Monday, March 7, 2011

Follow up: Molycorp as Acquirer in Rare Earths M&A (QRM.V; GWG.V; UCU)

For the old farts V no longer stands for Vancouver, it's the Canadian Venture Exchange. same digs and many of the same characters. I get a kick out of the thought of Bloomberg directing the unwary into the playground of the denizens of Howe, Pender and Georgia Streets.

On Friday we had a general overview of the potential moves in "Price Waterhouse: More Rare Earth and Uranium M&A Coming (MCP; REE; LYSCF)". Today it gets more specific, from Bloomberg:
Molycorp Surging as Acquirer as China Raises Rare Earth Stakes: Real M&A

China’s control of rare-earth metals is providing Molycorp Inc. (MCP), owner of the largest U.S. deposit of the minerals, with the most-valuable currency in the industry to pursue acquisitions.

Great Western Minerals Group Ltd. (GWG) and Ucore Rare Metals Inc. (UCU) may become targets after shares of Greenwood Village, Colorado-based Molycorp tripled since its U.S. initial public offering in July as China curbed exports, Byron Capital Markets’ Jon Hykawy said. Molycorp is now valued at 117 times earnings before interest, taxes, depreciation and amortization this year, according to data compiled by Bloomberg that includes net debt, the highest of any diversified metals producer.

The surge in Molycorp’s market value to $4 billion makes takeovers cheaper as it tries to compete with Chinese producers that control 95 percent of the world’s supply of elements used to make magnets for Raytheon Co. (RTN)’s Tomahawk cruise missiles and Toyota Motor Corp. (7203)’s Prius sedans. While Molycorp’s mine in the Mojave Desert once met almost all the world’s demand, it has yet to turn a profit and doesn’t have substantial amounts of the “heavy” rare-earth metals that command the highest prices.
“Time is not on their hands,” said Brian Hennessey, a Purchase, New York-based analyst for Alpine Mutual Funds, which oversees $6 billion. “Molycorp would do themselves a service by diversifying into heavy rare earth. There are a number of companies with much lower valuations in the marketplace. They can use their currency to do fairly accretive acquisitions.”

Periodic Table

Great Western, which plans to start production at a South African mine in 2013, and Canada’s Quest Rare Minerals Ltd. (QRM) and Avalon Rare Metals Inc. (AVL), which control heavy rare-earth deposits, may be possible takeover targets for Molycorp, Hennessey said....MORE

Rare Earths: What's in Your Mine? (MCP; REE; RES.tsxv; AVL.TO)
Rare Earth Metals: "Chinese Institutional Investors Look At Rare Metals Overseas" (AVL.TO: LYC.AX; MCP; UCU.V):
...America’s needs for light rare earths will be oversupplied by Molycorp as will Australia’s by Lynas in a massive way. 
For the heavy rare earths, America’s needs can be meet and exceeded  by Ucore Rare Metals and Rare Element Resources. 
The needs of China, Japan, Korea and India for heavy rare earths can be met by the Canadian and African operations of Great Western Minerals Group, the Canadian operations of Avalon Rare Metals or Quest Rare Minerals, and the southern African operations of Frontier Rare Earths and Tantalus Rare Earths....
Here are some of our other rare earths posts.