Molycorp 051011 Earnings

8/6/2019 Molycorp 051011 Earnings

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Safe Harbor Statement

This presentation contains forward-looking statements that represent Molycorp’s beliefs, projections and predictions about future events or Molycorp’sfuture performance. Forward-looking statements can be identified by terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other similar expressions or phrases. These forward-lookingstatements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause Molycorp’s actual results,performance or achievements or industry results to differ materially from any future results, performance or achievement described in or implied by suchstatements.

Factors that may cause actual results to differ materially from expected results described in forward-looking statements include, but are not limited to:Molycorp’s ability to secure sufficient capital to implement its business plans; Molycorp’s ability to complete its modernization and expansion efforts and reach fullplanned production rates for rare earth oxides and other planned downstream products; uncertainties associated with Molycorp’s reserve estimates and non-reserve deposit information; uncertainties regarding global supply and demand for rare earths materials; Molycorp’s ability to maintain appropriate relations withunions and employees; Molycorp’s ability to successfully implement its “mine-to-magnets” strategy; environmental laws, regulations and permits affectingMolycorp’s business, directly and indirectly, including, among others, those relating to mine reclamation and restoration, climate change, emissions to the air andwater and human exposure to hazardous substances used, released or disposed of by Molycorp; and uncertainties associated with unanticipated geologicalconditions related to mining.

For more information regarding these and other risks and uncertainties that Molycorp may face, see the section entitled “Risk Factors” beginning on page15 of the prospectus described below. Any forward-looking statement contained in this presentation or the prospectus reflects Molycorp’s current views withrespect to future events and Molycorp assumes no obligation to publicly update or revise these forward-looking statements for any reason, or to update thereasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future,except as otherwise required by applicable law.

This presentation also contains statistical data and estimates obtained by Molycorp from industry publications and reports generated by third parties.Although Molycorp believes that the publications and reports are reliable, it has not independently verified such data.

THIS PRESENTATION USES THE TERM “RESOURCES” TO DESCRIBE THOSE QUANTITIES OF REE’S THAT ARE POTENTIALLY RECOVERABLE FROMACCUMULATIONS YET TO BE DISCOVERED. BECAUSE OF THE UNCERTAINTY OF COMMERCIALITY AND LACK OF SUFFICIENT EXPLORATION DRILLING, THERESOURCES CANNOT BE CLASSIFIED AS RESERVES. INVESTORS ARE ADVISED THAT THE SEC DOES NOT RECOGNIZE RESOURCES. ONLY PROBABLE ANDPOSSIBLE RESERVES MAY BE DISCLOSED TO INVESTORS IN AN SEC FILING. RESOURCES HAVE A GREAT AMOUNT OF UNCERTAINTY AS TO THEIR EXISTENCE.

THERE IS NO CERTAINTY THAT ANY PORTION OF THE RESOURCES WILL BE DISCOVERED AND, IF DISCOVERED, WHETHER THEY COULD BE DEVELOPEDECONOMICALLY. THEREFORE, INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ALL OR ANY PART OF MOLYCORP’S RESOURCES EXIST, OR THAT THEY CAN BEDEVELOPED ECONOMICALLY. ACCORDINGLY, INFORMATION CONCERNING DESCRIPTIONS OF RESOURCES CONTAINED IN THIS PRESENTATION IS NOTCOMPARABLE TO INFORMATION INCLUDED IN SEC FILINGS.

The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before youinvest, you should read the prospectus in that registration statement and the other documents the issuer has filed with the SEC for more complete informationabout the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, anyunderwriter or any dealer partic ipating in the offer ing wi ll arrange to send you the prospectus if you request it by call ing tol l-free Morgan Stanley & Co.Incorporated at 1-866-718-1649 or J.P. Morgan Securities Inc. at 1-866-803-9204.

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http://www.sec.gov.alternatively%2Ctheissuer%2Cany/

http://www.sec.gov.alternatively%2Ctheissuer%2Cany/



Call Participants

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Mark A. SmithPresident, Chief Executive Officer and Director

James S. AllenChief Financial Officer and Treasurer

Jim SimsDirector of External Affairs



Call Agenda

n Operational Highlights – Mark Smith, CEO

– Met all milestones in Q1

– Project Phoenix Phase 2 approved

– Successful follow-on offering

– Acquisitions

– Sumitomo and Hitachi updates– 2011 Milestones

n Financial Review – Jim Allen, CFO

– Q1 2011 financial statement review

– Capital plan progress

n Production Guidance/Rare Earth Market Outlook – Mark Smith

n Questions & Answers – Mark Smith and Jim Allen

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Operational Highlights

n Met all milestones and targets in Q1– Emissions permit for cogen facility

– Initial building permits

– Construction underway

– Major equipment ordered

n Capacity Expansion Phase Two Approved– Takes production capacity to 40,000 tons/year in 2013

n Follow On Offering Partially Funds Phase Tw o

– $199 million raised

– Mandatory convertible preferred stock, dividend 5.5%

n Acquisitions for forward integration

– AS Silmet: Europe, additional capacity, metals capability

– Santoku America: metals and alloys

5



Forward Integration Acquisitions

n Molycorp Silmet AS

– Benefits:

• First European base of operations

• Larger global customer base

• Greater rare earth production capacity

• Expanded product line.– Purchased ~90% controlling interest for $89 million

– Sellers: Silmet Grupp and Treibacher Industrie AG

– Silmet Grupp retains ~10% interest

– Based in Sillamäe, Estonia

– 550 employees– One of only two rare earth processing facilities in Europe.

