Molycorp, Inc (MCP)

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Molycorp, Inc. (MCP)

Q1 2014 Earnings Conference Call

May 8, 2014 9:00 AM ET

Executives

Brian Blackman – Vice President-Investor Relations

Geoffrey R. Bedford – President and Chief Executive Officer

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

Analysts

Michael F. Gambardella – JPMorgan Securities LLC

Avinash Kant – D. A. Davidson & Co.

Paul S. Forward – Stifel, Nicolaus & Co., Inc.

Tom M. Daniels – Goldman Sachs & Co.

Paretosh Misra – Morgan Stanley & Co.

Owen Douglas – Robert W. Baird

Jeff Cramer – Morgan Stanley & Co. LLC

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Quarter One 2014 Molycorp Conference Call. My name is Sheena and I will be your operator today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to Mr. Brian Blackman, Vice President, Investor Relations. Please proceed, sir.

Brian Blackman

Thank you, operator, and good morning everyone. As many of you know, we issued our financial and – released our financial and operating results for the first quarter of 2014 last evening. Our press release is posted on the investor relations section of our website at molycorp.com.

This call is being webcast and a replay will be available along with the transcript 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 can 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 our disclaimers. All statements that address the expectations or projections about the future are forward-looking statements, although they reflect our current expectations, these statements are not guarantees of future results or performance, but involve a number of risks and assumptions. We urge you to review Molycorp’s SEC filings for a discussion of some of the factors that could cause actual results to differ.

We also will refer to non-GAAP financial measures and you can find reconciliations of the most directly comparable GAAP financial measures in our earnings release, also posted on our website.

As you can see on Slide 3, joining us today is Molycorp’s President and Chief Executive Officer, Geoff Bedford, and Executive Vice President and Chief Financial Officer, Michael Doolan.

I’d now like to turn the call.

Geoffrey R. Bedford

Thanks, Brian, and good morning everyone. First, let me make a few high-level comments before Michael provides details on our quarter financials.

Let’s start on Slide 4. As we have seen over the past several quarters, demand appears to be stabilizing at more normalized levels in several of our key markets, as customers continue to monitor inventory levels closely, and adjust purchasing plants accordingly.

In our core rare earth, demand was mixed in the first quarter, light rare earth product demand served by our Resources segment and our chemicals and Oxides segment was positive and total rare earth volumes increased as compared to the fourth quarter. However, these volume increases were offset by a product mix and included lower sales of heavy rare earth products.

Demand for magnetic powders produced in our Magnequench segment continues to show signs of strengthening and Q1 volumes are in line with expectations.

Looking forward, we expect the magnetic market demand will continue to grow. Overall, on global rare earth market, we continue to see less price volatility, which is positive as it builds confidence in the market and encourages customers to increase the utilization of rare earth. They can also lead to new application growth across our vertically integrated supply chain.

At our Mountain Pass, California facility, we continued to optimize and debottleneck our processes, as our production ramp up proceeds. We continued to experience some process interruptions within debottlenecks in the first quarter and that restricted our production more than what we would have liked. However, we are addressing bottleneck and other interruptions as we encounter them.

Our production processes are working as designed, and currently, we do not expect any material technology or process issues that will prevent us from continuing to ramp up production. Unsigned interruptions and bottlenecks are calm, and as production ramps up in a chemical facility at this time of the year. nevertheless, I continue to expect that we will achieve significantly higher production volumes in the second half of this year.

On the demand side, customer interest, an increase to those put at Mountain Pass continues to be encouraging, both in terms of external and internal customers. The single largest volume customer at Mountain Pass is our own vertically integrated supply chain, comprised of our chemicals and our site facilities in Estonia and in China and our magnetic material facilities in China, Thailand, Arizona and Japan.

These downstream facilities use Mountain Pass there for directly earth feedstock to produce a variety of engineered materials to market that diversify by, probably magnetic powders, automotive catalysts and many others. This vertical integration positions us to make custom made, specialty materials that go into a number of relatively niche market, it also helps us to take advantage of multiple margin caption opportunities across our supply chain, generate additional revenue streams and differentiate our company among the competition.

I’ll provide additional detail on our business segment operations later in the call. first, let me have Mike to review the details of our first quarter financials. Michael?

Michael F. Doolan

Okay. Thanks Geoff, and again, good day to everyone. I would like to start with an overview the quarter, now we’re moving into the status of our balance sheet and financial plans for 2014.

Read the rest of this transcript for free on seekingalpha.com