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Molycorp Beats Estimates as Rare-Earth Alloy Sales Gain

Molycorp Inc., owner of the largest rare-earth deposit outside China, reported fourth-quarter earnings that beat analysts’ estimates after it sold more high-value alloys.

Net income was $26.6 million, or 26 cents a share, the Greenwood Village, Colorado-based company said today in a statement. A year earlier, Molycorp reported a loss of $7.9 million, or 10 cents. Profit excluding compensation and water-removal expenses was 41 cents, beating by 1 cent the average of six estimates compiled by Bloomberg. Sales rose sixfold to $132.9 million from $21.7 million.

“One of the things that helped significantly is we sold a lot of alloy out of our Tolleson, Arizona, facility,” Chief Executive Officer Mark Smith said in a telephone interview.

Molycorp, which held an initial public offering in 2010, is restarting rare-earth production at its mine near Mountain Pass, California, which had been shut since 2002. China controls 95 percent of global rare-earth supplies, according to the U.S. Geological Survey. The 17 chemically similar metals are used in products including batteries, electric cars and wind turbines.

“Customers are willing to pay for a supply outside of China, especially one that’s pretty much guaranteed,” Jonathan Hykawy, an analyst with Byron Capital Markets in Toronto, said yesterday in an interview.

Output Forecast

Molycorp dropped 2 percent to $28.50 at 6:04 p.m. in after-hours trading in New York.

The company said Feb. 21 it started some operations at its rare-earth manufacturing facility in Mountain Pass, which is scheduled produce at a rate of as much as 19,500 metric tons of rare-earth oxides a year by Sept. 30. Molycorp plans to double annual capacity to 40,000 tons by the end of 2013.

Molycorp today reiterated its 2012 production forecast of 8,000 to 10,000 tons of rare earth oxide equivalent. It sold 52 tons of rare-earth alloys in the fourth quarter for $28.9 million in revenue, the company said on its website.

Rare-earth prices have fallen in recent months after soaring in 2010 and the first half of 2011 after China imposed export quotas.

The average price of lanthanum oxide, a rare earth used in rechargeable batteries and refining catalysts, was 129,167 yuan ($20,504) a metric ton in the fourth quarter, 15 percent less than in the third quarter, according to data from Shanghai Steelhome Information.

“On a worldwide basis, demand remains very strong,” Smith said. “A lot of people only talk about how much they’ve gone down. I still consider these prices to be very, very positive for our industry.”

The Mountain Pass deposit accounted for a majority of the world’s rare-earths production from 1965 to 1985, according to an April report from the U.S. Government Accountability Office.

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