– Produces rare earth oxides, rare earth metals (including

didymium metal), niobium and tantalum metals

– Feed stocks supplied by Molycorp

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Forward Integration Acquisitions

n Molycorp Metals and Alloys

– Acquisition price $17.5 million, all cash

– Expands our product line into high-purity rare earth metals and

alloys

• NdFeB

• SmCo

– Will source feed stocks from Mountain Pass.

– Specialty alloys produced there for 30+ years.

– Highly trained and experienced workforce.

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Hitachi Update

n Joint team feasibility study complete

n Formal presentation May 2

n Both parties strongly favor moving forward with JV

n Agreement expected to be executed this summer

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H1 2011 Milestones

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n 2011 Milestones

– Continue construction of Mountain Pass modernization (Phase 1)

– Finish capital raising efforts so that Phase 1 and Phase 2 are fully funded

– Complete engineering around Phase 2 expansion for up to 40,000 tonnes

– Convert 50% or more of the Phase 1 LOI product volume into finalcontracts



Q1 2011 Financial Results

n Sales of $26.3 million

– Up 21% sequentially, 770% y/y

n Sold 696 metric tons

– Up 9% sequentially, 64% y/y

n Average price $37.73/kg vs. $34.02/kg in Q410, $7.13/kg last

year

n Sequential growth balanced between volume and price

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Revenue (millions) Metric Tons Sold

Product Q1 2011 Q4 2010 Q1 2010 Q1 2011 Q4 2010 Q1 2010Ceric Hydrate $7.9 $7.2 -- 170 151 0

Didymium Products $4.7 $6.3 $0.1 122 120 69

Lanthanum Products $11.5 $5.6 $2.8 415 280 239

Cerium Products $1.2 -- 0 0 0

Other $1.0 $2.6 $0.2 0 87 0



Q1 2011 Financial Results

n Adjusted cost of goods sold $15.4 million, 41.5% gross

margin

– Up 3.8 percentage points versus Q4 2010

n SG&A of $8.3 million, up $2.4 million versus Q4 2010

– Staffing up for mine project, business development

n Adjusted earnings $2.0 million or $0.01 per share

– Compares to $2.2 million and $0.03 in Q4 2010*

– Compares to ($7.7 million) and ($0.16) in Q1 2010

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* Previous periods are adjusted for comparability, so will not match previously reported GAAP results



Corporate Capital Plan Update

n Molycorp Silmet and

Molycorp Metals & Alloys

acquisitions fully paid

n Mountain Pass Capital

Plan nearly funded

n Multiple Alternatives

– Traditional debt

– Project financing

– Public debt offering

– DoE loan guarantee

program

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Capital Need Amount

Phase One Plan $531

Phase Two Plan $250

Acquisitions (cash payments) $27

Total Need $808

Capital Source Amount

Offerings $578

Sumitomo* $130

Remaining to be raised $100

Total $808

* Assumes consummation of the Sumitomo memorandum of understanding



Follow On Offering

Symbol/Exchange: MCP PR/NYSE

Security: Mandatory Convertible Preferred

Shares Sold: 2,070,000

Pricing Date: February 16, 2011

Net Capital Raised: $199.6 million

Joint Book runners: JP Morgan, Morgan Stanley

Terms: Converts to common in February2014.

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Sumitomo Updates

n Due diligence underway

n Government funding is still available

n Earthquake/tsunami has slowed government processing

n Still anticipate Q3 closing

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Production/Volume Guidance

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Molycorp Minerals

(Mountain Pass, CA)(range of mt of REO)

Molycorp Silmet

(Estonia)(range of mt of REO)

Molycorp Metals & Alloys

(Tolleson, AZ)(range of mt of REO)

Total

(range of mt of REO)

Low

Range

High

Range

Low

Range

High

Range Low Range High Range

Low

Range

High

Range

1Q2011

(actuals) 638 638 229 229 68 68 935 935

2Q2011 755 1,021 235 317 51 69 1,040 1,408

3Q2011 977 1,321 235 317 51 69 1,262 1,708

4Q2011 1,017 1,377 235 317 51 69 1,303 1,763

3,387 4,357 933 1,181 221

(540 tons of

total alloy)

275

(550 tons of

total alloy)

4,541 5,813



Rare Earth Market Conditions - China

n 1H 2011 Chinese export quotas continue 7-year downward trend; senior

officials warn of declining quotas in the future.

n Multiple Chinese government initiatives will affect production and price

levels: hundreds of illegal mines closed; export licenses reduced; export

taxes increased; VAT rebate on exports withdrawn; coordinated pricing

sought; environmental reforms; vertical industry consolidation beingforced.

n Implementation of strict environmental standards expected to “double

production costs” (Wang Guozhen, the former VP of China Nonferrous

Engineering and Research Institute)

n Internal REE demand rising with GDP growth while Chinese production from2005-2010 relatively stagnant

n 59% of respondents think China will “become a net importer of rare earths

by 2015” in a Metal-Pages.com poll. Senior Chinese officials not ruling out

this possibility.

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Rare Earth Market Conditions - Prices

n Prices continue to rise as supply/demand imbalance widens

n Our future product mix is currently priced at roughly

$145/kg

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Rare Earth Oxides 1-Jan-11 31-Mar-11 Change

Lanthanum 60 121 102%

Cerium 61 121 98%

Praseodymium 86.5 196 127%

Neodymium 87 201 131%

Samarium 34.5 106.5 209%

Europium 630 940 49%

Gadolinium 44.5 147 230%

Terbium 605 990 64%

Dysprosium 290.5 640 120%

Yttrium 72.5 143 97%

Prices (USD/Kg)



Annual Shareholder’s Meeting

June 1, 10:00 am Mountain Time

Inverness Hotel and Conference Center200 Inverness Drive West

Englewood, CO 80112+1 (800) 832-9053

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Molycorp 051011 Earnings

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