Molycorp, Inc (MCP)

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Molycorp (MCP)

Q3 2012 Earnings Call

November 08, 2012 4:30 pm ET

Executives

Brian Blackman - Senior Manager of Investor Relations

Mark Alan Smith - Chief Executive Officer, President, Director, Member of Executive Committee and Member of Health, Environment, Safety & Sustainability Committee

Michael F. Doolan - Chief Financial Officer, Executive Vice President and Principal Accounting Officer

Analysts

Michael F. Gambardella - JP Morgan Chase & Co, Research Division

Paul S. Forward - Stifel, Nicolaus & Co., Inc., Research Division

Paretosh Misra - Morgan Stanley, Research Division

Bruce Klein - Crédit Suisse AG, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2012 Molycorp Earnings Conference Call. My name is Derick, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to Mr. Brian Blackman, Senior Manager of Investor Relations. Please proceed.

Brian Blackman

All right. Thank you, operator, and good day, everyone. We just released our financial and operating results for the third quarter of 2012. 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 archived on the Company's website. For those of you who dialed in to the call, a slide show that accompanies our prepared remarks is available on the Molycorp website as well, in the Investor Relations section, of course. For those of you listening by webcast, the slides will be presented in your webcast player. And please note that you need to advance the slides on your own.

During the course of this call, we will make forward looking statements, and I direct you to Slide 2 for our disclaimers. All statements that address expectations or projections about the future are forward-looking statements. Although they are -- they reflect our current expectations, these statements are not guarantees of future performance and 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 materially. We will offer -- we also refer to non-GAAP financial measures, and you can find reconciliations to the most directly comparable GAAP financial measures in our earnings release posted on our website.

Joining us on today's call is Molycorp's President and Chief Executive Officer, Mark Smith; and our Executive Vice President and Chief Financial Officer, Michael Doolan. Let me now turn the call over to Mr. Mark Smith.

Mark Alan Smith

Thanks, Brian, and good day, everyone. Let me start by noting a few highlights of our financial performance for the quarter, which you'll see summarized on Slide 4. We reported net revenue of $205.6 million, a 49% year-over-year increase and a 97% increase over the previous quarter, during which we owned the former Neo Materials, now called Molycorp Canada, for 19 days.

We generated positive cash flow from operations of $17.2 million. We sold 4,391 metric tons of product across our business segments, including 2,768 metric tons of rare earth oxide equivalent products at an average sales price of $43.45 per kilogram, 1,527 metric tons of bonded magnet powders and alloys at an average sales price of $48.98 per kilogram, and 96 metric tons of rare metals at an average sales price of $269.22 per kilogram.

We consider these results to be favorable in light of the current global economic environment. Several of our customers continue to work to deplete large volumes of stock piles, and we are now seeing signs that customers are coming back into the market, which is very positive going forward.

Michael will provide more details on our Q3 financial performance. For my part, I thought it would be most helpful if I address the top 5 areas where we get questions.

Turning to Slide 5. The first area is the progress we're making on Project Phoenix, our top corporate priority. Let me start by saying that I've never been more proud of what our team has accomplished in a single quarter, especially in terms of how this team has worked to overcome every single obstacle in our path to achieving Phase 1 production in the fourth quarter, which we are absolutely on track to deliver.

As you can see on Slide 6, we are well into ramping up operations across the entire project. To date, we have succeeded in bringing 80% of our new facilities at Mountain Pass up to or greater than Phase 1 operational capabilities. These include mining, crushing, milling, floatation, paste tailings processing, paste tailings disposal, combined heat and power production, heavy rare earth concentrate production and water treatment. Our cerium, crack and NdPr units are all operating as designed and are all rapidly closing in on Phase 1 operational capabilities.

As of this week, our new state-of-the-art facility is producing rare earth concentrate at higher than Phase 1 rates. Last week, I was out at Mountain Pass to celebrate over 4 million hours of work on Project Phoenix that has occurred without a lost time accident. I was able to watch our mill and floatation circuits operating at Phase I rates.

As you can see on Slide 7, what caught my attention was the uniformity and dryness of our rare earth concentrate coming off the mill which, at this point, is already greater than 60% total rare earth oxide content. Our freshly produced rare earth concentrate is certainly some of the finest and highest quality concentrate that I have ever seen in my 25-plus years in this business.

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