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On MCP
I sold off my Molycorp (MCP) last week. The stock is up about 400% in
less than a year. MCP has a market cap of just $5.4b. It has no earnings
at all. Not much in the way of sales either. About $25mm in the most
recent quarter.
I have little doubt that MCP will succeed as a mining company and it
will be producing rare earths in the coming years. So maybe the stock
price is justified. But this is a bet on the come. At a price of 50Xs
trailing sales it makes it one of the most expensive stocks out there.
We know that RE aren’t rare. It’s extracting them that’s the problem.
It’s a dirty business. We also know a thing or two about greed and
money. That’s also a dirty business. When it is possible to raise $400mm
and create a market value of $5b (MCP) on nothing more than a vague
promise about future results one can expect that there will be many
copycats.
I saw this article
this morning. It made me feel a bit better about running for cover on
MCP. Please don’t read this and conclude that MCP is a short. The stock
could be up $10 in any given week. Calling the top is a fool’s game.
Especially when the price is already at foolish levels. But taking
profits can be ‘sweet’ too.
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Bruce, it's great that you made 30% on this trading sardine. But when you bought it the company didn't have material sales or earnings either. What made you buy the stock then? I've traded this stock a number of times and will continue to trade it. Not because revenues were up 329% and 886% the last two quarters. And not because fund ownership went from 118 funds in Sept to 165 funds in Dec. And not because it's selling at 8X 2013 First Call Guestimates for 2013. I'm trading it long because it's in a powerful uptrend. There is nothing that I can see thus far that would suggest the tend is over. Attaching fundamental analysis to a momentum stock would seem a non-starter to me. Price and volume is the ultimate arbiter on what will happen with this stock
Bruce, did you do a thorough analysis of their MCP's contracts, their known reserves then discount, etc.? My analysis is completely different than yours.
I don't see any issue about OTHER ventures interfering with the machine that LYNAS (LYSDY or LYC ) and MOLYCORP (MCP) have got in place since the barriers to entry the rare earth production business are more than usually discussed (expensive, time consuming political hurdles 5-10 years as an estimate) and both LYNAS and MOLYCORP are the only two companies competing with China's virtual MONOPOLY on the product,period.
As far as the price, if the market goes down, remember all tides either take down or lift...but, if the market continues without major dislocation, the prices that both of these stocks are going for today, in my humble opinion, are still very undervalued...but, to get this figured out yourself, you have to dig, and calculate. I don't buy or sell without digging and calculating, and for those of you reading this, you will hurt yourself not to do the same...so pull the numbers, look at the prospects and make your own analysis instead of getting blown by the wind of anyone's articles or comments.
best regards
Analize what? Future sales and earnings? Of a mine and production facility that does not exist? What prices for materials are you using? Why do you believe these prices will be sustained?
I did make my own analysis. I made 30% in a few months. From experience that is should be taken.
They are actually selling a small amount of product and have been for a while...you can find details in SEC filings. If you "extrapolate" this, you won't believe what you find and if that is scalable, my estimates are HUGELY underestimated...but, I consider the fact that their future sales may not be the same rare earth that they sell right now-- and if you read, you can find details about their commitments and when they will sell which gives you future earnings....I know, that is speculative but in my mind, with all the dynamics, a speculation, well grounded in facts worth a bet.
You have to look at old REM prices for each element to get estimates and if you haven't been keeping them for you own personal use, it might be tough. I further discount back to prices that are not current prices in case the price pulls back to late 2009 prices.
Further, if you dig around, you will find that we have government support, since (our government now considers these elements are important for national security--after falling asleep at the wheel and letting China take charge for 20-30 years) for Molycorp's project so it is not going anywhere, but again, i am not suggesting you take my word for it.
I made a boatload on AVL.... regret selling at around 7.00... Even though I love the company, I know I will be able to reload at some time...Some of these companies have gone too far too fast
Kazakhstan is the world's number one source of uranium, CCJ has a JV there. The rare earths are coming as a byproduct of the uranium mining.
With NATO/UN/US all over Africa now, how long before China needs to throw its weight around to show it is a world power also?? All too soon, no doubt.
My short term trade was long the MCP-PA and short REE. No doubt MCP will be able to actually deliver some product and capture some the the extraordinary premium in prices before supply knowkcs them back down again. REE is little more than a post office box at a 600 sqft office, and that also serves as headquarters for several other companies. I closed it out for about a 20% gain about a week ago. Sure I wish I had been in MCP for the 400% ride.
I dabbled in REE when it was 3 or so...left alot of money on the table, but I knew they were not going to produce any cash for a long time...c'est la vie
Never underestimate the rapacity of suckers I guess.
The empire be not in Afghanistan just to destabilize.
It USED to be a mining company so in that sense....
Anyone have any thoughts on Dacha Strategic Metals?
I got out of MCP a month or so ago, it was going too high too fast. Moly is still a startup/restart that's not turned a profit yet. Another minus is California. One way to kill a business is to try in the left, lib, home of fruits & nuts California. Look at LYSCF for an ozzy RE play that should be profitable 2H11.
After Silver, this was my best long trade last year.
The best RE play is GWG.TO....examine their model and what they are doing fabrication wise...
Dammit!, why did you have to mention MCP? It was tempting me last Summer at a ridiculously low price and I walked away.
Dammit!
Time to sell a few calls, maybe?
I've been trading the weeklys in MCP. Fast and furious $$ to make there much of the time. The trip up I have been selling Puts....and cleaning up behind this run-up. It may be time to switch and sell calls though...I have sold some covered calls on weeklys, and lost my shares more than once...smiling all the way. "Call 'em away bitchez...that is still a profit for me."
Did you say four hundred percent?
Nice trade Bruce. Pigs get slaughtered as they say.
Had calls on AVL last thursday, sold them for a double on friday. Looks like there is more upside but has to do with chiner holding all their RE.
Anyone have any thoughts on Dacha Strategic Metals?
why do you scare me? Maybe it's the pic.
Yep.... their preferred convertables look more interesting to me.
Ooops... thought it was still below par... trading at 120, fuggedit
If China buys rare earths from Kazakhstan where will the rest of the world get its rare earths? Looks like China wants to corner this whole strategic market. The biggest users of RE are all in the west!
Africa.
China actually sends their people to work 6 month to 12 month shifts in African mines.
China has locked up 20% of the rare earth production from Noril'skiy. Which I own a small position in under NILSY.