why molycorp will fail

I quoted this from the Molycorp board at yahoo.

Cheers Five


" Fact #1: ENTIRE world market is $1-2 Billion (at today's prices - i'll be nice and use $2B for the figures below)

Fact #2: CHINA owns 95%+ of the entire $2 Billion Market. This leaves 5% of the 2 Billion to the *rest of the world*.

Fact #3: MCP can produce 20K tons/year starting at the END of 2012. So, nothing now and 20K in 2 years.

Fact #4: If MCP does 20K tons that adds 15% to the overall supply of Rare Earths (based on 120K tons for world wide consumption now)

Fact #5: If the above fact is true, then based on overall markets, they will bring in approx 300M/year in revenue. This ASSUMES they have the highest dollar rare earths.. the "heavies".. MCP doesn't have the heavies, but for the sake of argument, let's say they do.. At 300M/year and at 20% net profit, you're looking at 60M/year in profit

Fact #6: MCP has about 83M shares outstanding. This gives it earnings of approx $0.72/share. Giving a REAL P/E of mining companies (check TC, FCX, etc..) let's give it 20 (avg is actually 11). That gives it a price of $14.40. Darned close to the IPO

Please note, the above assumes they are producing *RIGHT NOW* and making money at TODAY's metal prices! But, what else do we ALSO already know?

LYNAS will be producing well before MCP thereby increasing supply.

Multiple other mines are coming online in 2012 and 2013 also increasing supply

What happens when supply is increased? Right... prices plummet. So, when MCP starts mining for REAL, they will be bringing in LESS income than they would if they were mining right NOW. Please refute that, you cannot!

So, in IDEAL conditions, you're looking at $14.40 share price. This assumes ZERO debt to worry about and assumes ZERO decrease in price and assumes $2B market when it is actually about $1B now.

Add to the above that they have 410 MILLION SHARES AUTHORIZED of which 83 MILLION SHARES are issued. They can issue 300+M shares at any time dilluting the earnings per share BIG time. If they were to issue all 300M shares over the next year, you're looking at the price per share being chopped by 75%!

If you can refute any of the above, please do so and provide facts to back it up.

Thank you in advance


Sentiment : Strong Sell "

Source: http://messages.finance.yahoo.com/Stocks_%28A_to_Z%29/Stocks_M/threadview?m=te&bn=57599&tid=16475&mid=16475&tof=1&frt=2#16475