Friday, June 26, 2015 9:45:55 AM
The poster child for what was once a 'can't lose' investment is filing for bankruptcy
Business Insider By Myles Udland
23 hours ago
(Reuters/David Gray) Rare-earth metals, once the world's hottest trade, have fallen apart.
Rare-earth miner Molycorp is filing for bankruptcy.
On Thursday, the company announced that it and its North American subsidiaries would file for Chapter 11.
It's been a long fall from the top for Molycorp, which was once a leader in the rare-earth mining space, one of the hottest trends in the market just a few years ago.
Last year, we chronicled the rise and fall of Molycorp and the rare-earths trade, which was all the rage back in 2011.
The idea behind the rare-earth trade was that not only were these minerals hard to extract (the minerals aren't necessarily rare, but just hard to find in large concentrations), but that they were also needed for all kinds of popular consumer products like lasers, magnets, and plasma TVs.
In short, the ability to sustain demand for these products was can't miss.
And how did the company get here? Spent too much money. In each of the last 3 years, the company ran an operating loss in excess of $350 million despite revenues that topped $500 million 2012 and 2013 and revenue of $475 million last year.
In 2010, ZeroHedge wrote: "Ever heard of the oxides of Lanthanum, Cerium, Neodymium, Praseodymiuor Samarium? With price surges between 250% and 600% in one quarter, you may wish you have." But now, maybe not.
Shortly after the market open on Thursday, shares of Molycorp, which will likely be delisted in the coming days, were down as much as 38% to $0.22. After going public in July 2010, Molycorp's shares more than quintupled in a year, trading as high as $74 per share.
Back in 2011, some analysts had price targets above $100 on Molycorp and industry experts were telling outlets like Bloomberg that the surge in rare-earth prices wasn't related speculation from investors, but "people who are desperate for the product."
As a result, the price of rare-earth metals skyrocketed in 2011 before completely crashing and doing nothing for the last few years.
.rare earth pricing
(Molycorp)
And so while Molycorp described rare-earth metal pricing as "less volatile" in this investor presentation, the price simply crashed.
And it took Molycorp with it
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