EDITOR: | January 14th, 2015 | 4 Comments

Lifton on could Molycorp survive a delisting

| January 14, 2015 | 4 Comments
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RareMetalBlog-Molycorp-2A Requiem for a Light Weight: It’s becoming difficult to imagine a situation in which the NYSE doesn’t delist Molycorp (NYSE: MCP) in May of this year. To be or to remain listed on the “big board” a stock must have a selling price of not less than a dollar for 30 contiguous trading days in the previous six months. Since November 28, 2014, MCP has been below a dollar and seems to have not yet as of this writing to have found a floor price. To understand the pressure on MCP think about the fact that if it has been below, say $0.75, for the last 30 days then it would have to be above $1.25 for the next 30 days in order to run out the clock. The longer that MCP stays below $1.00 the higher above $1.00 it will have to go and stay to maintain its NYSE listing.

I do not think MCP could survive a delisting, because I am going to guess that many of its bond and debt covenants are based on its having a NYSE listing with the concomitant “market value!”

The vultures certainly are circling. Many of my PALS, Pundit Analyst-Land Specialists, have told me of recent large volumes of requests to “analyze” MCP and, in my case, in addition, to value the PP&E. Note well that I cannot value MCP’s PP&E, unless and until I have access to the properties and a right to have questions answered. This is quite unlikely to occur in a regime that tells conference promoters that if I, Jack Lifton, am a participant then MCP will not be one. Superman has nothing on me!

I have my own plan for restructuring MCP in bankruptcy, and institutional investors listen to me politely, but I know what they are thinking: The parts of this turkey must be worth more than the whole, so we’ll take it over, break it into saleable chinks, and sell them off. In fact it is true that a “breaker” could probably make some money that way, but MCP can also be restructured into a smaller, right sized, operating company by selling off Neo Materials while keeping NdDy supply contracts with the new Neo; closing or selling Silmet also with a supply contract to anyone who wants to buy it; and downsizing the SX system at Mountain Pass with regard to its capacity for processing light rare earths, and using some of the then redundant front and back end facilities and adding a specialized core SX unit to separate/refine SEGs and heavy rare earths.

I think that the best move for a fund, perhaps supported by a defense contractor, or the DoD itself, would be to buy (in alphabetical order) Rare Element Resources, and/or Texas Rare Earth Resources, and/or Ucore Rare Metals and then using that entity to buy MCP.

The newly added SEG/HREE facility by the way would be one utilizing:

  1. Advanced group-specific SX,
  2. MRT,
  3. CIC, or
  4. Electrolytic type separation technology

Or perhaps some combination of them. I would then add a metals making facility either using the electrolysis of molten salts or one of the new technologies, and then I would j/v with one of the several experienced American rare earth permanent magnet makers to produce a total American rare earth supply chain  vendor to the US defense industry, the US consumer vehicle industry, the US consumer electronics industry, and anyone else who uses rare earth permanent magnets, rare earth alloys, rare earth metals, or rare earth chemicals (catalysts, lasers, pharmaceuticals, etc.).

Isn’t this what the original entrepreneurs said they were going to do and what they wanted to do? Isn’t this why you made your investments???

Now with a bit of creative destruction and a dose of innovation everyone can achieve their goal!

This is where the “financiers” could really shine, but so that everyone can come down to earth I doubt that any of them really care enough about the future of our country to carry it off.

In the meantime I will work to support the development of America’s three best managed and most technologically advanced junior rare earth ventures both in metallurgy and in the separation of the individual critical rare earths into producers.

They will all be survivors.


Jack Lifton

Editor:

Jack Lifton is the Sr. Editor for InvestorIntel Corp. and is the CEO for Jack Lifton, LLC. He is also a consultant, author, and lecturer ... <Read more about Jack Lifton>


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Comments

  • Tim Ainsworth

    “The Company can regain compliance with the minimum per share average closing price standard at any time during the six-month cure period if, on the last trading day of any calendar month during the cure period, the Company has (i) a closing share price of at least $1.00 and (ii) an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month.”

    While they certainly have plenty of work to do reads to me that they need to average $1 for a month within, not over the full, 6 month period. Average $1 1st June to 30th June and they are compliant.

    After extended “fix it” periods upcoming QR should be defining for both Moly & Lynas.

    January 14, 2015 - 8:16 PM

  • Dean H.

    Under the NYSE’s rules, the Company has a period of six months from the date of the NYSE notice (December 30, 2014) to bring its 30-day average share price back above $1.00. During this period, the Company’s common stock will continue to be traded on the NYSE, subject to the Company’s compliance with other NYSE listing requirements.

    Molycorp can also do a “reverse stock split” to regain compliance.

    But I do have say that staying “uplisted” in their least of their worries.

    January 14, 2015 - 9:41 PM

  • Andrew

    It is meaningless to wait until end of June. No matter what production volume they achieve, it is still selling at very cheap. It is not the right time for the Phoenix to awake. Should go sleep again like 20 years ago.

    January 14, 2015 - 10:30 PM

  • Moonflye

    If you read the actual indentures, a fundamental change occurs if: “the Common Stock (or other common stock underlying the Notes) ceases to be listed or quoted on any of The New York Stock
    Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or any of their respective successors).” When a stock is delisted from NYSE, it often goes to the Global Market. Not that you couldn’t be right in some circumstances, but delisting is not generally a cause of bankruptcy, but rather a symptom of it. The company is obviously very vulnerable to a bankruptcy filing for much more fundamental reasons, but the simple act of delisting is not likely to be one of them. And just because it goes bankrupt, it doesn’t mean the company disappears. The old Neo operations probably survive. What everyone wants to know is whether Mountain Pass shuts down, and that’s where you can be the best resource, Mr. Lifton.

    January 24, 2015 - 8:21 AM

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