Molycorp Update. NYSE: MCP June 2014

Transcription

1 Molycorp Update NYSE: MCP June 2014

2 Safe Harbor Statements This presentation contains forward-looking statements that represent Molycorp's beliefs, projections and predictions about future events or Molycorp's future performance. Forwardlooking 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: the potential need to secure additional capital to implement Molycorp's business plans, and Molycorp's ability to successfully secure any such capital; Molycorp's ability to optimize production at its Mountain Pass rare earth mine and processing facility, which we refer to as the Molycorp Mountain Pass facility, and the ability to develop internal and external demand for REO and other downstream products, including the ability to operate at commercial production rates and competitive cash production costs, in each case within the projected time frame; the success of Molycorp's cost mitigation efforts in connection with the optimization of the Molycorp Mountain Pass facility, which, if unsuccessful, might cause its costs to exceed budget; the final costs of Molycorp's planned capital projects, which may differ from estimated costs; Molycorp's ability to achieve fully the strategic and financial objectives related to the acquisition of Molycorp Canada, including the acquisition's impact on Molycorp's financial condition and results of operations; unexpected costs or liabilities that may arise from the acquisition, ownership or operation of Molycorp Canada; risks and uncertainties associated with intangible assets, including any future goodwill impairment charges; market conditions, including prices and demand for Molycorp's products; Molycorp's ability to control its working capital needs; foreign exchange rate fluctuations; the development and commercialization of new products; unexpected actions of domestic and foreign governments; various events which could disrupt operations, including natural events and other risks; uncertainties associated with Molycorp's reserve estimates and nonreserve deposit information, including estimated mine life and annual production; uncertainties related to feasibility studies that provide estimates of expected or anticipated costs, expenditures and economic returns, REO prices, production costs and other expenses for operations, which are subject to fluctuation; uncertainties regarding global supply and demand for rare earths materials; uncertainties regarding the results of Molycorp's exploratory drilling programs; Molycorp's ability to enter into additional definitive agreements with its customers and its ability to maintain customer relationships; Molycorp's sintered neodymium-iron-boron rare earth magnet joint venture's ability to successfully manufacture magnets within its expected timeframe; Molycorp's ability to successfully integrate other acquired businesses; Molycorp's ability to maintain appropriate relations with unions and employees; Molycorp's ability to successfully implement its vertical integration 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; and the outcome of the current stockholder class action litigation and derivative litigation including any actions taken by government agencies in connection therewith. For more information regarding these and other risks and uncertainties that Molycorp may face, see the section entitled "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2013 and of the Company's Quarterly Reports on Form 10-Q. Any forward-looking statement contained in this release or the Annual Report on Form 10-K or the Quarterly Reports on Form 10-Q reflects Molycorp's current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to Molycorp's operations, operating results, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. 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. 2

3 3 About Molycorp

4 Molycorp At A Glance Summary Original Discovery (Mountain Pass, Calif.) One of the world's leading manufacturers of custom engineered rare earth and rare metal products, Molycorp is vertically integrated from our world-class rare earth resource in Mountain Pass, California to our advanced downstream processing facilities located across three continents IPO Date July 29, 2010 Listed Global Footprint NYSE: MCP 26 locations in 11 countries Employees 2,500+ Market Cap $697 million (as of May 23, 2014) Shares Outstanding 244,698,024 (as of May 1, 2014) 4

5 A Diverse Footprint To Serve Customers Globally Peterborough, Canada Corporate Office, Toronto, Canada Napanee, Canada (discontinued facility) Abingdon, U.K. Stade, Germany (Joint Venture) Sagard, Germany (Joint Venture) Our Global Sillamäe, Footprint Estonia Corporate Office, Beijing, China Corporate Office, Greenwood Village, Colorado Tianjin,China Mountain Pass, California Hyeongok, South Korea Nakatsugawa, Japan (Joint Venture) LEGEND Rare Earth Resource Production Facilities Tolleson, Arizona Blanding, Utah Quapaw, Oklahoma Korat, Thailand Singapore Zibo, Shandong Province, China Jiangyin, Jiangsu Province, China Research & Development SALES & LIAISON OFFICES Corporate Offices Abingdon, U.K. Beijing, China Greenwood Village, Colo. Pendleton, Indiana Osaka, Japan Peterborough, Canada Sagard, Germany Seoul, South Korea Singapore Tokyo, Japan Toronto, Canada Tübingen, Germany 5

6 Competitive Advantages Diverse, Multinational Customer Base Ability To Meet Challenging Customer Specs World-Class Rare Earth Resource Vertical Integration Synergies Globally Sound Environmental Friendly Practices State of the art Facilities and Processing Capabilities No other rare earth company in the world enjoys this superior technology, resource, and market positioning. Ability to Offer Long- Term Contracts Global Production and Sales Footprint 6

