MP Materials 10-Q 2022-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑						QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

or

☐						TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-39277

MP MATERIALS CORP.

(Exact name of registrant as specified in its charter)

Delaware						84-4465489
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6720 Via Austi Parkway, Suite 450

Las Vegas, Nevada 89119

(702) 844-6111

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, par value of $0.0001 per share			MP			New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☑			Accelerated filer			☐			Non-accelerated filer			☐			Smaller reporting company			☐			Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of November 1, 2022, the number of shares of the registrant’s common stock outstanding was 177,543,027.

MP MATERIALS CORP. AND SUBSIDIARIES

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			Page
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements			1
Condensed Consolidated Balance Sheets (unaudited)			1
Condensed Consolidated Statements of Operations (unaudited)			2
Condensed Consolidated Statements of Comprehensive Income (unaudited)			3
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)			4
Condensed Consolidated Statements of Cash Flows (unaudited)			5
Notes to Condensed Consolidated Financial Statements (unaudited)			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
Item 3. Quantitative and Qualitative Disclosures About Market Risk			32
Item 4. Controls and Procedures			32
PART II—OTHER INFORMATION
Item 1. Legal Proceedings			32
Item 1A. Risk Factors			33
Item 4. Mine Safety Disclosures			33
Item 6. Exhibits			33
Signatures			34

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References herein to the “Company,” “MP Materials,” “we,” “our,” and “us,” refer to MP Materials Corp. and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this Quarterly Report on Form 10-Q for the three months ended September 30, 2022 (this “Form 10-Q”), that are not historical facts are forward-looking statements under Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by the use of the words such as “estimate,” “plan,” “shall,” “may,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” or similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”), and on the current expectations of our management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond our control.

These forward-looking statements are subject to a number of risks and uncertainties, including:

• fluctuations and uncertainties related to demand for and pricing of rare earth products;

• uncertainties regarding the growth of existing and emerging uses for rare earth products and ability to compete with substitutions for rare earth minerals;

• the intense competition within the rare earth mining and processing industry;

• uncertainties relating to our commercial arrangements with Shenghe Resources (Singapore) International Trading Pte. Ltd., an affiliate of Shenghe Resources Holding Co., Ltd., a global rare earth company listed on the Shanghai Stock Exchange;

• potential changes in China’s political environment and policies;

• unanticipated costs or delays associated with our Stage II optimization project;

• unanticipated costs or delays associated with our Stage III project;

• risks associated with our intellectual property rights, including uncertainties related to the Company’s ability to obtain the intellectual property rights or licenses of intellectual property rights to produce NdFeB alloy and magnets;

• uncertainties related to the Company’s ability to produce and supply NdFeB alloy and magnets;

• the ability to convert current commercial discussions with customers for the sale of rare earth oxide products, NdFeB alloy and magnets into contracts;

• uncertainties relating to the COVID-19 pandemic;

• potential power shortages and interruptions at Mountain Pass;

• increasing costs or limited access to raw materials that may adversely affect our profitability;

• fluctuations in transportation costs or disruptions in transportation services;

• inability to meet individual customer specifications;

• diminished access to water;

• uncertainty in our estimates of rare earth oxide reserves;

• risks associated with work stoppages;

• a shortage of skilled technicians and engineers;

• loss of key personnel;

• risks associated with the inherent dangers involved in mining activity and metal and alloy manufacturing;

• risks associated with events outside of our control, such as natural disasters, climate change, wars or health epidemics or pandemics;

• risks related to technology systems and security breaches;

• ability to maintain satisfactory labor relations;

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• ability to comply with various government regulations that are applicable to our business;

• ability to maintain our governmental licenses, registrations, permits, and approvals necessary for us to operate our business;

• risks relating to extensive and costly environmental regulatory requirements;

• risks associated with the terms of our convertible notes; and

• the other factors described elsewhere in this Form 10-Q, included under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A, “Risk Factors” or as described in our Form 10-K, or as described in the other documents and reports we file with the Securities and Exchange Commission (“SEC”).

