DOESN'T LOOK GOOD I note that some analysts are projecting cerium at a selling price of $8/kg by 2015 for 99.99% oxide. If MCP's FUTURE cost is $7/kg then you, jbde, are predicting a disaster, since half of the predicted 40,000 mt/a will be cerium, and since NO ONE pays a posted price for volume this would mean that MCP would have to sell cerium oxide at a loss.
Please do not tell me about the market for Xorbex. That is a fantasy at any price but at a cerium price of $8/kg there is a fatal problem in that it has already been stated by MCP that Xorbex will fail in the marketplace if cerium is below $11/kg.
I note that at $21/kg cerium Xorbex is already a flop.
Molycorp's problem is that it is basing its supply model on a demand market that does not exist except, perhaps, for neodymium. The question is: Can Molycorp survive when it has to produce 40,000 MT/a of the light rare earths in order to produce 5,000 mta of neodymium or 7,500 mta in total of didymium, if you count the praseodymium as a desirable product?
Molycorp's problem is one of break even. It is already too high.
The biggest worry for Molycorp has got to be Lynas, which will produce nearly 4,000 mta of neodymium and a total of 8,000 mta of dudymium from just 22,000 mta production. I doubt very much that Lynas' cost structure is twice as high as that of Molycorp, so they will be able to sell their Nd and NdPr at a lower price than Molycorp.
I think Molycorp's basic problem is, as I have already said, their break even is too high and the target production rate is far too high for the real market. This has been obvious for years. The investing public has just caught on, and the greater fool theory that drove it has finally run out of greater fools. S**t happens.
There are much better managed REE companies out there than Molycorp. Look, for example, at GWMG, UCORE, TASMAN, and REE. Their managers all understand the market far better than Molycorp's managers do. More importantly all of those managements understand that profitability not overall size is the target of a well managed business. Economy of scale is a useful manufacturing approach. It works for natural resource production only when, as an example, in the case of the heavy rare earths you cannot achieve production of the desired metal values without concomitant production of the other rare earths.
Polymetallic projects can also exhibit an economy of scale through diversification into marginal products. For example, Orbite Aluminae Inc. will produce low cost heavy rare earths and gallium, scandium, yttrium, and zirconium as byproducts of large scale production of alumina into a market that has capacity to absorb more than Orbite can produce even at its current costs. This will allow Orbite to produce and sell 1,200 tons per year of critical technology metals at a large margin while the costs are borne by the 250,000 mta of alumina that is their principal product. There are other good companies doing the same thing with polymetallic deposits. For example, Australia's Alkane is a zirconium producer that will produce substantial rare earths and hafnium as cost contained byproducts.Turkey's AMR will do the same with a broad range of technology metals which will be byproducts of its magnetite (iron ore) production.
I think that Molycorp just overshot the mark and never considered cost control as an important target. Now I think its too late.
One more company, Tantalus, in Madagascar will have a very low cost of producing rare earth concentrates from an ionic clay field larger than those known to us in China. Tantalus has an LOI with Rhodia in FRANCE to process the concentrates. If that goes to a final deal then Tantalus will be the first producer of rare earths from ionic clays outside of China within a year and a half.
There's a lot happening also with regard to rare earths in Australia, southern Africa, Greenland and eastern Canada. Stop worrying about Molycorp.