Amid heavy volume, shares of rare-earth miner Molycorp Inc. (NYSE:MCP) dropped as much as 8.6% to $10.36 after regular trading hours yesterday, when its announced it was on the look for a successor in the Chief Executive Officer after Mark Smith, resigned. Smith who was also the president of the company had served as CEO for the last five years and it was during his tenure that the company got listed on the New York Stock Exchange and also underwent facility upgrades.
Molycorp Inc. (NYSC:MCP) Vice Chairman, Constantine Karayannopoulos, has been temporarily moved to fill the vacancy as the company seeks a suitable leader. He became a part of the management after the company acquired his previous employer Neo Material Technologies Inc. (now Molycorp Canada) where he served as both Chief Executive Officer and President.
Jim Sims the company representative said the ousting was mutually agreed as the company’s profile was “rapidly changing”. Alan Schlesinger a Molycorp Inc. (NYSC:MCP) investor, mentioned that even a technically profound person like Smith sometimes appeared to be overwhelmed by having to deal with “financials of an emerging company,” . Schlesinger also owns and runs New York based Alchemy Management LLC
According to Michael Gambardella analyst at one of the lead managers for the company’s IPO, Mike had lost trust of “ a number of constituents” including shareholders and potential investors, after the Securities and Exchange Commission initiated a probe into quarterly results per a filing with the regulator. Gambardella has rated the company as “Underperform” which is equivalent to a sell rating on the stocks.
Molycorp Inc. (NYSE:MCP) came into existence when two private funds equities, Denver based Resource Capital Funds and Pegasus Capital Advisers of New York, took over its predecessor Molybdenum Corp of America, from Parent The Chevron Corp (NYSE:CVX). The company owns the biggest reservoir (outside of China) of the earth metal and ores which can be used in high tech and advanced applications. The company is also processing ores into alloys through Molycorp Canada.
The rare earth mining industry is in decline as most of the buyers are turning to alternative materials or consumed stocks piled up in their warehouses. The demand for Lanthanum oxide and Cerium oxide used in gasoline refining and glass polishing declined by 56% and 58% respectively.
The company Chairman Ross Bhappu said his company is going through what he termed as a “natural inflection point” where it has to chose “ongoing operations “over “development” initiatives. This culminates into “ramp-up of production capacity” and “integration of Molycorp Canada” he said. The company has already funded its Mountain Pass facility’s rehabilitation though a $14 per share IPO in 2010 and its stakes are high in a industry with slacked growth.
Commenting on the recent rather abrupt move in the top tier management Bhappu went only as far as thanking Mark on behalf of the company “for his significant contributions and leadership” which helped Molycorp Inc. (NYSE:MCP) “transition into an ongoing operating business,”.
The shares of Molycorp Inc. (NYSE:MCP) were down by 3% to close at $10.99, shares of Chevron Corp (NYSE:CVX) were up by 0.32% to close at $108.08.