If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements.

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Form 10-Q are more fully described within Part II, Item 1A, “Risk Factors” in this Form 10-Q and “Part I, Item 1A. Risk Factors” in our Form 10-K. Such risks are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, statements of belief and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us, as applicable, as of the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

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PART I—FINANCIAL INFORMATION

MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

			September 30, 2022						December 31, 2021
(in thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents			$	427,969					$	1,179,297
Short-term investments			836,288						—
Total cash, cash equivalents and short-term investments			1,264,257						1,179,297
Accounts receivable (including related party), net of allowance for credit losses of $0 and $0, respectively			16,018						51,009
Inventories			61,645						38,692
Income taxes receivable			3,857						—
Prepaid expenses and other current assets			11,004						7,809
Total current assets			1,356,781						1,276,807
Non-current assets
Property, plant and equipment, net			830,033						610,612
Other non-current assets			2,348						2,247
Total non-current assets			832,381						612,859
Total assets			$	2,189,162					$	1,889,666
Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued liabilities			$	70,242					$	35,734
Income taxes payable			—						3,463
Current installments of long-term debt—related party			—						16,082
Other current liabilities			4,504						4,264
Total current liabilities			74,746						59,543
Non-current liabilities
Asset retirement obligations			5,244						17,615
Environmental obligations			16,584						16,598
Long-term debt, net of current portion			677,563						674,927
Deferred income taxes			167,028						104,500
Other non-current liabilities			5,691						7,751
Total non-current liabilities			872,110						821,391
Total liabilities			946,856						880,934
Commitments and contingencies (Note 10)
Stockholders’ equity:
Preferred stock ($0.0001 par value, 50,000,000 shares authorized, none issued and outstanding in either period)			—						—
Common stock ($0.0001 par value, 450,000,000 shares authorized, 177,534,638 and 177,816,554 shares issued and outstanding, as of September 30, 2022, and December 31, 2021, respectively)			18						18
Additional paid-in capital			947,973						936,299
Retained earnings			294,412						72,415
Accumulated other comprehensive loss			(97)						—
Total stockholders’ equity			1,242,306						1,008,732
Total liabilities and stockholders’ equity			$	2,189,162					$	1,889,666

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

			For the three months ended September 30,												For the nine months ended September 30,
(in thousands, except share and per share data)			2022						2021						2022						2021
Revenue:
Product sales (including related party)			$	124,231					$	98,581					$	425,169					$	230,842
Other sales (including related party)			214						1,173						9,096						2,001
Total revenue			124,445						99,754						434,265						232,843
Operating costs and expenses:
Cost of sales (including related party)(excluding depreciation, depletion and amortization)			22,417						21,907						67,682						57,798
Selling, general and administrative			17,604						14,881						56,391						40,986
Advanced projects, development and other			2,743						1,327						6,229						2,436
Depreciation, depletion and amortization			2,096						6,951						12,763						19,767
Accretion of asset retirement and environmental obligations			418						595						1,255						1,780
Write-down of inventories			—						—						—						1,809
Total operating costs and expenses			45,278						45,661						144,320						124,576
Operating income			79,167						54,093						289,945						108,267
Interest expense, net			(1,224)						(2,624)						(4,455)						(6,417)
Other income, net			6,168						97						8,574						3,656
Income before income taxes			84,111						51,566						294,064						105,506
Income tax expense			(20,934)						(8,803)						(72,067)						(19,458)
Net income			$	63,177					$	42,763					$	221,997					$	86,048
Earnings per share:
Basic			$	0.36					$	0.24					$	1.26					$	0.50
Diluted			$	0.33					$	0.23					$	1.16					$	0.47
Weighted-average shares outstanding:
Basic			176,543,624						176,053,586						176,476,276						172,577,303
Diluted			193,409,857						193,215,313						193,438,939						188,639,373

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The following discussion and analysis of financial condition, results of operations, liquidity and capital resources should be read in conjunction with, and is qualified in its entirety by, the unaudited Condensed Consolidated Financial Statements and the notes thereto included in this Quarterly Report on Form 10-Q (“Form 10-Q”), and the Consolidated Financial Statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2021. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under “Part II. Item 1A. Risk Factors” and elsewhere in this Form 10-Q and “Part I. Item 1A. Risk Factors” and elsewhere in our Form 10-K. In addition, see “Cautionary Note Regarding Forward-Looking Statements.” References herein to the “Company,” “we,” “our,” and “us,” refer to MP Materials Corp. and its subsidiaries.

