MP Materials 10-Q 2023-03-31

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 March 31, 2023

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.)

1700 S. Pavilion Center Drive, Suite 800

Las Vegas, Nevada 89135

(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 May 1, 2023, the number of shares of the registrant’s common stock outstanding was 177,620,849.

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			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			27
Item 4. Controls and Procedures			28
PART II—OTHER INFORMATION
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28
Item 4. Mine Safety Disclosures			28
Item 6. Exhibits			29
Signatures			30

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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 March 31, 2023 (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, 2022 (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 with numerous governmental agencies 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)

			March 31, 2023						December 31, 2022
(in thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents			$	651,215					$	136,627
Short-term investments			517,831						1,045,718
Total cash, cash equivalents and short-term investments			1,169,046						1,182,345
Accounts receivable (including related party), net of allowance for credit losses of $0 and $0, respectively			21,245						32,856
Inventories			61,804						57,554
Income taxes receivable			1,727						2,201
Prepaid expenses and other current assets			13,566						18,872
Total current assets			1,267,388						1,293,828
Non-current assets
Property, plant and equipment, net			1,002,240						935,743
Non-current inventories			6,844						5,744
Other non-current assets			4,630						2,472
Total non-current assets			1,013,714						943,959
Total assets			$	2,281,102					$	2,237,787
Liabilities and stockholders’ equity
Current liabilities
Accounts payable, construction payables and accrued liabilities			$	68,574					$	72,265
Income taxes payable			21,161						21,163
Other current liabilities			4,139						4,053
Total current liabilities			93,874						97,481
Non-current liabilities
Asset retirement obligations			5,351						5,295
Environmental obligations			16,571						16,580
Long-term debt, net			679,326						678,444
Deferred income taxes			129,711						122,353
Other non-current liabilities			4,464						5,000
Total non-current liabilities			835,423						827,672
Total liabilities			929,297						925,153
Commitments and contingencies (Note 9)
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, 177,619,805 and 177,706,608 shares issued and outstanding, as of March 31, 2023, and December 31, 2022, respectively)			17						18
Additional paid-in capital			952,791						951,008
Retained earnings			398,866						361,419
Accumulated other comprehensive income			131						189
Total stockholders’ equity			1,351,805						1,312,634
Total liabilities and stockholders’ equity			$	2,281,102					$	2,237,787

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 March 31,
(in thousands, except share and per share data)			2023						2022
Revenue:
Product sales (including related party)			$	95,666					$	161,755
Other sales (including related party)			34						4,503
Total revenue			95,700						166,258
Operating costs and expenses:
Cost of sales (including related party)(excluding depreciation, depletion and amortization)			24,216						23,173
Selling, general and administrative			19,403						20,308
Advanced projects, start-up, development and other			8,280						1,818
Depreciation, depletion and amortization			8,122						5,260
Accretion of asset retirement and environmental obligations			227						418
Loss on sale or disposal of long-lived assets, net			2,490						257
Total operating costs and expenses			62,738						51,234
Operating income			32,962						115,024
Interest expense, net			(1,359)						(1,905)
Other income, net			13,693						194
Income before income taxes			45,296						113,313
Income tax expense			(7,849)						(27,762)
Net income			$	37,447					$	85,551
Earnings per share:
Basic			$	0.21					$	0.49
Diluted			$	0.20					$	0.45
Weighted-average shares outstanding:
Basic			176,881,723						176,355,566
Diluted			193,613,539						193,490,330

See accompanying notes to the Condensed Consolidated Financial Statements.

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**MP MATERIALS CORP. AND SUBSI

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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, 2022. 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. See also “Cautionary Note Regarding Forward-Looking Statements.”

Business Overview

MP Materials Corp., including its subsidiaries (“we,” “our,” and “us”), is the largest producer of rare earth materials in the Western Hemisphere. We own and operate 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 currently produce a rare earth concentrate that is principally sold pursuant to the Offtake Agreement to Shenghe (as such terms are defined in Note 13, “Related-Party Transactions,” in the notes to the unaudited Condensed Consolidated Financial Statements), that, in turn, typically sells that product to refiners in China. These refiners separate the constituent rare earth elements (“REE”) contained in our concentrate and sell the separated products to their customers.

