-quarter results and an update on the project this week.
Third-quarter sales were $8.4 million and loss per share came in at $0.14. But if you own Molycorp, you own it for its future mining capabilities, not the tiny amount it is producing today. So here are the highlights that should interest you:
- Sales price per pound was $7.31 in the quarter, up from $2.45 per pound last year.
- The Mountain Pass project in California is now expected to cost $531 million, $20 million higher than originally expected.
- The company will build a new mill capable of annual production of 40,000 tons, above the expected production of 20,000 tons. With prices for its products through the roof, the company is thinking about increasing production across the board.
Molycorp is a long way from full-scale production, but if prices remain high it should be a wild success when the mine is fully open. But there is competition coming. Rare Element Resources (AMEX: REE ) could be close behind if its Bear Lodge Project in Wyoming is built into a fully functioning mine.
I'm not excited about Molycorp's value right now, but traders don't seem to mind paying up for the stock. At current prices and mix, Molycorp could reach $292 million in annual sales with 20,000 tons of production, making its $2.6 billion market cap look pretty expensive in my eyes. But if prices for rare earth elements keep rising, I guess the sky is the limit.
If you want a diverse way to invest in rare earth elements, the Market Vectors Rare Earth/Strategic Metals ETF (NYSE: REMX ) owns a swath of miners and developers. You won't get the ride up Molycorp has had since its IPO, but you might not get as seasick from the volatility either.