Molycorp Corporate Presentation - January 2011
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Transcript of Molycorp Corporate Presentation - January 2011
RARE EARTH RESURGENCE:Building A Mine-To-Magnets Rare Earths Supply Chain
January 2011 Update
Forward-Looking Statementsand Other Important Cautions
This presentation contains forward‐looking statements that represent Molycorp’s beliefs, projections and predictions about future events or Molycorp’s future 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‐looking statements 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 such statements.
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 full planned 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 with unions and employees; Molycorp’s ability to successfully implement its “mine‐to‐magnets” strategy; environmental laws, regulations and permits affecting Molycorp’s business, directly and indirectly, including, among others, those relating to mine reclamation and restoration, climate change, emissions to the air and water and human exposure to hazardous substances used, released or disposed of by Molycorp; and uncertainties associated with unanticipated geological conditions related to mining.
For more information regarding these and other risks and uncertainties that Molycorp may face, see the section entitled “Risk Factors” in Molycorp Quarterly Report on Form 10‐Q for the quarterly period ended September 30, 2010 filed with the SEC. Any forward‐looking statement contained in this presentation, or the Quarterly Report on Form 10‐Q , reflects Molycorp’s current views with respect to future events and Molycorp assumes no obligation to publicly update or revise these forward‐looking statements for any reason, or to update the reasons 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 FROM ACCUMULATIONS YET TO BE DISCOVERED. BECAUSE OF THE UNCERTAINTY OF COMMERCIALITY AND LACK OF SUFFICIENT EXPLORATION DRILLING, THE RESOURCES CANNOT BE CLASSIFIED AS RESERVES. INVESTORS ARE ADVISED THAT THE SEC DOES NOT RECOGNIZE RESOURCES. ONLY PROBABLE AND POSSIBLE 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 DEVELOPED ECONOMICALLY. THEREFORE, INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ALL OR ANY PART OF MOLYCORP’S RESOURCES EXIST, OR THAT THEY CAN BE DEVELOPED ECONOMICALLY. ACCORDINGLY, INFORMATION CONCERNING DESCRIPTIONS OF RESOURCES CONTAINED IN THIS PRESENTATION IS NOT COMPARABLE TO INFORMATIONINCLUDED IN SEC FILINGS.
2
IPO Summary
Issuer: Molycorp, Inc.
Symbol/Exchange: MCP/NYSE
Shares Sold: 29,128,700
Net Capital Raised: $378.6 million
Joint Book runners: Morgan Stanley, JP Morgan
Use of proceeds: Modernization and expansion of our Mountain Pass, CA facility, andexpansion into metals, alloys, and magnet production.
Shares outstanding: 82,291,200
Market Cap (as of 1/20/11): $3.75 billion
3
Molycorp Update
Successful IPO on July 29, 2010; raised $378.6M.
Successful commercial scale operation of new processing technologies and ramp-up to a 3,000 tons/year rate.
Construction commenced of new facility; mining re-started.
Commercial launch of cerium-based water treatment technology: XSORBX™
Passage of a rare earth R&D bill (HR 6160) by the U.S. House in 2010 with very strong bipartisan support; multiple bills to be introduced in 2011.
“Mine-to-Magnets” project is on time and on budget.
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Lanthanum
Cerium
Praseodymium
Neodymium
Samarium
Dysprosium
Europium
Terbium
Gadolinium
Erbium
ReducesWeightEmissionsEnergy consumption
AllowsGreater efficiencyPerformanceMiniaturizationSpeedDurabilityThermal stability
Commercially significant rare earth elements to be produced by Molycorp Properties Product applications
Molycorp intends to produce all 10 of these rare earth elements commercially.
Rare Earths Are Critical to Enabling Various Technologies
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What We’ll Produce
* Depending upon market conditions. Molycorp could increase production to this extent under current operating permits, but has not yet made any decision to do so.
3,000
19,050
40,000
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2010 12 / 2012 Expansion Option*
Total REO EquivalentREO equivalent in metric tons / year
6
What We’ll Produce
* Depending upon market conditions. Molycorp could increase production to this extent under current operating permits, but has not yet made any decision to do so.