Business Overview

MP Materials Corp. is the largest producer of rare earth materials in the Western Hemisphere. The Company owns and operates the Mountain Pass Rare Earth Mine and Processing Facility (“Mountain Pass”), the only rare earth mining and processing site of scale in North America. We estimate the rare earth concentrate we produced and sold in 2021 represented approximately 15% of the rare earth content consumed in the global market.

Rare earth elements (“REE”) are fundamental building blocks of the modern economy, impacting trillions of dollars in global economic activity through the enablement of end products across industries including transportation, clean energy, robotics, national defense and consumer electronics, among others. Neodymium (“Nd”) and praseodymium (“Pr”) are rare earth elements which in combination form neodymium-praseodymium (“NdPr”), which represents a majority of the value contained in our rare earth concentrate. NdPr is most often utilized in NdPr magnets, which are also commonly referred to as “neo,” “NdFeB,” “NIB,” or permanent magnets and are made predominantly from an alloy of NdPr, iron and boron. NdPr magnets are the most widely used type of rare earth magnets and are critical for many advanced technologies that are experiencing strong secular growth, including electric vehicles (“EV”), drones, defense systems, wind turbines, robotics and many others. The rapid growth of these and other advanced motion technologies is expected to drive substantial demand growth for NdPr.

We produce our materials at Mountain Pass, one of the world’s richest rare earth deposits, co-located with integrated state-of-the-art processing and separation facilities. We acquired the Mountain Pass assets in 2017, restarted operations from cold-idle status and embarked on a deliberate, two-stage plan to optimize the facility and position the Company for growth and profitability. We commenced mining, comminution, beneficiation, and tailings management operations, which we designated Stage I of our multi-stage optimization plan, between December 2017 and February 2018.

We currently produce a rare earth concentrate that we sell pursuant to an offtake agreement (the “Offtake Agreement”), which became effective upon the termination of the A&R Offtake Agreement (as defined in Note 3, “Relationship and Agreements with Shenghe,” in the notes to the unaudited Condensed Consolidated Financial Statements), to Shenghe Resources (Singapore) International Trading Pte. Ltd. (“Shenghe”), an affiliate of Shenghe Resources Holding Co., Ltd., which, in turn, typically sells that product to refiners in China. These refiners separate the constituent REE contained in our concentrate and sell the separated products to their customers. Upon completion of our Stage II optimization project (“Stage II”), we anticipate producing separated rare earth oxides (“REO”), including NdPr oxide, and selling these products directly to end users, at which time we may no longer sell our concentrate.

In February 2022, we commenced construction of our initial rare earth metal, alloy and magnet manufacturing facility in Fort Worth, Texas (the “Fort Worth Facility”). Furthermore, in April 2022, we entered into a definitive long-term supply agreement with General Motors Company (NYSE: GM) (“GM”) to supply U.S.-sourced and manufactured rare earth materials, alloy and finished magnets for the electric motors in more than a dozen models using GM’s Ultium Platform, with a gradual production ramp that is expected to begin in late 2023, starting with alloy. The definitive long-term supply agreement finalized the terms of a binding agreement announced by the Company in December 2021. These developments are a part of our Stage III downstream expansion strategy (“Stage III”).

