Molycorp Seen Too Cheap as Rare Earth Lures Deal Talk: Real M&A By Tara Lachapelle - Apr 2, 2012 7:05 AM PT
Molycorp (MCP) Inc.’s gambit to supply Chinese-made magnets to carmakers in Japan is making it one of the mining industry’s most attractive takeover candidates.
The owner of the biggest U.S. rare-earth deposit, which rose 30 percent since agreeing in March to buy Neo Material Technologies Inc. to bolster its magnet-making ability, was still valued last week at 3.4 times next year’s earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg. That was cheaper than nine out of 10 metals and mining companies and a third less than the industry median, the data show. Enlarge image Molycorp Too Cheap as Rare-Earth Revival Spurs Deal Talk
While Molycorp’s mine in the Mojave Desert once met almost all the world’s demand, it has yet to turn a profit and doesn’t have substantial amounts of the “heavy” rare-earth metals that command the highest prices. Photographer: Jacob Kepler/Bloomberg
“Molycorp’s cheap,” Scott Goginsky, a research analyst and money manager at Milford, Pennsylvania-based Biondo Investment Advisors LLC, which oversees $450 million and owns shares of Molycorp, said in a telephone interview. Being able to make magnets on its own “does help cushion some of the price concerns out there. It’s not just a commodity,” he said.
LYC Price at posting:
71.0¢ Sentiment: LT Buy Disclosure: Held
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