7
201,395
402,790
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2010 12 / 2012 Expansion Option*
Sm, Eu, Dy, Gd, TbREO equivalent in kgs / year
Producing Essential Componentsto a Diverse Set of Industries
Molycorp is well-positioned to capitalize on a variety of high-growth technologies
Top Revenue Contributors
2013E1 Anticipated Market Growth
Product Finished Product End Markets Production % of Revenue
2010-2015E CAGR
Neodymium Iron Boron alloy
Neodymium Iron Boron Magnets
Wind Turbines, Hybrid and Electric Vehicles
8.16mm kgs 57% 14%
Cerium oxide Water purification
Industrial and Drinking Water Filters, and Autos
8.21mm kgs 18% NA
Samarium Cobalt alloy
Samarium Cobalt Magnets
Defense, Aerospace .77mm kgs 8% 14%
Lanthanum metal Nickel Metal Hydride Batteries
Electronics, Hybrid Vehicles
2.49mm kgs 7% 16.4%
Lanthanum oxide Catalysts FCC Catalysts 3.1mm kgs 4% 4.8%
Source: IMCOA1 Based on assumed prices used by SRK report dated April 2010. Actual prices and percentage of revenue could vary materially.2 Represents anticipated market growth for REOs used in magnets3 Represents anticipated market growth for REOs used in metal alloys4 Represents anticipated market growth for REOs used in catalysts
2
3
2
4
8
9
Robust Expected Demand Growth Driven by Rapidly Expanding
End-Markets
Source: IMCOANote: Totals may not add to 100% due to rounding
2010E REO Demand by Application 2010E–2015E End-Market Demand CAGR (REO)
2010E Total 125,000 mt REO
2015E Adj. Total 205,000 mt REO
Others6%
Ceramics6%
Phosphors7%
Magnets21%
Metal Alloys17.5%
Polishing 15%
Glass 8%
Catalysts19.5% 16.4%
14.0%
9.6%
7.1%
5.2%
4.8%
1.8%
5.2%
Metal Alloys
Magnets
Polishingpowder
Phosphors
Ceramics
Catalysts
Glassadditives
Other
2010E – 2015E Total Growth64%
2015E REO Demand by Application
Others4.5%
Ceramics4.5%
Phosphors6%
Magnets25%
Metal Alloys23.5%
Polishing 15%
Glass 6%
Catalysts15.5%
Hybrid and Electric Vehicles Demand Drivers:
Annual Hybrid and Electric Vehicle Sales (000’s)
Rare Earths Are Critical Inputs for the Hybrid and Electric Vehicles Market
Total Rare Earth Metal Alloys Consumption (ktpa)
22.3
52.0
2010f 2015fSource: IMCOA
9621,270
1,7752,247
2,5592,974
3,206
2010f 2011f 2012f 2013f 2014f 2015f 2016f
Hybrid Vehicles Electric Vehicles
Intensive use of rare earths in hybrid and electric vehicles are compounding the traditional use of rare earths
Hybrid and electric vehicles contain 9-11 kgs of rare earths
Anticipated rare earth demand from hybrid and electric vehicles is estimated to grow significantly
Source: JD Power and Associates
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Wind Turbines Are a Significant Driver for Rare Earth Magnet Growth
Global commitment to increasing the presence of wind energy: U.S. EIA estimates >3x increase in installed wind
generation 2010-30 to 490GW China is estimated to have allocated >$150bn to become
the world’s wind leader Growing European use of offshore wind generation
Permanent rare earth magnets are used in generators of wind turbines Increased reliability and efficiency – reduces expensive
breakdowns and maintenance expenditures Critical element for 3MW+ and off-shore turbine segments
With the expected JV, Molycorp would have access to the raw materials, IP and technical expertise to be a world-class supplier of permanent magnets
Wind turbine demand drivers
Permanent rare earth magnet in generator
Each 3MW permanent magnet turbine requires approximately one metric ton of neodymium iron boron magnets1
61
159
249319
397
490
0
100
200
300
400
500
600
2006 2010F 2015F 2020F 2025F 2030F
North America Europe Asia Other
26.346.0
8.0
26.3
54.0
2010f 2015f
Magnets Consumption Wind Turbine Impact
Source: IMCOANote: Both magnet consumption and wind turbine impact are middle of IMCOA range
Wind turbine production (GW) REO consumption for magnets (ktpa)
Source: Energy Information Administration1 IMCOA estimates each megawatt requires 0.4 tons of NdFeB magnets
11
US DOECritical Materials Strategy
Short-Term Criticality Matrix
DOE assigned a high supply risk and high importance for five rare earths over the next five years.