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Key Performance Indicators

We use the following key performance indicators to evaluate the performance of our business. Our calculations of these performance indicators may differ from similar measures published by other companies in our industry or in other industries. The following table presents our key performance indicators:

			For the three months ended September 30,												Change												For the nine months ended September 30,												Change
(in whole units or dollars, except percentages)			2022						2021						$						%						2022						2021						$						%
REO production volume (MTs)			10,886						11,998						(1,112)						(9)		%				32,014						32,152						(138)						—		%
REO sales volume (MTs)			10,676						12,814						(2,138)						(17)		%				32,382						32,484						(102)						—		%
Realized price per REO MT			$	11,636					$	7,693					$	3,943					51		%				$	13,130					$	7,043					$	6,087					86		%
Production cost per REO MT			$	1,653					$	1,449					$	204					14		%				$	1,661					$	1,484					$	177					12		%

REO Production Volume

We measure our REO-equivalent production volume for a given period in metric tons (“MTs”), our principal unit of sale. This measure refers to the REO content contained in the rare earth concentrate we produce. Our REO production volume is a key indicator of our mining and processing capacity and efficiency.

The rare earth concentrate we currently produce is a processed, concentrated form of our mined rare earth-bearing ores. While our unit of production and sale is a MT of embedded REO, the actual weight of our rare earth concentrate is significantly greater, as the concentrate also contains non

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Interest rate risk

We had cash, cash equivalents and short-term investments totaling $1,264.3 million as of September 30, 2022, of which $1,245.6 million was invested in money market funds, U.S. Treasury and agency securities. Our cash, cash equivalents and short-term investments are held for working capital and general corporate purposes. We do not enter into investments for trading or speculative purposes.

Our cash equivalents and short-term investments are subject to market risk due to changes in interest rates. Fixed rate securities may have their market value adversely affected due to a rise in interest rates. Due in part to these factors, our future investment income may fall short of our expectations due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. As our short-term investments are classified as available-for-sale, no gains are recognized due to changes in interest rates. As losses due to changes in interest rates are generally not considered to be credit related, no losses in such investments are recognized due to changes in interest rates unless we intend to sell, it is more likely than not that we will be required to sell, we sell prior to maturity, or we otherwise determine that all or a portion of the decline in fair value is due to credit related factors.

As of September 30, 2022, a hypothetical increase of 100-basis points in interest rates would not have a material impact on the value of our cash equivalents or short-term investments in our unaudited Condensed Consolidated Financial Statements.

With the exception of the item above, there have been no material changes in our market risk exposures for the three months ended September 30, 2022, as compared to those discussed in our Form 10-K for the year ended December 31, 2021.

The Company’s management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of September 30, 2022. Based on this evaluation, our principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2022, to ensure that information required to be disclosed by the Company in reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, evaluated and reported, as applicable, within the time periods specified in the United States Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

There were no changes that occurred during the fiscal quarter covered by this Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be subject to legal and governmental proceedings and claims in the ordinary course of business. We are not currently a party to any material legal or governmental proceedings, and, to our knowledge, none is threatened.

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The Company’s business, reputation, results of operations and financial condition, as well as the price of the Company’s common stock, can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A. “Risk Factors” in our Form 10-K for the year ended December 31, 2021. When any one or more of these risks materialize from time to time, the Company’s business, reputation, results of operations and financial condition, as well as the price of the Company’s common stock, can be materially and adversely affected. There have been no material changes to the risk factors disclosed in our Form 10-K for the year ended December 31, 2021.

ITEM 4. MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Form 10-Q for the quarterly period ended September 30, 2022.

Exhibit No.						Description
31.1*						CEO Certification pursuant to rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
31.2*						CFO Certification pursuant to rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes‑Oxley Act of 2002.
32.1**						CEO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
32.2**						CFO Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002.
95.1*						Mine Safety Disclosure pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
101.INS						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						Inline XBRL Taxonomy Extension Schema Document.
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104						Cover Page Inline XBRL File (included in Exhibit 101).
*						Filed herewith.
**						Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

						MP MATERIALS CORP.
Dated:			November 4, 2022			By:			/s/ Ryan Corbett
									Ryan Corbett
									Chief Financial Officer