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Molycorp Loss Wider Than Expected Amid Rare-Earth Mine Delay

Molycorp Inc., owner of the largest rare-earth deposit outside China, reported a wider-than-expected loss after the company missed a production target and prices for the commodities declined.

The fourth-quarter net loss was $359.6 million, or $2.91 a share, the Greenwood Village, Colorado-based company said yesterday in a statement after the close of trading. The company reported net income of $26.6 million or 26 cents a year earlier.

Excluding a $264.3 million writedown and other one-time items, the loss was 45 cents a share, wider than the 30-cent average of six analysts’ estimates compiled by Bloomberg. Sales rose 1 percent to $134.3 million, missing the $138.5 million average of four estimates.

Molycorp was originally scheduled to report its results at the end of last month. On Feb. 28, the company said it needed more time to determine the size of the non-cash impairment charge related to its C$1.3 billion ($1.3 billion) acquisition of Toronto’s Neo Material Technologies Inc., which was completed in June.

The company said its “financial performance” in the first half of 2013 will be “slightly weaker” than in the second half of last year. High inventories held by end-users and lower prices will offset improving demand from the auto, oil and battery industries, Chief Executive Officer Constantine Karayannopoulos said in an interview yesterday. Customers will return to the market “in a meaningful way” by the third quarter, he said.

Missed Target

Molycorp rose 3.3 percent to $6.19 in New York.

“Until the inventories are exhausted and customers have the confidence they can start buying rare-earths from a reliable producer with some visibility on prices, I don’t think we’ll see large-scale return into the markets,” the CEO said.

Molycorp said Jan. 10 its Mountain Pass mine complex in California missed a target of producing rare-earth oxides at an annual rate of 19,050 metric tons by the year-end. The company now plans to meet that target by the middle of 2013.

In November, Molycorp said it was being investigated by the U.S. Securities and Exchange Commission over the accuracy of its public disclosures. It fired CEO Mark Smith in December, replacing him with Karayannopoulos.

Investor Credibility

“The biggest issue that’s within their control is credibility with investors,” said Ben Kallo, an analyst at Robert W. Baird & Co. Inc in San Francisco. “The management team did a good job of starting the process of restoring credibility which I think is much needed.”

Molycorp raised $414.2 million from bond and equity sales in January to help fund completion of Mountain Pass. Molycorp expects capital expenditures will be $450 million this year.

In a separate statement, Molycorp yesterday announced a five-year agreement with Univar Inc. to sell Molycorp’s cerium-based water-treatment product to municipal and industrial wastewater treatment plants in North America.

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