Battered Molycorp investors shrug latest setback

Molycorp (NYSE: MCP) shares were static on Wednesday despite a warning from Morgan Stanley over possible revenue shortfalls at the rare earth miner.

The investment bank downgraded the stock to underweight with a price target of $2.50 after cutting its 2015–2016 revenue forecast by roughly 40% due to a slow ramp-up in volumes and detrimental sales mix based on lower sales of neodymium and praseodymium.

"Management is working to address both, but investor confidence is low given past shortfalls," Morgan Stanley said in a posting on Barron's:

"Cash could become tight in the second half. Under our revised base case, Molycorp ends 2014 at $80 million and 2015 at $20 million; however, it is possible that this amount of cash may still be below company's preferred level, because some cash could be held in foreign countries and may not be quickly accessible for use to run operations.

For instance, $63 million of cash was held in China, as of end of the first quarter, whereas a significant fraction of total cash costs are incurred in the U.S."

Molycorp is a speculators' favourite and the closely watched stock regularly features among the most active on the New York stock exchange, but Wednesday's downgrade attracted little attention.

By the close of regular trading on Wednesday some 3.8 million shares had changed hands compared to the 5.5 million daily average with the counter closing at $2.74.

Investors who wanted to exit the share had probably done so already – Molycorp has lost nearly 40% if its value over just two weeks since releasing disappointing financials May 7.

The Colorado-based company reported an 18.5% year on year decline in Q1 revenues against expectations of an uptick and despite a 10% jump in sales volume over the final quarter of last year to 3,518 tonnes.

That was due to average selling prices – falling 13% to $33.69/kg – continuing a protracted slump.

That compares to full year average selling prices for 2013 of $42.26 per kilogram from its Mountain Pass, California mine and processing plant.