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~~March 31, 2023


☐						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,~~1700 S. Pavilion Center Drive, Suite ~~450~~800

Las Vegas, Nevada ~~89119~~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 ~~November~~May 1, ~~2022,~~2023, the number of shares of the registrant’s common stock outstanding was ~~177,543,027.~~177,620,849.

MP MATERIALS CORP. AND SUBSIDIARIES

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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~~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, ~~2021~~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.

iii

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(in thousands, except share and per share data)	(in thousands, except share and per share data)					(in thousands, except share and per share data)
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	427,969	$	1,179,297	Cash and cash equivalents	$	651,215	$	136,627
Short-term investments	Short-term investments	836,288		—		Short-term investments	517,831		1,045,718
Total cash, cash equivalents and short-term investments	Total cash, cash equivalents and short-term investments	1,264,257		1,179,297		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	Accounts receivable (including related party), net of allowance for credit losses of $0 and $0, respectively	16,018		51,009		Accounts receivable (including related party), net of allowance for credit losses of $0 and $0, respectively	21,245		32,856
Inventories	Inventories	61,645		38,692		Inventories	61,804		57,554
Income taxes receivable	Income taxes receivable	3,857		—		Income taxes receivable	1,727		2,201
Prepaid expenses and other current assets	Prepaid expenses and other current assets	11,004		7,809		Prepaid expenses and other current assets	13,566		18,872
Total current assets	Total current assets	1,356,781		1,276,807		Total current assets	1,267,388		1,293,828
Non-current assets	Non-current assets					Non-current assets
Property, plant and equipment, net	Property, plant and equipment, net	830,033		610,612		Property, plant and equipment, net	1,002,240		935,743

Non-current inventories						Non-current inventories	6,844		5,744
Other non-current assets	Other non-current assets	2,348		2,247		Other non-current assets	4,630		2,472
Total non-current assets	Total non-current assets	832,381		612,859		Total non-current assets	1,013,714		943,959
Total assets	Total assets	$	2,189,162	$	1,889,666	Total assets	$	2,281,102	$	2,237,787
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities	Current liabilities					Current liabilities
Accounts payable and accrued liabilities		$	70,242	$	35,734
Accounts payable, construction payables and accrued liabilities						Accounts payable, construction payables and accrued liabilities	$	68,574	$	72,265
Income taxes payable	Income taxes payable	—		3,463		Income taxes payable	21,161		21,163
Current installments of long-term debt—related party		—		16,082

Other current liabilities	Other current liabilities	4,504		4,264		Other current liabilities	4,139		4,053
Total current liabilities	Total current liabilities	74,746		59,543		Total current liabilities	93,874		97,481
Non-current liabilities	Non-current liabilities					Non-current liabilities
Asset retirement obligations	Asset retirement obligations	5,244		17,615		Asset retirement obligations	5,351		5,295
Environmental obligations	Environmental obligations	16,584		16,598		Environmental obligations	16,571		16,580
Long-term debt, net of current portion		677,563		674,927
Long-term debt, net						Long-term debt, net	679,326		678,444

Deferred income taxes	Deferred income taxes	167,028		104,500		Deferred income taxes	129,711		122,353
Other non-current liabilities	Other non-current liabilities	5,691		7,751		Other non-current liabilities	4,464		5,000
Total non-current liabilities	Total non-current liabilities	872,110		821,391		Total non-current liabilities	835,423		827,672
Total liabilities	Total liabilities	946,856		880,934		Total liabilities	929,297		925,153
Commitments and contingencies (Note 10)
Commitments and contingencies (Note 9)						Commitments and contingencies (Note 9)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock ($0.0001 par value, 50,000,000 shares authorized, none issued and outstanding in either period)	Preferred stock ($0.0001 par value, 50,000,000 shares authorized, none issued and outstanding in either period)	—		—		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
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)						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	Additional paid-in capital	947,973		936,299		Additional paid-in capital	952,791		951,008
Retained earnings	Retained earnings	294,412		72,415		Retained earnings	398,866		361,419
Accumulated other comprehensive loss		(97)		—
Accumulated other comprehensive income						Accumulated other comprehensive income	131		189
Total stockholders’ equity	Total stockholders’ equity	1,242,306		1,008,732		Total stockholders’ equity	1,351,805		1,312,634
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	2,189,162	$	1,889,666	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 September 30,				For the nine months ended September 30,					For the three months ended March 31,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2022		2021		2022		2021		(in thousands, except share and per share data)	2023		2022
Revenue:	Revenue:									Revenue:
Product sales (including related party)	Product sales (including related party)	$	124,231	$	98,581	$	425,169	$	230,842	Product sales (including related party)	$	95,666	$	161,755

