Molycorp, Inc. (NYSE:MCP) Facing Heavy Headwinds


Dallas, Texas 10/28/2013 (Financialstrend) – Molycorp, Inc. (NYSE:MCP) is an $879 million market capitalized metals and minerals manufacturer. Over the past 10 days its stock has taken a beating at the browsers due to negative sentiments prevailing in the investor community about the potential of this stock.

On October 15, Goldman Sachs reduced the target price for the metals producer to $5 from earlier estimated $6. The downgrade occurred in the back drop of Goldman analysts estimating a dip in the earnings per share that Molycorp is expected to report over the next 4 quarters. Readers should note that earlier in the month, the metal producer had indicated that it would look at raising additional  $200 million in capital to augment for anticipated dip in future revenue. Molycorp had also forecasted reduced cash flow due to dip in revenue generation.

The analysts at Goldman are reading the fund rising as a pointer towards continued operational roadblocks and lack of efficiencies in the commissioning of Mountain Pass mining facility. The $100 million ramp up over its initially budget outlay has also caused concern among the analyst community. Post the report being made public, the stock haemorrhaged close to 17% of its market value.

The rating agencies announcement comes in the back drop of Molycorp announcement on October 16  that it had increased its share offering to 45 million and had priced it at $5 per sale.  The $5 price indicated a substantive 10% discount on the price at which the stock was being traded on the browsers. This resulted in a further dip of 6% in its market valuation.

In the past month the stock has lost close to 27% of its market value and investors who are still holding on to the stock would be hoping that the recent announcement of Greenland to allow mining for rare earth metals would hopefully turn around the fortunes of the company.