Cash neededMolycorp's Form 10-Q, which it filed with the US Securities and Exchange Commission (SEC) on Thursday, provides some insight into just what those numbers mean for the company. In it, the company states, "[a]s a result of continuing softness in the prices for our products, as well as inconsistent or depressed demand for certain of our products and the delayed ramp-up of operations at our Mountain Pass facility, we have incurred, and continue to incur, operating losses. While certain of our business units currently generate positive cash flow from operations, we have not yet achieved break-even cash flow from operations (excluding interest) on a consolidated basis as we continue the ramp-up and optimize production at our Mountain Pass facility." That's fairly negative, but what's even more damning is the fact that the total principal balance of Molycorp's outstanding debt sits at about $1.7 billion, including around $206.5 million of its 3.25-percent convertible notes. Given that those notes mature on June 15, 2016, the company fears it "may not have sufficient funds available to repay those convertible notes at maturity." Furthermore, the company is at risk for being delisted from the NYSE. And though it's currently seeking shareholder approval for a reverse stock split to rectify that situation, there's no guarantee that the proposition will go through. If it does not, it "will be obligated to offer to repurchase all of our outstanding convertible notes at a price equal to 100% of the aggregate principal amount plus accrued and unpaid interest." Combined, those circumstances and others have placed Molycorp in dire straits, and at the moment it's uncertain whether the company will be able to dig its way out. The upshot is that if it is "unable to execute [its] business plan and restructure [its] debt, [it] may not be able to continue."
Overall, Molycorp is down 33.45 percent year-to-date and 87.69 percent in the last year. It will certainly be interesting to see where its volatile share price goes next and whether the company will be able to get the cash injection it needs to survive.Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. Related reading: Molycorp Gains 77 Percent on Siemens Supply Deal Molycorp Takes a Hit Following Q1 Results Release from Rare Earth Investing News