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Molycorp, Inc. (MCP)

Q3 2011 Earnings Call

November 10, 2011 4:30 pm ET


Brian Blackman – Senior Manager, Investor Relations

Mark A. Smith – President and Chief Executive Officer

James S. Allen – Chief Financial Officer and Treasurer


Anthony Young – Dahlman Rose & Co.

Michael Gambardella – JPMorgan Chase & Co

Jagadish Iyer – Piper Jaffray

Paretosh Misra – Morgan Stanley

Luisa Moreno – Jacob Securities Inc.

Dan Mazer – Harvest Capital



Good day, everyone and welcome to the Molycorp’s Third Quarter 2011 Earnings Release Conference. Today’s call is being recorded. At this time, I would like to turn the conference over to Brian Blackman, Senior Manager, Investor Relations. Please go ahead.

Brian Blackman

Thank you operator, and good afternoon to everyone. We just released our financial and operating results for the third quarter of 2011. If you have not yet seen the press release, you can find it posted on the Investor Relation section of our website at This call is being webcast and a replay will be archived in the company’s website.

For those of you dialed into the call, a slide show will accompany our prepared remarks is available on Molycorp’s website in the investor section.

For those of you listening by webcast, the slides will be presented in the webcast player. Please note, that you need to advance slides on your own.

Slide 2 has our Safe Harbor statements. As always, we need to advice you that some of the information discussed on this call will contain forward-looking statements that involve risks, uncertainties and assumptions that are difficult to predict. The company’s actual results could differ materially from those contained in such statements because of a variety of factors including those described in detail in the risk factor section of Molycrop’s Annual Report on Form 10-K for the year ended December 31, 2010 and Quarterly Report on Form 10-Q for the period ended March 31, 2011.

We also want to caution you that today’s presentation includes discussions of adjusted or non-GAAP financial measurements, which reflect how the management and directors of Molycrop analyze the business on a daily basis. The adjusted measurements segregate out certain non-cash items such as depreciation and amortization and stock-based compensation and certain out of ordinary items. Internally, Molycorp management analyses our business from an operating income perspective and we want our shareholders to have access to the same information we use in understanding our business.

However these non-cash and other out of ordinary items are important to understanding the company’s long-term performance. Therefore listeners are highly encouraged to study the non-GAAP to GAAP reconciliation supplied at the end of the earnings release, which can be found on our website.

On the call today is Molycorp’s President and Chief Executive Officer, Mark Smith; and our Chief Financial Officer and Treasurer, Jim Allen. Mark will provide an update on third quarter financial highlights, an update on our accelerated Project Phoenix initiative, an important milestone we have met, our multi-pronged strategy for heavy rare earth production, and an update on operations. Jim will discus the detailed financial results for the quarter and finally, we will conclude with the discussion on global rare earth market conditions as well as provide a guidance on future production.

Let me now turn the call over to our CEO and President, Mark Smith.

Mark A. Smith

Thank you, Brian and thank you all for joining today’s call. We are exceptionally pleased to report our third quarter earnings in which we achieved record financial performance. We’ve also completed a number of strategic goals during the third quarter and in the first few weeks of the fourth quarter. These accomplishments have helped to accelerate the realization of full scale production that amount vast facility and position us to take full advantage of rising demand for our products and continue tight global markets for rare earths.

As discussed on the last call, we have focused on achieving four principle operational milestones for the second half of this year, which are shown on slide 6. The first of these is to keep Project Phoenix progressing on time and on budget. And as I will discuss on today’s call, not only have we succeed in this effort from the projects inception, but we are now engaged in accelerating the initial start of the Project Phoenix. The second operational goal was to further the engineering for our Phase 2 expansion so that we could achieve a 40,000 metric ton per year production capacity by the end of 2013.

In fact, Phase 2 engineering has been progressing ahead of schedule and as a result of our recently announced project acceleration, we now anticipate achieving our Phase 2 mechanical completion by the end of 2012, a full six months earlier than planned. The third goal for the year was to have 75% or more of our current letters of intent for Phase 1 product volume converted into final definitive contracts. As of this, week we have a total of 47% of our Phase 1 volume either closed or contracted or reserved for XSORBX, an additional 10% of that volume is currently in the final closing stages with the remainder deeply into the final qualification stages with customers.

Our fourth goal for 2011 was to explore continued down the stream joint venture or acquisition opportunities. I’m pleased to report that we made significant progress in this area during the third quarter and into the first few weeks of the fourth quarter. For example in September, we made a significant financial investment in Boulder Wind Power, which has designed a wind turbine generator that uses dysprosium HREE permanent rare earth magnets and can produce electricity for as low as $0.04 per kilowatt hour.

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