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莫纳什大学BFC5130 Molycorp Cases

BFC5130 - Case studies in banking and finance

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Molycorp Cases

Molycorp, the western hemisphere‘s only producer of rare earth minerals, was in the middle of a $1 billion capital expenditure project in its effort to become a vertically integrated supplier of rare earth minerals, oxides, and metals. Yet it had just reported lower than expected revenues and earnings for the second quarter of 2012. In response to the announcement, its stock price fell 29% (its stock price had fallen from $77 to $11 in the past 18 months). The weakening financial performance was due in large part to falling prices for rare earth minerals. With less internally-generated cash flow available to fund the project, management had to decide: how much capital to raise, what kind to raise, and when to raise it. These decisions would determine its capital structure, at least in the short term, as well as its ability to implement its business strategy.(增加细节 straight bond, common stock) Questions to be answered1. The question facing the management:❑ How much capital to raise ❑ What kind to raise ❑ When to raise it 2. What are the reasons of decreasing in prices of REO after peaking in the middle of 2011? 3. What is the business plan of Molycorp? What is the objective of this plan? 4. What are the two key parts using the start-up funds for? 5. Three historical financing sources: ❑ Convertible preferred stock and secondary stock offering ❑ Convertible senior notes and secondary stock offering ❑ Senior secured notes Questions to be answered6. Future financing needs Capital expenditures ✓ 289 million in 2012 ✓ 25 million in 2013 ✓ 45 million in 2012 Interest and accounts payable ✓ 230 million in 2012 ✓ 33.2 million in 2012 自有资金 Cash 369 million, at lease 75 million on hand 7. Sources to finance ❑ Straight debt up to 350 million ❑ Convertible debt up to 350 million ❑ Common stock 100 to 350 million

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