This will be my last post for a while, so happy new year! This short comes down to simple economics in a world gone mad. Please refer to the post on seeking alpha for a more detailed (and insidious) thesis. The thesis here is simple.
1) the total production of rare earth elements is 130k tons. of this, japan uses 30k, the US uses 8k, and china uses 90k. these are round numbers, to be sure.
2) the mine that molycorp will bring on-line in the next year will be between 25k and 40k tons. note that this is versus 8k that the US imports.
3) the mine that molycorp will bring on-line in the next year will have a cost per ton of roughly half what REE will have, based on the ore grades
4) the mine that REE will bring on-line will not produce until 2015, in which time the world will have gone from 10k tons undersupply to 50-100k tons oversupply (at least) based on announced projects
5) note i have included the mine construction costs in the TEV calculation. say that REE produces 10k tons a year, this is 10m kilos, at a price of $20/kg (vs under $5 a year ago) and a cost of $5, this is $15 of gross profit per kilo, so $150m gross profit. less 25m of sg&a, and tax it, and you are paying 17x net income today for a mine that may or may not exist 5 years from now. crazy...
so, REE will never be an economic mine. the numbers here are staggering- MCP can bring on 40k tons, or 1/3 of the world production, and 5x what the US imports, in one year.
all the other stuff is nice also- the secondary with insider sales, the crooked management team, the easing borrow rates...
china eases exports
japanese efforts at recycling get more press