Other sales (including related party)	Other sales (including related party)	214		1,173		9,096		2,001		Other sales (including related party)	34		4,503
Total revenue	Total revenue	124,445		99,754		434,265		232,843		Total revenue	95,700		166,258

Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of sales (including related party)(excluding depreciation, depletion and amortization)	Cost of sales (including related party)(excluding depreciation, depletion and amortization)	22,417		21,907		67,682		57,798		Cost of sales (including related party)(excluding depreciation, depletion and amortization)	24,216		23,173
Selling, general and administrative	Selling, general and administrative	17,604		14,881		56,391		40,986		Selling, general and administrative	19,403		20,308
Advanced projects, development and other		2,743		1,327		6,229		2,436
Advanced projects, start-up, development and other										Advanced projects, start-up, development and other	8,280		1,818
Depreciation, depletion and amortization	Depreciation, depletion and amortization	2,096		6,951		12,763		19,767		Depreciation, depletion and amortization	8,122		5,260
Accretion of asset retirement and environmental obligations	Accretion of asset retirement and environmental obligations	418		595		1,255		1,780		Accretion of asset retirement and environmental obligations	227		418
Write-down of inventories		—		—		—		1,809
Loss on sale or disposal of long-lived assets, net										Loss on sale or disposal of long-lived assets, net	2,490		257

Total operating costs and expenses	Total operating costs and expenses	45,278		45,661		144,320		124,576		Total operating costs and expenses	62,738		51,234
Operating income	Operating income	79,167		54,093		289,945		108,267		Operating income	32,962		115,024
Interest expense, net	Interest expense, net	(1,224)		(2,624)		(4,455)		(6,417)		Interest expense, net	(1,359)		(1,905)
Other income, net	Other income, net	6,168		97		8,574		3,656		Other income, net	13,693		194

Income before income taxes	Income before income taxes	84,111		51,566		294,064		105,506		Income before income taxes	45,296		113,313
Income tax expense	Income tax expense	(20,934)		(8,803)		(72,067)		(19,458)		Income tax expense	(7,849)		(27,762)
Net income	Net income	$	63,177	$	42,763	$	221,997	$	86,048	Net income	$	37,447	$	85,551

Earnings per share:	Earnings per share:									Earnings per share:
Basic	Basic	$	0.36	$	0.24	$	1.26	$	0.50	Basic	$	0.21	$	0.49
Diluted	Diluted	$	0.33	$	0.23	$	1.16	$	0.47	Diluted	$	0.20	$	0.45

Weighted-average shares outstanding:	Weighted-average shares outstanding:									Weighted-average shares outstanding:
Basic	Basic	176,543,624		176,053,586		176,476,276		172,577,303		Basic	176,881,723		176,355,566
Diluted	Diluted	193,409,857		193,215,313		193,438,939		188,639,373		Diluted	193,613,539		193,490,330

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)


		For the three months ended September 30,				For the nine months ended September 30,					For the three months ended March 31,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022
Net income	Net income	$	63,177	$	42,763	$	221,997	$	86,048	Net income	$	37,447	$	85,551
Other comprehensive income (loss), net of tax:
Other comprehensive loss, net of tax:										Other comprehensive loss, net of tax:

Change in net unrealized gains (losses) on available-for-sale securities		319		—		(97)		—
Change in net unrealized losses on available-for-sale securities										Change in net unrealized losses on available-for-sale securities	(58)		—

