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$MCP Hands Investors a 61% Loss in 2012, Now Seen as a Takeover Target Based on Evaluation


Molycorp Inc. (MCP)’s plunge below the value of its net assets is turning the owner of a rare-earth supply that’s unmatched in the Western hemisphere into a takeover target.

The owner of the biggest U.S. deposit of metals that go into everything from smartphones to solar panels and hybrid cars handed investors losses of 61 percent in 2012 amid a slump in rare-earth prices, cost overruns at its California mine, a regulatory probe and the departure of its chief executive officer. Even after the shares rebounded from a record low in November, Molycorp is trading at a 19 percent discount to its book value, according to data compiled by Bloomberg.

Molycorp’s low valuation and the chance to lock in rare- earth resources could spur manufacturers from Nissan Motor Co. (7201) to Siemens AG (SIE) to make a bid, according to Byron Capital Markets Ltd. After expanding its refining and processing operations with last year’s purchase of Neo Material Technologies Inc., the $1.3 billion company may even appeal to private-equity firms, Robert W. Baird & Co. said. Goldman Sachs Group Inc. projects that Molycorp could fetch $15 a share in a takeover, a 59 percent premium to its Dec. 31 close.

“At this point, Molycorp is definitely in play,” Luisa Moreno, an analyst at Euro Pacific Capital Inc. in Toronto, said in a telephone interview. “It would be a very good target for companies that are interested in being in this space if they recognize the rare-earth space is important and they have the cash to take Molycorp and make it a real producing company.”

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