Mechanical problems, market conditions lower earnings from Unocal Molycorp unit
El Segundo, Calif., Nov. 26, 1997 - Unocal Corporation today said that mechanical problems at the company's Questa, N.M., molybdenum mine and continued competitive pressures from Chinese lanthanide producers are expected to reduce earnings from its Molycorp, Inc., subsidiary by $10 million (aftertax), or 4 cents per Unocal common share, in the fourth quarter 1997.
Unocal's carbon and minerals segment, which includes Molycorp and the company's graphite and petroleum coke operations, is now expected to break even in the fourth quarter 1997. The segment reported adjusted earnings of $10 million (aftertax) in the third quarter 1997.
The mechanical problems at Questa involved a conveyor belt that transports the ore from the mine to the mill. A portion of the belt broke in early November, causing a shutdown in production. While repairs are being made, Molycorp is doing additional development work in the mine to improve the ore grade.
The company expects the mine to resume operation in early December, and the mill, which separates the molybdenum, will be back on-line by mid-December. The company reduced its workforce at Questa by 68 workers to adjust for reduced output because of changes in operations that have lowered ore throughput.
Molycorp expects to resume shipments of molybdenum from Questa to its roasting contractors in January.
Molycorp's lanthanide business continues to face lower margins and sales volumes due to intense competition from China producers. In response, Molycorp restructured operations at its lanthanide mine and processing facility at Mountain Pass, Calif. This restructuring has eliminated about 60 hourly, supervisory and management employee positions while reorganizing around a team management organization to more closely coordinate production with customer requirements.
Unocal is a leading global energy resource and project development company, with year-end 1996 petroleum reserves of more than 9.8 trillion cubic feet of natural gas equivalent (1.6 billion barrels of oil equivalent) and major oil and gas production activities in Asia and the U.S. Gulf of Mexico. The company is also active in energy resource development in Asia and Latin America and is developing gas-marketing solutions for Turkmenistan. The company maintains twin headquarters in California and Malaysia, with major offices in Singapore, Jakarta, Bangkok and Sugar Land, Texas.
Forward-looking statements, including estimates of financial results and production activities, in this news release are based on assumptions concerning production, market conditions, competition, and other considerations. Actual results could differ materially.
Updated: November 1997