Jan 25 2011
Molycorp, Inc. (NYSE: MCP), the Western hemisphere's only producer of rare earth oxides, today announced that its Board of Directors has approved a Phase 2 expansion plan that is expected to double the production capacity of its Mountain Pass facility in California.
In addition, the Company has filed a registration statement on Form S-1 with the U.S. Securities and Exchange Commission (SEC) in connection with a proposed mandatory convertible preferred stock offering by the Company as well as an offering of common stock by certain stockholders.
“Their willingness to take on significant, early stage risk has positioned Molycorp, and all of our stakeholders, to continue to benefit from the very positive fundamentals of the rare earth sector.”
In light of strong industry fundamentals, including reduced Chinese supply and the strong pricing environment, Molycorp's Board of Directors approved a Phase 2 expansion plan that is expected to give Molycorp the ability to produce at an annual rate of up to approximately 40,000 metric tons of rare earth oxide (REO) equivalent per year at its Mountain Pass facility by the end of 2013. This expansion represents an approximate doubling of the original Phase 1 production capacity at an estimated capital cost of approximately $250 million, in addition to the costs for the Phase 1 plan. The Company believes that it will realize substantial savings by committing to this expansion now while construction activities are underway for its Phase 1 initial modernization and expansion plan.
While Molycorp's production capacity is expected to reach 40,000 metric tons of REO equivalent per year with the Phase 2 expansion, the Company will sell its products into the market at a rate commensurate with customer and/or demand growth.
Molycorp expects to use the net proceeds from the proposed mandatory convertible preferred stock offering to fund its Phase 1 and Phase 2 plans.
The proposed secondary offering will help facilitate the liquidity objectives of the selling stockholders via an orderly underwritten offering and will provide additional public float with respect to the Company's common stock. The principal selling stockholders are affiliates of Resource Capital Funds, Pegasus Capital Advisors, L.P., and The Traxys Group, which are the three main investors that led the purchase of the Mountain Pass Rare Earth Facility in 2008. These selling stockholders will remain substantial investors in Molycorp immediately after the offering.
"Without the foresight and long-term, strategic commitment of Resource Capital Funds, Pegasus Capital Advisors, and The Traxys Group, Molycorp would not be in the position we are today," said Mark Smith, a member of Molycorp's Board of Directors and the Company's Chief Executive Officer. "Their willingness to take on significant, early stage risk has positioned Molycorp, and all of our stakeholders, to continue to benefit from the very positive fundamentals of the rare earth sector."