Why Shares of Molycorp, Inc. Got Rocked Again Today

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, Inc. (NYSE: MCP  ) dropped another 15% today following a massive drop yesterday on weak earnings.

So what: Yesterday's drop was a result of another massive loss in the first quarter and today analysts at JPMorgan piled on by downgrading the stock to underweight. They said another capital raise is likely this year, which is logical considering the rate Molycorp is burning through cash.  

Now what: Cash balance on March 31 was $236.1 million but operations burned through $45.8 million in the first quarter and there was another $29.8 million spent on capital expenditures. With rare earth mineral prices falling as Molycorp increases supply, there's no reason to think that operations will suddenly turn cash flow positive and the only option to stay afloat is to sell more shares. With so many factors working against Molycorp, I'd stay far away from this stock.

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  • Report this Comment On May 09, 2014, at 3:01 PM, flounderuiuc wrote:

    So what happened to rare earth independence for US and breaking the stranglehold of the Chinese on the market?

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