Total comprehensive income	Total comprehensive income	$	63,496	$	42,763	$	221,900	$	86,048	Total comprehensive income	$	37,389	$	85,551

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

Three months ended September 30, 2022 and 2021
Preferred Stock Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Loss
Total
Stockholders’
Equity
(in thousands, except share data) Shares Amount Shares Amount
Balance as of July 1, 2022 — $ — 177,534,132 $ 18 $ 939,900 $ 231,235 $ (416) $ 1,170,737
Stock-based compensation — — 506 — 8,073 — — 8,073
Shares used to settle payroll tax withholding — — — — — — — —
Net income — — — — — 63,177 — 63,177
Unrealized gains on available-for-sale securities — — — — — — 319 319
Balance as of September 30, 2022 — $ — 177,534,638 $ 18 $ 947,973 $ 294,412 $ (97) $ 1,242,306
Balance as of July 1, 2021 — $ — 177,748,487 $ 18 $ 925,944 $ (19,337) $ — $ 906,625
Stock-based compensation — — — — 4,552 — — 4,552
Shares used to settle payroll tax withholding — — (889) — (36) — — (36)
Net income — — — — — 42,763 — 42,763
Other — — — — 291 — — 291
Balance as of September 30, 2021 — $ — 177,747,598 $ 18 $ 930,751 $ 23,426 $ — $ 954,195


		Nine months ended September 30, 2022 and 2021																Three months ended March 31, 2023 and 2022
		Preferred Stock			Common Stock			Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Loss					Total Stockholders’ Equity			Preferred Stock						Common Stock					Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
(in thousands, except share data)	(in thousands, except share data)	Shares	Amount		Shares	Amount				Accumulated Other Comprehensive Loss			Shares								Amount			Shares			Amount				Additional Paid-in Capital	Retained Earnings
Balance as of January 1, 2022		—	$	—	177,816,554	$	18				$	936,299				$	72,415	$	—			$	1,008,732
Balance as of January 1, 2023																					Balance as of January 1, 2023	—			$	—		177,706,608	$	18						$	951,008		$	361,419		$	189	$	1,312,634
Stock-based compensation	Stock-based compensation	—	—		60,691	—		25,970			—			—					25,970		Stock-based compensation	—			—			98,418	—				7,758		—			—			7,758
Shares used to settle payroll tax withholding	Shares used to settle payroll tax withholding	—	—		(342,607)	—		(14,296)			—			—					(14,296)		Shares used to settle payroll tax withholding	—			—			(185,221)	(1)				(5,975)		—			—			(5,976)
Net income	Net income	—	—		—	—		—			221,997			—					221,997		Net income	—			—			—	—				—		37,447			—			37,447
Unrealized losses on available-for-sale securities	Unrealized losses on available-for-sale securities	—	—		—	—		—			—			(97)					(97)		Unrealized losses on available-for-sale securities	—			—			—	—				—		—			(58)			(58)

Balance as of September 30, 2022		—	$	—	177,534,638	$	18	$	947,973		$	294,412		$	(97)				$	1,242,306
Balance as of March 31, 2023																					Balance as of March 31, 2023	—			$	—		177,619,805	$	17			$	952,791	$	398,866		$	131		$	1,351,805

Balance as of January 1, 2021		—	$	—	170,719,979	$	17	$	916,482		$	(62,622)		$	—				$	853,877
Redemption of Public Warrants		—	—		7,080,005	1		(2)			—			—					(1)
Balance as of January 1, 2022																					Balance as of January 1, 2022	—			$	—		177,816,554	$	18			$	936,299	$	72,415		$	—		$	1,008,732

Stock-based compensation	Stock-based compensation	—	—		54,722	—		14,723			—			—					14,723		Stock-based compensation	—			—			46,882	—				10,179		—			—			10,179
Forfeiture of restricted stock		—	—		(90,000)	—		—			—			—					—

