The company has enough cash on hand to survive hard times: $264 million, compared with current liabilities of just $181 million. Molycorp is looking for a revolving line of credit as well to the tune of $125 million to help pay ongoing capital expenditures related to the company’s deposit in Mountain Pass, Calif. Molycorp has an operational capacity of 15,000 metric tons per year and is working toward a goal of 19,050.
As of 2012, global demand for rare earths was around 145,000 metric tons, but supply was limited to just 113,000 — worldwide demand is forecast to rise 7.6% by 2015, up to 180,000 metric tons. That’s a simple supply-and-demand story — and investors are beginning to take notice.
More than 15 million shares of stock were purchased in the past six months by insiders — a classic sign of strength for prospective investors. The high short float of 33% should be taken into consideration but may provide an opportunity for a short squeeze should the rare earths market rise faster than predicted during the second half of this year.
Risks to consider: The Russian investment plan should cause rare earth prices to drop but help Molycorp manufacture in greater supply. Management will need to be effective at controlling cash costs and improving efficiencies.
Actions to Take –> From a technical standpoint, the stock has had a multiple bottom around $5, which is seen as a buy signal. At just above $7, this stock has plenty of room to run as investors begin to take notice of this forgotten sector.
Most people have no idea that thanks to a special deal made during the Clinton administration, Putin now has the opportunity to disrupt 10% of America’s electrical supply — before the end of the year. Click here to get all the shocking details.