Molycorp Inc. (MCP) Chief Executive Officer Mark Smith left the rare-earths producer amid an investigation of its disclosures and a lawsuit related to engineering deficiencies at its mine.
Vice Chairman and former Neo Material CEO Constantine Karayannopoulos is Smith’s interim replacement, the Greenwood Village, Colorado-based company said yesterday in a statement. Molycorp said its board is looking for a permanent hire.
“We feel that Mark had lost credibility with a number of constituents, shareholders, potential investors and analysts,” said Michael Gambardella, a New York-based analyst at JPMorgan Chase & Co.
Molycorp disclosed the probe by the U.S. Securities and Exchange Commission in a filing on Nov. 9, the day after reporting its third-quarter earnings and hosting a conference call to discuss results with investors, a decision that eroded investors’ trust in his management, Gambardella said.
Gambardella, who rates Molycorp shares underperform, equivalent to a sell, said that regardless of who takes Smith’s place, the company will be producing into an oversupplied market and will need to raise more money next year.
Big Deposit
Molycorp is the owner of the Mountain Pass mine in California, the largest rare-earths deposit outside China.
The exit of Smith, 53, comes as the company is completing construction at the project and is shifting its focus to processing and manufacturing rare-earth products, Jim Sims, a Molycorp spokesman, said by telephone. Molycorp asked Smith to leave, he said.
“The board decided to make a management change because the profile of the company is rapidly changing,” Sims said.
The shares fell 3 percent to $10.99 in New York. Molycorp has plunged 58 percent since announcing March 8 it would purchase Toronto-based Neo Material, which processes rare-earth ores into magnetic powders and alloys.
“Smith has excellent credentials from a technical perspective but his ability to deal with the financials of an emerging company appeared to overwhelm him at times,” Alan Schlesinger, owner of Alchemy Management LLC in Great Neck, New York, and a Molycorp investor, said in a telephone interview.
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