Cult Stock Change: Molycorp, Rare Earths, and Now Wind Power? (MCP)

Molycorp, Inc. (NYSE: MCP) is one of the kings of the cult stocks as rare earths continue to remain a relevant issue for supply and demand in the years ahead.  China’s curbs on exports and quotas have really changed the global landscape for the so-called rare earths.  But now there is a new twist… The rare earths leader in America is investing in a wind energy technology outfit.

This investment is into Boulder Wind Power, which is said to have designed a rare earth magnet powered wind turbine generator that can produce electricity for what is said to be as low as $0.04 per kilowatt-hour.

The investment was in Series B Convertible Preferred Stock as part of a $35 million capital raise by the company.  Molycorp will gain board representation and is said to be positioned to be the preferred provider of rare earth magnets and alloys for wind generators using this technology. Other details of Molycorp’s investment were not disclosed.

Where this gets interesting is that Molycorp has done a substantial amount of capital raising efforts since its 2010 IPO.  The good news is that this may signal that the rare earths leaders needs no more capital because the company noted that it using cash from operational earnings for the investment.

Worth noting…

• Boulder Wind Power’s patented wind turbine technology allows for the use of rare earth permanent magnets that do not require dysprosium, a relatively scarce rare earth. By utilizing dysprosium-free permanent magnets, and other engineering innovations that dramatically reduce the use of structural steel and eliminate the use of expensive laminated electrical steel, wind turbines incorporating Boulder Wind Power’s technology are expected to produce power at or below $0.04 cents per kilowatt-hour, positioning it to compete directly with fossil fuel-based generation.

Many companies have tried this Kiretsu approach or tried the in-house venture fund approach.  There has been some success here on that front, while others have not exactly flourished with their investment efforts.

JON C. OGG