Molycorp Inc., is the owner of the world’s largest non-Chinese deposit of rare-earth metals, and is a strong buy afte it declined in its first day of trading after chopping the size of its initial public offering by 18 percent according to Shayne Heffernan of Ebeling Heffernan.

Shares of the Colorado-based company fell as much as $1.90, or 14 percent, to $12.10 at 11:24 a.m. in New York. Molycorp sold 28.13 million shares at $14 each after its underwriters failed to attract enough buyers at $15 to $17 apiece. The mining company’s owners purchased about 8.9 percent of the shares in the IPO which is encouraging, Shayne Heffernan put a price target of $25 mid term and $35 long term on the stock.

Molycorp will use the $394 million in IPO proceeds to fund plans to restart operations at a mine that holds deposits of rare-earth metals used to make magnets for everything from smart bombs to hybrid cars. The producer, which hasn’t made a profit since acquiring the site two years ago, will compete with Chinese companies that currently supply 97 percent of the metals globally, according to its regulatory filing.

Morgan Stanley and JPMorgan Chase & Co. in New York led the company’s offering.

Neodymium, Ytterbium

Molycorp’s mine near Mountain Pass, California, once met almost all the world’s rare-earth metals demand before closing down eight years ago as China, which has the world’s biggest deposits, increased low-cost production.

The mine may yield 19,050 metric tons of rare-earth oxides annually at full production, equal to 38 percent of the amount that China exported last year, Molycorp’s filing with the Securities and Exchange Commission showed. The site, about 60 miles southwest of Las Vegas in the Mojave Desert, may lose money for two more years before becoming profitable.

The company’s first-quarter net deficit widened 38 percent to $7.75 million from a year earlier after selling its stockpiles at a loss. It lost $28.6 million in 2009.

The rare-earth elements are 17 chemically similar metals, such as lanthanum, cerium, neodymium and ytterbium. They are used in magnets for everything from cell phones and electric cars to guided missiles and targeting systems for tanks.

About 80 percent of magnets made from neodymium are produced in China, with most of the remainder coming from Japan. Almost none are produced in the U.S.

Existing Owners

Molycorp’s biggest shareholders include private equity firms Resource Capital Funds of Denver and Pegasus Capital Advisors in New York. No existing stockholders sold shares in the IPO, and owners such as Resource Capital bought 2.5 million of the shares in the offering, a filing showed.

Posted by Shayne Heffernan on Jul 29th, 2010and filed underMarket, Pennystocks, Shayne Heffernan, The Hot List.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site