Why Molycorp 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 miner Molycorp (NYSE: MCP  ) climbed 10% today after it announced that its chloralkali plant at Mountain Pass, California, is now mechanically complete and that full-scale commissioning operations have commenced.

So what: The stock has slumped this year on concerns over the plant's progress, as well as general weakness in rare earth prices, but today's announcement reignites some optimism over Molycorp's production growth going forward. Additionally, the chloralkali plant is expected to help management achieve its cash production cost targets, helping ease some investor worry over the company's mounting losses.

Now what: Molycorp expects to enter into production in the fourth quarter of 2013. "These are the last major construction activities of Project Phoenix, the rebuild of Mountain Pass," said CEO Constantine Karayannopoulos. "Bringing these units online will help us focus on increasing production while continuing to reduce our production costs." So while Molycorp is certainly still too speculative for average investors, today's good news, coupled with the stock's still-depressed price, might provide resource-savvy Fools with an attractive risk/reward trade-off.

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  • Report this Comment On October 02, 2013, at 4:05 PM, gberrera wrote:

    There's still Novembre, Decembre and January until investors really know what is going on with MCP. Upping production doesn't mean Jack if you don't control the supply. Until then, MCP will swing back down to $6.85-$6.90 in between if it cannot break that psychological upside barrier of $8.00. Completion of the production plants aren't enough of a catalyst to drive the stock price upwards. Heed Warning Folks. Those that bought in when the stock shot up 13% will get slaughtered.

  • Report this Comment On October 03, 2013, at 2:18 PM, graciefan1 wrote:

    "Heed Warning Folks. Those that bought in when the stock shot up 13% will get slaughtered."

    Only if you are a trader. If you plan on holding the stock for a year or two from now a 13% gain/loss on this highly volatile stock is meaningless. Today the stock is at $7.10. Lets see where it is one year from now. If it's over $10 I prove my case

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