Rare Earths Producer MP Materials Reports Strong Results, Books $66 Million Charge for Loosening Chinese Ties

Business looks spectacular at MP Materials, the largest rare earth materials producer in the Western Hemisphere. In its most recent quarter, revenue doubled to $42.2 million compared to the same period a year ago, while for the full year production and sales volumes were up 40% over 2019 levels. Profits are jumping, too, the company announced on March 18 in its financial reporting for the year ended December 31. 

The company mines rare earths at its Mountain Pass mine in California, shown above, which is located near Las Vegas. Currently, the ore must be shipped to China for processing but the company seeks to change that by developing its own processing capability onsite. It is the only significant rare earths producer outside of China besides Lynas Corporation of Australia which already conducts its own processing. MP produces about 15% of the world’s rare earth content. 

“MP made significant progress throughout 2020 towards our mission to restore the full rare earth supply chain to the United States’” said James Litinsky, chairman and CEO. “In addition to strengthening our balance sheet through a successful business combination, we ramped up our production of rare earths by nearly 40%, scaled our team to over 300 people, and put in motion our Stage II optimization plan at Mountain Pass. The accelerating global transformation towards electrification and decarbonization is creating strong demand for critical rare earth materials. These trends present a bright outlook for the company as we prepare to begin delivering separated rare earth oxides in 2022.”  

“During the fourth quarter,” he continued, “we completed design improvements that de-risk our Stage II optimization plan, improve our potential long term operating model and further reduce the environmental impact of processing. Despite significant cost inflation throughout the economy in recent months, our Stage II optimization net capital cost, including these design improvements, is now contracted and expected to remain consistent with prior estimates.” 

The big revenue increase during the final quarter was driven by increases in both the sales prices of contained rare earth oxide in concentrate and in the tonnage sold. Prices rose 70% due to higher demand for REO driving increased market prices, as well as the lifting of certain import duties in China. The 21% increase in tonnage sold was due to higher demand as well as higher percentages of rare earth oxide in concentrate driven by improved productivity. Sales volumes fluctuate quarter-to-quarter based on shipment timing, notes the company, but it continues to foresee 100% sell-through of its production.  

Operating profitability nearly tripled for the quarter, increasing 297% from the same period a year ago. For the full year of 2020, revenue increased 83% from $73 million to $134 million. 

Despite the big gains in cash flow and operating performance, MP posted a net loss of $21.8 million for the year as it booked a non-cash settlement charge of $66.6 million in connection with the termination of its distribution and marketing agreement with rare earths company, Shenghe Resources. Holder of an 8% stake in MP, Shenghe is a Singapore company which is an offshoot of Chinese parent Shenghe Holding. 

It has been the sole buyer of MP’s output through an exclusive right to purchase and process it which was negotiated several years ago as an offtake advance. The agreement helped pave the way for the Mountain Pass property to emerge from bankruptcy and was valued at about $78 million when terminated last year. Its conclusion allows MP to sell on the open market, a situation generally seen as advantageous for loosening its tether to China while anticipating its expectation to process its own ore in the future, especially since that effort is being funded partially by the U.S. Department of Defense as it seeks to build a domestic supply chain for rare earths. For more info, see www.mpmaterials.com