Will Molycorp Stock Ever Recover?

Molycorp (NYSE: MCP) will release its quarterly report on Thursday, and investors have never been more downbeat on the company's prospects, having bid the stock down to its lowest levels since the rare-earth metals specialist's 2010 IPO. Just as commodities giants Cliffs Natural Resources (CLF 1.85%) and Barrick Gold (GOLD -0.54%) have struggled from weak pricing in their respective metals markets, Molycorp has had to contend with huge price volatility from Chinese sources of rare-earth metals.

For years, investors looked at Molycorp as being a surefire winning play on demand for rare-earth metals from makers of consumer electronics and electric vehicles. With China controlling a huge portion of the world's rare-earth market, Molycorp appeared to have a key position in ensuring obtainable supplies of rare-earth metals. Yet thus far, the anticipated trade-squeeze from Chinese rare-earth exports has failed to materialize, sending commodity prices plunging and taking away Molycorp's biggest profit potential. Let's take an early look at what's been happening with Molycorp over the past quarter and what we're likely to see in its report.

Stats on Molycorp

Source: Yahoo! Finance.

What's in store for Molycorp earnings this quarter?
Analysts have only gotten more pessimistic about Molycorp earnings over the past few months, widening their third-quarter loss estimates by more than a third and expanding their loss projections for the full 2014 year by $0.13 per share. The stock has suffered greatly, dropping more than 30% since early August.

Molycorp hasn't delivered good news at earnings time for a while now, and its second-quarter release in August was no exception. The company saw an increase in sales of more than 30%, but that was still well below what investors had expected to see. A loss of $70 million stemmed from poor pricing on rare-earth metals, which have dived from supply gluts. Cliffs Natural has seen the same conditions hit the iron ore and metallurgical coal market, while Barrick is still facing gold-production levels that don't reflect the recent plunge in gold prices earlier this year.

Molycorp investors did cheer the news last month that it had completed its Mountain Pass chloralkali plant. With expectations that the plant will begin production this quarter, Molycorp will at least be able to generate some cash flow -- albeit with its added supply potentially depressing prices even further. In addition, Molycorp named a new CEO, with Geoff Bedford taking over the reins from interim leader Constantine Karayannopoulos as of next month.

Yet Molycorp's gains proved short-lived. Just a few weeks ago, Molycorp said it would do a secondary stock offering to raise between $200 million and $230 million, diluting shareholders even as the stock falls to all-time lows. Still, with Mountain Pass having gone considerably over budget, the need for capital outweighed the desire to protect shareholders from further losses.

In the Molycorp earnings report, watch to see whether incoming CEO Bedford provides any details on his strategic plans to take the company forward. Without an innovative strategy, Molycorp might be left suffering the same fate as Cliffs Natural and Barrick, hoping that metals prices will move in its favor before it's too late.

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