7 Our Business Segments Chemicals & Oxides Products: Rare earth engineered materials Facilities: Estonia; China Capacity: 9,000 to 10,000K mt Magnetic Materials & Alloys Products: Rare earth alloys, magnetic powders, and magnets Facilities: China; Thailand; U.S.; Japan Capacity: 12,000mt Resources Products: Rare earth oxides (REO); rare earth feedstock for downstream facilities; SorbX Facility: U.S. (Mountain Pass, Calif.) Rare Metals Products: Rare metals (tantalum, niobium, gallium, rhenium, indium) Facilities: U.S; Canada; Europe; Asia Capacity: Establishing 25,000mt (including LREC) 7

8 Revenue By Segment (2013) Chemicals & Oxides 35% 41% Magnetic Materials & Alloys 10% 14% Resources (Mountain Pass) Rare Metals 8

9 High Growth Markets / Diverse Customer Base 2016e 2020e End-Market Demand CAGR Diverse & Global Customer Base Magnets 10% Metal Alloys Polishing 8% 8% Catalysts Glass Ceramics 5% 5% 6% Phosphors 0% Other 8% 0% 2% 4% 6% 8% 10% 12% Source: IMCOA/Curtin University, April Estimates are ±25% 9

10 Mountain Pass Update 10

11 Mountain Pass Update Construction / Commissioning Completed Optimization Efforts Underway Production Costs Declining ü ü All major elements of the new production facility have finished construction & commissioning. Production continues to ramp up to original design capacity. ü ü Optimization and debottlenecking efforts are ongoing, and all production processes are working as designed. No material technological or process issues seen that would prevent us from continuing production ramp. ü ü Cash costs continue to decline as production rates increase, onsite reagents are produced, and other cost-reducing technologies ramp up. Production cost targets will allow us to be cost and price competitive world-wide 11

12 What Makes Mountain Pass Unique Superior Superior Ore Ore Grade, Tonnage Grade, Tonnage & & Mineralogy Mineralogy 12 Low-Cost, Low-Cost, Reliable Reliable Power Power Proven and probable reserves of 1.35M mt of REO in 18.4M mt of ore with ~8% ore grade (5% cut-off) Onsite CHP plant converts cleanburning natural gas into highly efficient and reliable power and steam. Highly beneficial mineralogy that allows for high recoveries and efficient, lower-cost processing. Produces power at a fraction of the cost of non-interruptable baseload power from the grid. Reagent Reagent Production ProductionFrom From Wastewater Wastewater Chlor-Alkali plant uses wastewater to produce reagents needed for REE separation. Reduces wastewater haulage costs. Reduces reliance on externally purchased reagents. Superior Environmental Performance Environmental footprint of the plant is much reduced through wastewater recycling, clean power generation, more efficient processing, etc. Raises the bar for competitors, who are likely to incur higher costs as they seek to improve their environmental performance. Ability to Feed Ability to Feed Downstream Downstream Facilities Facilities Ability to send LREE and HREE feedstock to downstream processing plants allows for increased production volumes and provides added production flexibility.

13 Declining Production Costs Mountain Pass Example Economics Not actuals or forecast amounts Sales scenarios Prod. MT NdPr La Ce LREC SEG Total ASP $/ kg 1 Adj. Cash Cost $/kg Including Cerium Sales 20K 2,400 5,100 7,300 5, ,000 $15 $6-7 Excluding Cerium Sales 20K 2,400 5, , ,700 $19 $9-11 NOTE: Average selling price (ASP) and recent FOB pricing per Metal Pages and Company estimates: NdPr $72, La $5.60, Ce $5.50 þ þ þ Rare earth economics derive from production costs, and we will have one of the lowest cost producing plants in the world. Light Rare Earth Concentrate (LREC) will be produced to supply downstream plants; separated oxides produced to maximize volume of NdPr and La. With each additional 1,000 mt of Cerium sold, cash cost/kg should decrease approximately 5% to 8% 13

14 Markets Through Vertical Integration 14

15 Mixed Oxides: A Growing Cerium Consumer Global emission legislation present in most regions and becoming more stringent Global Market Drivers for Mobile Emissions Catalyst Markets Sources: BASF, Umicore, Molycorp Internal Estimates Mobile Emission Catalysts Total Global Market Size ($B USD) $5. 2 $7-8 Global tightening of environmental regulations Accelerated shift of vehicle manufacturing to BRIC countries Ongoing powertrain changes require continuous development of new catalytic solutions Molycorp Differentiation ü Proximity to the Customer ü Vertical Integration

16 Magnetics: Better Performance & Efficiency in Vehicles Power Steering Sensor/ Motor Seat Motor AC Compressor Motor Engine Cooling Fan Motor Fuel Pump Motor Headlight Adjustment Motor 16

