molycorp buys estonian rare earths company, page-3

The Silmet buy is a smart move by Moly. But it reaffirms my view of Moly. Silmet does open the European market to some extent and Moly can ship concentrate to the plant in a fairly economical way. Moly's Bastnaesite is easy to concentrate and clearly Moly will produce enough to support the current pilot and Silmet. But the bigger question is does this say anything about Phoenix?

According to Moly's prior comments about other ore bodies Tasman and the Greenland's projects are not projects they would consider. So, unless they have changed their mind and are now going global with a 3,000tpa Estonian processor I think there must be something else going on here.

My conclusion is Phoenix is delayed and the paring back of technologies is becoming obvious. If Pheonix were progressing well. Mountain Pass might get 5,000 tons of ore from Silmet before Phoenix would open (scheduled for late 2012) and make Silmet obsolete. This would not justify the $89 million buy. I therefore conclude Phoenix will be delayed.

I further conclude that Moly's claims of producing for half the price of the Chinese are out the window in the near term. If Phoenix could produce rare earth for less than Silmet the delay I anticipate would have to be severe to justify the buy.

In stead I conclude the Phoenix delay is enough to allow escalation of Moly's production through Silmet in the near term- say two years or more? And I further conclude Phoenix will produce at a cost of Silmet production plus the additional shipping cost of shipping concentrate versus oxide to Europe. None of this is that bad for Moly, but it does further suggest that Moly's valuation is too high. It also says Lynas is still a good buy with an even greater first mover advantage than the market previously expected. That's MO