Molycorp's Stock Makes Rare-earth Company Ripe for Takeover

NEW YORK — Molycorp's plunge below the value of its net assets is turning the owner of a rare-earth supply that's unmatched in the Western hemisphere into a takeover target.

The Greenwood Village-based owner of the biggest U.S. deposit of metals that go into everything from smartphones to solar panels and hybrid cars handed investors losses of 61 percent in 2012 amid a slump in rare-earth prices, cost overruns at its California mine, a regulatory probe and the departure of its chief executive. Even after the shares rebounded from a record low in November, Molycorp is trading at a 19 percent discount to its book value, according to data compiled by Bloomberg.

Molycorp's low valuation and the chance to lock in rare-earth resources could spur manufacturers from Nissan to Siemens to make a bid, according to Byron Capital Markets Ltd. After expanding its refining and processing operations with last year's purchase of Neo Material Technologies, the $1.3 billion company may even appeal to private-equity firms, Robert W. Baird & Co. said. Goldman Sachs projects that Molycorp could fetch $15 a share in a takeover, a 59 percent premium to its Dec. 31 close.

Molycorp shares Wednesday jumped 10 percent, or 95 cents, to close at $10.39.

"At this point, Molycorp is definitely in play," Luisa Moreno, an analyst at Euro Pacific Capital in Toronto, said in a telephone interview. "It would be a very good target for companies that are interested in being in this space if they recognize the rare-earth space is important and they have the cash to take Molycorp and make it a real producing company."

Jim Sims, a spokesman for Molycorp, declined to comment.

Molycorp owns the biggest U.S. deposit of rare earths, 17 chemically similar elements including cerium and lanthanum that are used in a range of products, including Apple Inc.'s iPads and Raytheon Co.'s Tomahawk cruise missiles. It paid $1.1 billion last year to acquire Toronto-based Neo Material, adding plants that process rare-earth ores into magnet powders and alloys, and is set to finish work on a refining plant at its Mountain Pass mine in California's Mojave Desert.

Since the deal closed June 14, Molycorp shareholders have lost more than $600 million amid a decline in rare-earth prices.

On Nov. 15, six days after Molycorp said it was being investigated by the Securities and Exchange Commission over the accuracy of its public disclosures, the stock closed at almost half the value of its net assets, its lowest valuation on record, data compiled by Bloomberg show. The company took more than two months to disclose the probe, which began in August.

Molycorp asked Mark Smith to step down as CEO last month, and said the departure wasn't related to the SEC investigation.

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