17 Better Performance & Efficiency in Consumer Goods Ceiling Fan Air Fan Motor High- Efficiency Vacuum Cleaners 17

18 Rare Earth Pricing Much Less Volatile Rare Earth Index Prices: (% based on Jan Prices) 4000% 3800% 3600% 3400% 3200% 3000% 2800% 2600% 2400% 2200% 2000% 1800% 1600% 1400% 1200% 1000% Y 800% 600% 400% 200% 0% Eu Pr Dy Tb Nd La Ce La Ce Pr Nd Eu Tb Dy Y (Source: Metal-Pages, FOB China min) 18

19 Competitive Advantages Diverse, Multinational Customer Base Ability To Meet Challenging Customer Specs World-Class Rare Earth Resource Vertical Integration Synergies Globally Sound Environmental Friendly Practices State of the art Facilities and Processing Capabilities No other rare earth company in the world enjoys this superior technology, resource, and market positioning. Ability to Offer Long- Term Contracts Global Production and Sales Footprint 19

20 20 Thank You

21 21 Appendix Slides

22 Molycorp: A Brief History s Rare earth production begins at Mountain Pass Publicly traded Molycorp is acquired by Union Oil of California (UNOCAL). Molycorp ramps up production of light and mid rare earths, and is able to meet a majority of the world s demand. Unocal acquired by Chevron Corp. Privately held Molycorp Minerals, LLC, acquires the Mountain Pass facility from Chevron Mining Initial public offering and listing on the NYSE of Molycorp, Inc Molycorp acquires Toronto-based Neo Material Technologies, All construction and commissioning of new Mountain Pass facility is complete and production is ramping up to initial design capacity. 22

23 Mountain Pass Operations Step 1 Step 2 Step 3 Step 4 Step 5 MINING CRUSHING / BLENDING MILLING / FLOTATION MULTI-STAGE CRACKING IMPURITIES REMOVAL The orebody at Mountain Pass is one of the world s largest, richest and most readily processable rare earth resources. Ore is milled to a fine consistency and a high-grade rare earth concentrate is produced by a flotation process. Ore is milled to a fine consistency and the rare earth minerals are extracted via a flotation process. A proprietary multistage chemical process liberates rare earths from the concentrate, for later separation into individual elements and products. Non-rare-earth impurities are removed. 23

24 Mountain Pass Operations Step 6 Step 7 Step 8 Step 9 Step 10 HEAVY RARE EARTH CONCENTRATE RARE EARTH OXIDE SEPARATION WATER TREATMENT PLANT CHLOR-ALKALI PLANT PRODUCT FINISHING A heavy rare earth concentrate is produced which can be processed into high-purity, engineered heavy rare earth materials at other Molycorp facilities. Rare earths such as Cerium, Lanthanum, Neodymium, and Praseodymium are separated and purified into various products. Wastewater is treated for re-use, and brine (highly concentrated saltwater) is recovered from the wastewater. The Chlor-Alkali plant converts brine into HCl, NaOH, and bleach, which are used in the rare earth separation process. Rare earth carbonates, oxalates, chlorides, and other products are finished for delivery to customers. 4

25 A Broad Product Suite Custom- Engineered Materials Rare Earth Magnetic Materials Rare Earth/ Zirconium Mixed Oxides Rare Metals Products Water Water Purification Purification Products Products Cerium Lanthanum Praseodymium Neodymium Samarium Europium Gadolinium Terbium Dysprosium Holmium Erbium Thulium Ytterbium Lutetium Yttrium NdFeB Alloys SmCo Alloys NdFeB magnetic powders Sintered NdFeB magnets Rare earth- Zirconium mixed oxides for use in vehicle catalytic converters. Tantalum Niobium Gallium Indium Rhenium SorbX family of rare earthbased water purification products 25

26 Resources Resources Segment Products: Rare earth oxides (REO), rare earth feedstock for downstream facilities, SorbX Facility: Mountain Pass $ million Q Revenue $15.6 Dep, Amort & Accretion $(13.1) Operating Income (loss) $(49.5) Volume Sold (metric tons) ASP ($/kg) 988 mt $15.75/kg 26

27 Chemicals & Oxides Chemicals & Oxides Segment Products: Standard Rare Earths, Specialty Rare Earths, Engineered Materials Facilities: Silmet, Zibo, and Jiangyin $ million Q Revenue $46.6 Dep, Amort & Accretion (3.9) Operating Income (loss) (0.6) Volume (metric tons) 1,926 mt ASP ($/kg) $24.17/kg OIBDA

