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Molycorp drops as JPMorgan cuts target on rare-earth quotas
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Updated: Dec. 29, 2011 | 9:19 a.m.
NEW YORK -- Stock prices for Molycorp Inc., owner of the largest rare-earth deposit outside China, dropped the most in three months Wednesday after JPMorgan Chase lowered its earnings estimate and price target because Chinese export quotas won't fall next year.
Molycorp expects to reach annual production capacity of 20,000 tons of rare-earth oxides at its mine in Mountain Pass, Calif., just south of Primm, next year and double it in mid-2013, the company said on its Nov. 10 earnings call.
Molycorp fell 14 percent, to $24.04, the biggest decline since Sept. 20.
The Chinese government said Tuesday it will keep 2012 export quotas virtually unchanged. That, coupled with planned increases in production by Greenwood Village, Colo.-based Molycorp and Australia's Lynas Corp., "will put additional downward pressure on rare-earth prices," Michael Gambardella, a New York-based analyst at JPMorgan, wrote in a note Tuesday.
Prices for rare earths -- 17 chemically similar metallic elements used in products including batteries, electric cars and wind turbines -- jumped in 2010 after China said it would cut exports by 72 percent to conserve resources and protect the environment. China produces more than 90 percent of global supplies.
JPMorgan reduced its share-price target for Molycorp to $39 from $57 and cut its estimate for 2012 earnings to $2.78 a share from $4.50 a share. Molycorp will earn $2.95 a share next year, according to the average of eight analysts' estimates compiled by Bloomberg.
The bank also lowered its estimate for the basket price of Molycorp's ore to $58 a kilogram in the fourth quarter of 2012 from $84.
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