There's No Hope for Molycorp

When Molycorp (NASDAQOTH: MCPIQ  ) was a hot stock in 2010, it was because rare earth mineral prices were through the roof as China cut back exports. As the theory went, if Molycorp could open its mine in a timely manner, it could take advantage of those high prices and make a mint for investors. 

But the inelastic demand for rare earth minerals that led to high prices in 2010 also resulted in a rapid drop in prices when Lynas in Australia and Molycorp opened their mines. Suddenly, the tiny rare earth mineral market was fully supplied and buyers didn't have to pay high prices for the materials they needed. 

The resulting impact on Molycorp has been falling revenue, even with increased production and massive losses quarter after quarter. There seems to be no end in sight to the financial challenges and, before long, another share offering may be needed to stay afloat. In the video below, specialist Travis Hoium covers Molycorp's challenges and why this is an investment you should stay far away from. 

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Read/Post Comments (4) | Recommend This Article (3)

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  • Report this Comment On May 16, 2014, at 1:49 PM, zaphodt wrote:

    I think it's a big understatement to say that the rare earth metals market is tiny - electronics, hybrid cars, etc. all need rare earths for their batteries. That, and china's increasing demand/reducing exports means that it all has to come from somewhere.

  • Report this Comment On May 16, 2014, at 5:53 PM, Npard23 wrote:

    Saying Molycorp is hopeless without much to back it up is the type of contrarian signal I look to buy distressed stocks like Molycorp.

  • Report this Comment On May 19, 2014, at 5:23 AM, CanadaDreamer wrote:

    There never was any hope for a pimp play like MCP.

    Anyone with the slightest understanding of the REE market knew it was a massive hype job. Ironically, REEs aren't rare, and the market is minuscule. The only reason nobody had built a large mine was simply because there wasn't any demand. When a few did build big mines, the inevitable happened, and prices collapsed.

    The guys who bought the REE hype were the same morons who bought into Uranium and all the other minor metal hyping (Moly/Vanadium etc etc) based on all that "huge" China demand. They are all a lot poorer today. Few are any wiser, and more are born every minute.

  • Report this Comment On May 19, 2014, at 9:13 AM, OriginalNewman1 wrote:

    MCP was 77 in March 2011.

    They should be investigated for mismanagement.

    They were also hyping AVL when the mine hasn't even opened. Saying that this mine contained 2 of the most important rare earth metals. More BS

    Try DDN-- a Uranium hype Another pump.

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Travis Hoium

Travis Hoium has been writing for since July 2010 and covers the solar industry, renewable energy, and gaming stocks among other things.

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8/31/2015 11:14 AM
MCPIQ $0.11 Down +0.00 +0.00%
Molycorp, Inc. CAPS Rating: **