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RENO (MINEWEB) - Standard & Poor's Monday assigned its preliminary ‘B'corporate credit rating to U.S. rare earths miner Molycorp with astable outlook. At the same time, S&P assigned a preliminary ‘B'issue-level rating to the company's proposed $650 million seniorsecured notes due 2020. Molycorp plans to use proceeds of theproposed notes to finance a portion of the acquisition of NeoMaterials Inc. "The rating and outlook reflect what we consider to be thecombination of its ‘vulnerable' business risk profile and‘aggressive financial risk profile," said S&P CreditAnalysts Marie Shmaruk and Megan Johnston. "In our view the company's vulnerable business risk stems fromexposure to volatile pricing, the pricing and supply uncertaintiesresulting from China's control of most of the supply of global rareearth elements, the execution risks inherent in starting up amining operation and integrating the Neo Materials acquisition, andreliance on a single mine to drive future performance," saidShmaruk. "In our view, the vulnerable financial risk profile reflects thecompany's lack of operating history, high capital spending needs,what we would consider relatively high debt levels (considering thestartup and integration risks facing its business), and, in ourassessment, the company's ‘less than adequate' liquidity,which could cause the company to slow its mine development plans,resulting in lower-than-expected cash flow," S&P advised. "Both Molycorp and Neo Materials lack a history of strong operatingresults," said S&P. "The Mountain Pass mine has only recentlyresumed production and has been processing ore from prior miningactivities." "In light of this lack of operating history, we feel that the totaldebt level contemplated, totaling about $865 million, is somewhataggressive. In addition, the proposed financing increases fixedcash outflows in a period of heavy capital spending and operatingchallenges." "Although market conditions for the company's products remainrelatively strong, which should allow the company to complete thereopening of its mine and begin to generate cash flow in 2013, thecompany is subject to commodity price fluctuations, execution risksand operating risks inherent in reopeining the mine, andintegration risks associated with the Neo Materials acquisition,"S&P cautioned. In March, Molycorp announced the proposed US$1.3 billion cash andshare acquisition of Toronto-based rare earth processor NeoMaterials Technologies. At the time, Molycorp said the transactionwill give it "greater exposure to the world's largest andfastest-growing rare earth consuming nation, China, which nowcomprises about 70% of global rare earth consumption." The acquisition also expands Molycorp's strategic rare metalsportfolio to include gallium, rhenium and indium, which are used inadvanced electronics, aerospace, photovoltaic, catalyticconverters, and lighting industries. Molycorp is offering a consideration of Cdn$11.30 per Neo Materialsshare. SUBSCRIBE to Mineweb.com's free daily newsletter now. I am an expert from wire-cabletray.com, while we provides the quality product, such as Wire Netting Fence , Cable Tray Accessories, Wire Cable Tray,and more.
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