Molycorp Loss Beats Estimates as Rare-Earth Sales Rise

Molycorp Inc. (MCP), owner of the largest rare-earth deposit outside China, posted a smaller-than-expected quarterly loss as sales rose after customers began returning to the market.

The third-quarter loss excluding inventory writedowns and other items was 5 cents a share, the Greenwood Village, Colorado-based company said yesterday in a statement released after the close of regular trading. That beat the average of six analysts’ estimates compiled by Bloomberg for a loss of 12 cents.

Molycorp’s rare-earth output more than doubled to 4,391 tons in the quarter after its C$1.3 billion ($1.3 billion) acquisition of Canada’s Neo Material Technologies Inc. in June added production capacity in China. The company said demand is beginning to stabilize as China, the largest producer of the of the 17 chemically similar elements, curbs supplies.

“A lot of our customers who had increased their working inventory levels of rare-earth products are now at the point where they’re starting to come back into the market to purchase again,” Chief Executive Officer Mark Smith said yesterday in a telephone interview.

The shares rose 4.6 percent to $9.08 as of 9:42 a.m. in New York. Molycorp’s net loss was 19 cents a share, compared with 49 cents of net income a year earlier. Sales rose 49 percent to $205.6 million, missing the $208.8 million average of five estimates.

Mine Schedule

Molycorp is increasing output at its Mountain Pass mine in California and said yesterday the project is still scheduled to produce at an annual rate of as much as 19,500 tons of rare- earth oxides at some point in the fourth quarter. The company plans to double the mine’s capacity to 40,000 tons by the end of 2013.

Rare-earth prices surged in 2011 after China, which produces more than 90 percent of global supplies, restricted export quotas. Prices have tumbled since mid-2011 as customers used alternative materials and stockpiles.

Lanthanum oxide, a rare earth used to refine gasoline, dropped 56 percent in the past year, according to Shanghai Steelhome Information data. Cerium oxide, used in glass polishing, has declined 61 percent and neodymium oxide, used in magnets, has fallen 63 percent, the data show

Prices should cease to fall as demand returns and customers feel more confident about the reliability supplies from outside Chine, Smith said.

“Higher prices isn’t necessarily what you look for all the time,” Smith said. “Making sure that we have prices that meet our customers’ needs is also very important.”

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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