12
US DOECritical Materials Strategy
Medium Term Criticality Matrix
DOE found that a high supply risk and high importance for these REEs continues out to 5-15 years.
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0
50,000
100,000
150,000
200,000
250,000
2005 2006 2007 2008 2009 2010f 2011f 2012f 2013f 2014f 2015fChina Supply Molycorp Supply Other Supply China Demand Adjusted Global Demand
Global Supply & Demand
Global Rare Earths Supply and Demand(tonnes, REO ±20%)
Source: IMCOA
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Chinese ExportsVersus ROW Demand
Global Surplus Global Deficit
Additional demand drivers: Government stockpiling Further adoption of wind turbine technology Potential for China to become a net RE importer
Source: IMCOA
15
Met
ric
tons
ObservationsOn China
China continues to warn of declining quotas in the future
Closed 280 illegal mines; reducing export licenses; designated 11 mines Jaingxi as “national planning mines”
Internal REE demand rising with GDP growth while Chinese production from 2005-2010 relatively stagnant
Strict environmental standards expected to double production costs (Wang Guozhen, the former VP of China Nonferrous Engineering and Research Institute)
53% of respondents think China will“become a net importer ofrare earths by 2015”in a Metal-Pages.com poll.
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1
2
3
4
5
1 SRK estimates used for model2 As of June 15, 2010; Metals-Pages.com3 As of Jan. 18, 2011; Metals-Pages.com 4 Molycorp estimatesNote: 3-yr average refers to Metals Pages oxide and metal prices averaged from May 2007 – May 2010, FOB China
Pricing Drivers
Market Dynamics SupportContinued Pricing Gains
Note: NdFeB = Neodymium iron boron; SmCo = Samarium cobalt
China continues to focus supply inward, despite growing ROW demand
– Dramatic consolidation of Chinese rare earths industry
Existing rare earths production insufficient to meet expected market demand
National strategic stockpiling– China, Japan, and S. Korea
currently stockpiling– US and EU looking to
stockpile4
4
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Pricing ($/kg)
3-Year Average
March 20101 June 20102 Jan. 20113
% change March 2010- Jan. 2011
Oxides
Lanthanum oxide $6.05 $6.60 $8.12 $60.80 821%
CeriumOxide (glass applications) $4.03 $4.09 $6.47 $63.40 1,449%
Oxide (water filters) $13.20 - -
XSORBX™ $9.90 - -
Europium oxide $442.07 $473.00 $567.60 $630.00 33%
Metals
Lanthanum $10.01 $13.20 $13.20 $62.50 373%
Praseodymium $32.12 $37.99 $42.94 $115.50 204%
Neodymium $32.41 $37.99 $42.94 $117.50 209%
Alloy products
NdFeB alloy $35.20 $42.94 $84.37 140%
SmCo alloy $50.60 $54.14 $69.36 37%
World-Class Mining Resourceat Mountain Pass, CA
• 58 years of operating history
• 30-year mine permit and EIR approved
• Mining operations re-started in Dec. 2010
• Construction of new processing facility underway
• Plan provides for fully installed infrastructure
– Water– Electricity– Natural gas pipeline– Easy access to Interstates, rail head, and
California seaports
• Facility is ISO 9000 and ISO 14000 certified
• Estimated 30+ years mine life
• Ability to double planned production under current permitting
• 168 Employees
Reserves & Resources
Source: SRK report dated April 2010Note: See disclaimer for information on reserves and resources, resources are from the initial SRK report prior to redaction to comply with SEC Industry Guide 7
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Category REO% k tons REO (Mlbs)
SEC Guide 7: Proven and Probable 8.24 13,588 2,210
NI 43-101: Measured & Indicated 6.68 24,341 3,251
NI 43-101: Inferred 6.32 10,446 1,320
NI 43-101 Totals 34,787 4,571
Energy Efficiency Increasesand GHG ReductionsWith On‐Site Natural GasCo‐Gen
Higher RE Recovery and Process Efficiency
BreakthroughsAllow for Same
Amount of Product Using
½ The Ore
Near‐ZeroWastewater Discharge
DramaticReduction in Process Use of Fresh Water
EnvironmentalTechnology Breakthroughs
Large Reduction of Reagent Use
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1 IMCOA2 Wang Guozhen, the former VP of China Nonferrous Engineering and Research Institute, indicated that China’s production costs may double as a result of
ongoing environmental reforms. (Metal-Pages.com, Jan. 7, 2011)3 Lynas presentation on 12/6/2010
China
Anticipated Cost Advantages vs. Key Competitors
3
Average Rare Earth Oxide Production Cost (per kg.)