Upon completing commissioning of the Stage II optimization project (“Stage II”), we anticipate producing and selling separated rare earth products, including neodymium-praseodymium (“NdPr”) oxide. In addition, we are constructing our initial rare earth metal, alloy and magnet manufacturing facility in Fort Worth, Texas (the “Fort Worth Facility”), where we anticipate manufacturing, among other products, neodymium-iron-boron (“NdFeB”) permanent magnets. Furthermore, in April 2022, we entered into a 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. These developments are a part of our Stage III downstream expansion strategy (“Stage III”).

Certain REE serve as critical inputs for the rare earth magnets inside the electric motors and generators powering carbon-reducing technologies such as electric vehicles (“EVs”) and wind turbines, as well as drones, defense systems, robotics and many other high-growth, advanced technologies. Our integrated operations at Mountain Pass combine low production costs with high environmental standards, thereby restoring American leadership to a critical industry with a strong commitment to sustainability.

Recent Developments and Other Information

Distribution Agreement with Sumitomo

In February 2023, we entered into a distributorship agreement (“Distribution Agreement”) with Sumitomo Corporation of Americas (“Sumitomo”), under which Sumitomo will serve as the exclusive distributor of NdPr oxide, produced by us, to Japanese customers. Further, in connection with the Distribution Agreement, we intend to collaborate with Sumitomo on the supply of rare earth metals and other products. Under the terms of the Distribution Agreement, Sumitomo will be paid a variable commission. The initial term of the Distribution Agreement is through the end of 2025 with options to renew annually.

Tolling Agreement with VREX

In March 2023, we entered into a tolling agreement with Vietnam Rare Earth Company Limited (“VREX”), a majority-owned subsidiary of Shenghe, which owns and operates a metal processing plant and related facilities in Vietnam (the “Tolling Agreement”). Pursuant to the Tolling Agreement, we will deliver NdPr oxide to VREX which VREX would then process into NdPr metal for delivery to our customers globally. As several of our potential customers that manufacture magnets outside of China prefer to purchase NdPr metal in addition to NdPr oxide, this Tolling Agreement will enable us to distribute NdPr products more widely to customers in Japan and other global markets. During the term of the Tolling Agreement, we will pay VREX a processing fee per unit of rare earth metal produced. We will maintain title to the products and directly enter into sales agreements for the produced NdPr metal. The initial term of the Tolling Agreement is three years and may be renewed for additional three-year terms.

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COVID-19 Pandemic

The impact of the COVID-19 pandemic and its effects continue to evolve. Since the onset of the pandemic, we have experienced, at times, significant shipping delays due to congestion and slowdowns at U.S. and international ports caused by shortages in vessels, containers, and truckers, also disrupting the global supply chain. Despite these factors, we have not experienced a reduction in production or sales due to the COVID-19 pandemic. However, the COVID-19 pandemic has contributed to certain cost and schedule pressures for capital projects, and may impact reliability of transportation, particularly as we expect a significant increase in inbound logistics of raw materials to be consumed in our Stage II operations.

We continue to monitor the global situation, including the impacts of new and potential future variants of COVID-19, or other factors that may affect international shipping, logistics, and supply chain, or involve responses to government actions such as strikes or other disruptions. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic on our business, results of operations, production and sales volumes, or growth projects.

Key Performance Indicators

We have historically used the following key performance indicators to evaluate the performance of our business. However, as we evolve as a business and transition from a producer of rare earth concentrate to a producer of separated rare earth products upon completing the commissioning of our Stage II project, the metrics that management anticipates using to evaluate the business may change or be revised. For example, in completing the transition to separated rare earth products, we may determine that production cost per rare earth oxide (“REO”) equivalent metric ton (“MT”), which is a metric focused solely on Stage I concentrate operations, is no longer meaningful in evaluating and understanding our business or operating results. 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 March 31,

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There have been no material changes in our market risk exposures for the three months ended March 31, 2023, as compared to those discussed in our Form 10-K for the year ended December 31, 2022.

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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 March 31, 2023. 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 March 31, 2023, 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.

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, 2022. 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, 2022.

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 March 31, 2023.

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Exhibit No.						Description
10.1*†						Form of MP Materials Corp. 2020 Stock Incentive Plan Restricted Stock Unit Agreement with Performance Conditions.
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.
†						Indicates a management contract or compensatory plan or arrangement.

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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:			May 5, 2023			By:			/s/ Ryan Corbett
									Ryan Corbett
									Chief Financial Officer