Molycorp: A Growth Stock With Big Risks

By John Warbuck Molycorp (MCP) is a leader in the production of rare earths in the United States and has positioned itself favorably in the market this year by securing advance orders on 58% of its Phase I production quota while being able to utilize an additional 20% of that quota for the production of its proprietary water treatment products. The company has moved ahead in an industry that is characterized by spot sales and managed to secure long term contracts that secure its profitability and ability to move its products. Molycorp is now in a position to expand its production and margins due to an increase in production of products that are key to renewable energy technologies. Molycorp came into existence only four years ago, based out of Greenwood Village, Colorado, and specializes in the production of rare earth oxides that are required in the application of many green technologies, weapons, fiber optics, hard disk drives and water treatment products. Having access to such a broad scope of applications makes Molycorp’s products extremely marketable, and the company has very minor competition from the Australian based Lynas Corporation (LYSCF.PK) and the Chinese rare earth industry. The rare earths Molycorp produces…