Molycorp announced that it would shelve the second stage of its plan to renovate and enlarge its openpit mine in Mountain Pass, CA.
The Mountain Pass complex is designed to be able to allow for expanded production to a “Phase 2” rate of as much as 40 kt/a (44,000 stpy) of rare earth oxide equivalent. However, the company stated that, while most of the equipment necessary to complete Project Phoenix Phase 2 is already on site, the decision to complete Phase 2 construction and start-up will not be made until market demand, product pricing, capital availability, and financial returns justify additional increases in production beyond Phase 1.
Company officials said that controlling capital and operating costs continues to be a top priority. With the combination of the new Phase 1 ramp-up schedule and current rare earth pricing environment, the company anticipates lower than expected revenue and cash flow for 2013, and is evaluating its capital needs for 2013.
The company also projected that revenues and cash flow would run “lower than expected” this year, although it divulged no specifics.
When announced two years ago, Phase 2 was touted as doubling the mine’s annual production from 19.5 kt (21,500 st) tons of ore to 40 kt (44,000 st), at a cost of about $250 million. Both that and the Phase 1, that restarted production and replaced or renovated the processing machinery, were estimated to cost $781 million.
Molycorp said it would hit its Phase 1 target by midyear.
This is the latest setback for Molycorp, a Wall Street darling just two years ago. The company announced losses in the third quarter as rare-earth prices fell, while the cost overruns on the mine renovation were predicted to run about $150 million. The Securities and Exchange Commission has also opened an investigation into the company's financial reporting practices.