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Molycorp, Inc. (MCP)

Q1 2013 Earnings Call

May 9, 2013 4:30 pm ET


Brian Blackman – Vice President-Investor Relations

Constantine Karayannopoulos – President and Chief Executive Officer

Michael F. Doolan – Executive Vice President and Chief Financial Officer


Brian Lee – Goldman Sachs

Michael Gambardella – JPMorgan

Jeff Cramer – MorganStanley

Ben Joseph Kallo – Robert W. Baird & Co. Equity Capital Markets

Michael Ritzenthaler – Piper Jaffray



Good day, ladies and gentlemen, and welcome to the Q1 2013 Molycorp Inc. Earnings Conference Call hosted by Mr. Brian Blackman, Vice President of Investor Relations for Molycorp. My name Ron, and I’m the event coordinator. During the presentation your lines will remain on listen-only mode. (Operator Instructions) I would like to advise all parties that this conference is being recorded. The recording is also available via the webcast.

I would now like to turn the call over to Mr. Brian Blackman. Please go ahead.

Brian Blackman

Thank you, operator, and good day to everyone. We just released our financial and operating results for the first quarter of 2013. Our press release is posted on the Investor Relations section of our website at This call is being webcast and replay will be archived on the company’s website. For those of you dialed into the call, a slideshow that accompanies our prepared remarks is available on the Investor page of Molycorp’s website as well. For those of you listening by webcast, the slides will be presented in your webcast player, where you must advance the slides on your own.

During the course of this call, we’ll make forward-looking statements and I direct you to Slide 2 for you of our disclaimers. All statements that address expectations or projections about the future are forward-looking statements. Although they reflect our current expectations, these statements are no guarantees of future performance, but involve a number of risks and assumptions. We urge you to please review Molycorp’s SEC filings for discussion of some of the factors that could cause actual results to differ materially.

We also refer to non-GAAP financial measures and as you can find reconciliations of the most recently or most directly comparable GAAP financial measures in our earnings release issued today.

As you can see on slide three, joining us today is Molycorp’s President and Chief Executive Officer, Constantine Karayannopoulos, Executive Vice President and Chief Financial Officer, Michael Doolan and our Chief Operating Officer, Jeff Edward. I’d like to now turn the call over to Constantine.

Constantine Karayannopoulos

Thanks Brian and good day everyone. Let me make a few high level comments before Michael provides details on our financial performance for the quarter. I’ll then speak to some of the market and technologies trends we’re seeing across our business segments and finally Michael, Jeff and I will be happy to take your questions.

Let’s start on slide four. The first quarter was reflective on the seasonal ebbs in market activity that we typically see during this time of year. January and February are always slow months across Asia, given the Chinese New Year and Spring festival holidays.

We are however beginning to see signs of demand returning to more normal levels across several segments. Customers appear to be working down inventories that were built up in 2011 and 2012 and we are starting to return to more normal purchasing patterns. Our production ramp up of Mountain Pass is progressing well.

We’re now producing at an annual run rate of just over 7000 metric tons per year and we remain on track at this point to achieve our initial target run rate of about 20,000 metric tons per year by mid year.

At this point I see no major technical hurdles to executing on that production ramp up. We continue to conserve cash aggressively, and have implemented measures such as layoffs, salary cuts for all senior management and other initiatives. Based on our current forecast, I believe we have sufficient liquidity for execution of our business Mountain. As I have said many times before, it is now all about execution of Mountain Pass, that’s our focus and will continue to be until the [delivery] on the production that this world class deposit offers to a vertically integrated supply chains and our customers.

Let me turn it over now to Michael for details on our first quarter 2013 financial performance. Michael?

Michael F. Doolan

Thank you, Constantine, and again good afternoon to everyone. First, a quick summary of our quarter, please turn to Slide 6. We reported net revenue of $146.4 million, a 9% increase over the fourth quarter, $134.3 million, and we sold more than 3,200 metric tons of product during the quarter. our gross margin of negative 14% or a gross loss of $20.5 million was a slight improvement in margin compared to the fourth quarter of 2012 of a negative 15.2%.

We reported a loss before interest, tax, depreciation and amortization of $37.1 million, and a positive $7.1 million on an adjusted basis. Our net loss attributable to common stockholders for the quarter was $50.1 million or a loss of $0.33 per share. on an adjusted non-GAAP basis, we had a loss of $0.15 per share.

As market pricing continued to make its move downwards, we incurred $37.2 million of inventory write-downs at Mountain Pass, and another $2.9 million at our other divisions.

Moving to our detailed financial performance, our operating segment results begin on Slide 7 with the Resources segment. We sold 763 metric tons of rare earth oxide equivalents products out of resources during the quarter, an increase of 21% over the fourth quarter 2012. Our average sales price increased compared to Q4 largely due to favorable product mix. Market spot pricing for rare earth oxides was lower during the quarter compared to Q4, although there was little movement through the first three months of the year, which is typical due to the seasonality.

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