28 Magnetic Materials & Alloys Magnetic Materials & Alloys Segment Products: RE alloys, magnetic powders Facilities: Magnequench - China, Thailand; Tolleson, AZ $ million Q Revenue $55.9 Dep, Amort & Accretion (4.2) Operating Income (loss) 9.5 Volume (metric tons) 1,374 mt ASP ($/kg) $40.71/kg OIBDA

29 Rare Metals Rare Metals Segment Products: Rare metals (gallium, indium, niobium, rhenium, tantalum) Facilities: Silmet, Blanding, Quapaw, Peterborough, Hyongeok, Stade, Sagard $ million Q Revenue $20.4 Dep, Amort & Accretion (2.1) Operating Income (loss) (2.2) Volume (metric tons) ASP ($/kg) 101 mt $201.61/kg 29

30 Q Financial Results Summary In millions $USD Cash from Ops $119 Cash from Inv ($23.1) Cash from Fin (19.4%) Net Change in Cash* ($78.3) Cash Balance at Q4 13 $314.3 Cash Balance at Q1 14 $236.0 Cash from Fin Total Cash Capex in Q1 14 $29.8 Remaining Cash Capex 2014 $61.0 *Includes $0.3M effect of exchange rate changes on cash 30

31 Magnetic Materials & Alloys: Commercial Case Studies High Efficiency Refrigerator Fan Motor Residential HVAC Circulation Pump Compressors for AC Systems Action: Replaced motors using ferrite magnets in refrigerator fan motor with MQ1 magnets RESULTS: ü Reduce the size of the motor height by 70% and diameter by 27% ü Motor efficiency improved by 10%, resulting in 1~2% improvement in whole refrigerator system ü Better design by eliminating protruded parts due to the height of motors and fans and increases storage space. Action: Replaced induction motor in circulation pumps with motors using MQ1 magnets RESULTS: ü Helps pumps meet new energy efficiency standards and reduces energy consumption. ü Replacement is cost effective. ü Helps manufacturers meet new EU regulations which prohibit the sale of technically outmoded, inefficient pump models from 2013 onwards Action: Replaced motor using sintered Neo magnets (7-8% Dy) with MQ3 (2-3% Dy) magnets RESULTS: ü Performance maintained while reducing component costs and cost volatility with less Dysprosium (a very scarce rare earth). 31

32 Rare Earth Pricing Much Less Volatile Rare Earth Index Prices: (% based on Jan Prices) 4000% 3800% 3600% 3400% 3200% 3000% 2800% 2600% 2400% 2200% 2000% 1800% 1600% 1400% 1200% 1000% Y 800% 600% 400% 200% 0% Eu Pr Dy Tb Nd La Ce La Ce Pr Nd Eu Tb Dy Y (Source: Metal-Pages, FOB China min) 32

33 Rare Earth Supply / Demand Dynamics Following a fall in demand of 5-10% in 2013, IMCOA forecasts a modest CAGR for of 6-10% per annum, marking a recovery as alternative supplies to China come on-line. -- IMCOA / Curtin University Forecast Global Growth Rates 2013 to 2017 Application Growth between with Comments Catalysts Steady growth at 4-6%pa 2014 to 2017, which may improve with better availability and lower Ce and La prices Glass Growth in 2014 to 2017 growth at 4-6%pa Polishing Growth at 5-10% per annum in 2014 to 2016 due to lower cerium prices. Metal Alloys 2013 to 2016 growth forecast at 6-10% Magnets Forecast growth 2014 to 2017 of 8-12%pa; which could be greater if more of the rare earths used in permanent magnets were to become available on a long term sustainable basis at reasonable prices. Ceramics Phosphors (including Pigments) Compound Average Rate of Growth Steady growth rates at historic rates of 4-6%pa New lighting devices, television and computer screens use significantly less rare earths and the market is contracting. Pigments for plastics, textiles and cosmetics is a potentially high growth sector. CAGR for of 6-10%%pa, marking a recovery as alternative supplies to China come on-line. However, if China restricts the export of HREEs then this rate of growth would be constrained. Source: IMCOA/Curtin University, in a Dudley Kingsnorth presentation of April

34 Chemicals & Oxides: Multiple Markets in Automotive Diesel Fuel Additive -- Cerium -- Lanthanum UV Cut Glass -- Cerium Glass / Mirrors Polishing -- Cerium LCD Screens -- Cerium -- Europium -- Yttrium Catalytic Converter -- Cerium/Zirconium -- Lanthanum 25+ Motors Throughout Vehicle -- Neodymium -- Praseodymium -- Dysprosium Component Sensors -- Yttrium Headlight Glass -- Neodymium Hybrid Electric Motor & Generator -- Neodymium -- Praseodymium -- Dysprosium -- Terbium Hybrid NiMH Battery -- Cerium -- Lanthanum 34