1,2
Cost-advantaged processing drives significant commercial advantage:
High-power quality and efficient onsite natural gas co-generation
On-site reagent production and acid recycling
Process technology break-throughs
Infrastructure
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$2.77
$5.58
$7.00
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
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Dependent Upon China
Dependent Upon
Foreign Supplies
Trading One DependenceFor Another?
Petroleum Supply Chain
Hybrid Vehicle Supply Chain
Our Mine-to-MagnetsManufacturing Supply Chain
Rare Earths Material
Processing
Rare Earths Metals
Rare Earths Alloys
Rare Earths Magnets
Global Supply Chain:
~97% Chinese Production
~100% Chinese Production
80% Chinese
20% Japanese(1)
80% Chinese
17% Japanese(1)
3% Europe(1)
Molycorp’s "Mine-to-Magnets” strategy differentiates us from other early stage concentrate or oxide-only projects, and provides exposure to the high margin metals, alloys, and magnet markets
Source: REITA report dated January 27, 20101 Dependent on Chinese rare earths feedstock2 “Molycorp and Hitachi Metals, Ltd. have entered into an agreement regarding the planned formation of joint ventures for the production of rare earth alloys and magnets in the U.S.
Molycorp BusinessMagnet
Joint Venture2
Rare Earths Mining and
Milling
~97% Chinese Production
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$3.85 $4.49 $4.49$6.60$6.60
$49.68$35.20 $36.92
$131.41
Nd Oxide Nd Metal Nd Alloy
Oxide Cost Metal Cost Alloy Cost Margin
23
1 Molycorp cost data based on SRK report dated April 20102 Per kilogram of Nd Oxide
Vertical Integration Across the Value Chain Drives Superior Margins
Nd Oxide to Alloy Value Chain (per kg.)1
1 kg 0.86 kgs 3.06 kgsProduction:
Margin2: $31.35 $70.64+125%
Molycorp Has Secured Non-Binding LOIs Across the “Mine to Magnets” Value Chain
Total Number of LOIs
19 Non-binding LOIs representing 138% of 2013 anticipated production volume.
Contracts signed in 11/10 with W.R. Grace for 5-year purchase of La with 3-year option.
Neo Materials non-binding LOI represents another 15-25% of 2013 anticipated production volume.
Counterparties
Neo Materials
US chemical and energy companies
Japanese industrial, electronics, and chemical companies
European industrial, electronics, and chemical companies
XSORBX™ successfully introduced into commercial wastewater and recreational water markets.
XSORBX™ being readied for introduction into intl. drinking water purification markets.
New Product Introduction
Denotes Customer Location
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BreakthroughTechnologies
Water Treatment
• Lack of Clean drinking water is a global problem
• XSORBX® unique chemistry removes:
• Pathogens such as Protozoa, Fungi, Bacterial, Viruses
• Organic toxins such as Pesticides
• Heavy metals such as Arsenic, Selenium, and Chromium
• We’re developing man-portable filters togive our troops thecleanest drinking water available
Industrial Process Waste Streams
• XSORBX® ASP, Arsenic Sequestration Process employs the XSORBX®
technology in the mining and smelting industry
• Volumetric capacity for specific hazardous materials that exceeds any other commercially available product
• Studies show stable, concentrated waste could potentially be classified as non hazardous
Molycorp Deploys Incredibly Flexible Technology Focused on:
25
Recycling will be critical to the rare earth industry, and Molycorp will be a leader in the recycling industry.
Molycorp's new plant was designed with recycling in mind.
• Lowest-cost operation in the industry.• Highly flexible circuit design.• Recycled REE's can be co-processed with primary
production, yielding additional cost savings.
Key focus areas:• RE phosphors from CFLs• NdFeB alloy recovery in magnet manufacture
Commercial OpportunitiesIn Recycling
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2
3
Q&A
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