Why Molycorp's Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of rare-earth mineral miner Molycorp (NYSE: MCP  ) rose 13% in late afternoon trading today, after the company announced the startup of its heavy rare-earth concentrate facilities.

So what: Project Phoenix, as the project is known, is now moving into the final phase after the startup of the concentrate facilities. The company is on schedule with the project and expects full production to be reached in the fourth quarter.

Now what: There isn't really anything new here, and I think the market is reacting to news we already knew was coming. The stock may be doing a bit of a dead-cat bounce, since it's coming off fresh lows.

Operationally, there are a lot of unknowns for Molycorp. Rare-earth mineral prices have been crushed in recent months, affecting the company's profitability. The company may still have some potential with the vertical integration it has bolted on in the past two years, but I still see this as a wait-and-see stock. Catching a falling knife is never a good idea, and we don't know when Molycorp is going to hit bottom.

Interested in more info on Molycorp? Add it to your Watchlist.

Fool contributor Travis Hoium has no position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his CAPS picks at TMFFlushDraw.

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  • Report this Comment On August 28, 2012, at 7:15 PM, ravens9111 wrote:

    A lot of the recent drop had to do with raising cash to complete the project. Now that is complete. I suspect that MCP will see a similar to that of FSLR or GMCR but maybe not as big. The kicker today was that MCP moved much higher while the other rare earth's did not. In the past, they would all either go up or down together.

  • Report this Comment On August 28, 2012, at 9:22 PM, harkvasa wrote:

    MCP was punished as many investors felt that the management was out of control and was spending too much money and not worrying about the cash flow. Over the last 30 days , things have begun to turn around. Mgmt has raised the needed working capital, ( Mgmt team also invested their personal money to invest in the secondary shares), there is now timely communication from the CEO about what is going on. MCP has a strong possibility of earning $3 per share in 2 years from now, and once investors begin to see some good results, MCP should rise to $20 to $30 range.

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