Shares used to settle payroll tax withholding	Shares used to settle payroll tax withholding	—	—		(17,108)	—		(563)			—			—					(563)		Shares used to settle payroll tax withholding	—			—			(337,429)	—				(14,094)		—			—			(14,094)
Net income	Net income	—	—		—	—		—			86,048			—					86,048		Net income	—			—			—	—				—		85,551			—			85,551
Other		—	—		—	—		111			—			—					111
Balance as of September 30, 2021		—	$	—	177,747,598	$	18	$	930,751		$	23,426		$	—				$	954,195

Balance as of March 31, 2022																					Balance as of March 31, 2022	—			$	—		177,526,007	$	18			$	932,384	$	157,966		$	—		$	1,090,368

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


		For the nine months ended September 30,					For the three months ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Operating activities:	Operating activities:					Operating activities:
Net income	Net income	$	221,997	$	86,048	Net income	$	37,447	$	85,551
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	Depreciation, depletion and amortization	12,763		19,767		Depreciation, depletion and amortization	8,122		5,260
Accretion of asset retirement and environmental obligations	Accretion of asset retirement and environmental obligations	1,255		1,780		Accretion of asset retirement and environmental obligations	227		418
Accretion of discount on short-term investments	Accretion of discount on short-term investments	(3,921)		—		Accretion of discount on short-term investments	(8,842)		—
Gain on forgiveness of Paycheck Protection Loan		—		(3,401)
Loss on sale or disposal of long-lived assets, net		258		219
Loss (gain) on sale or disposal of long-lived assets, net						Loss (gain) on sale or disposal of long-lived assets, net	(5)		257
Stock-based compensation expense	Stock-based compensation expense	25,019		14,723		Stock-based compensation expense	7,013		9,773
Accretion of debt discount and amortization of debt issuance costs	Accretion of debt discount and amortization of debt issuance costs	3,153		5,388		Accretion of debt discount and amortization of debt issuance costs	882		1,394
Write-down of inventories		—		1,809
Revenue recognized in exchange for debt principal reduction	Revenue recognized in exchange for debt principal reduction	(13,566)		(38,858)		Revenue recognized in exchange for debt principal reduction	—		(13,566)
Deferred income taxes	Deferred income taxes	62,561		11,262		Deferred income taxes	7,377		23,479
Decrease (increase) in operating assets:	Decrease (increase) in operating assets:					Decrease (increase) in operating assets:
Accounts receivable (including related party)	Accounts receivable (including related party)	34,991		(33,506)		Accounts receivable (including related party)	11,611		13,901
Inventories	Inventories	(22,386)		(3,663)		Inventories	(5,024)		(927)
Income taxes receivable	Income taxes receivable	(3,857)		—		Income taxes receivable	474		—
Prepaid expenses, other current and non-current assets	Prepaid expenses, other current and non-current assets	1,339		(2,352)		Prepaid expenses, other current and non-current assets	(351)		694
Increase (decrease) in operating liabilities:	Increase (decrease) in operating liabilities:					Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(1,271)		4,304		Accounts payable and accrued liabilities	(3,586)		(7,176)
Income taxes payable	Income taxes payable	(3,463)		8,097		Income taxes payable	(2)		1,783
Other current and non-current liabilities	Other current and non-current liabilities	(453)		(1,153)		Other current and non-current liabilities	148		130
Net cash provided by operating activities	Net cash provided by operating activities	314,419		70,464		Net cash provided by operating activities	55,491		120,971
Investing activities:	Investing activities:					Investing activities:
Additions to property, plant and equipment	Additions to property, plant and equipment	(214,332)		(86,420)		Additions to property, plant and equipment	(74,462)		(54,932)
Purchases of short-term investments	Purchases of short-term investments	(1,358,390)		—		Purchases of short-term investments	(320,884)		—
Proceeds from sales of short-term investments	Proceeds from sales of short-term investments	313,865		—		Proceeds from sales of short-term investments	447,227		—
Proceeds from maturities of short-term investments	Proceeds from maturities of short-term investments	212,000		—		Proceeds from maturities of short-term investments	410,307		—
Proceeds from sale of property, plant and equipment		—		125

Proceeds from government awards used for construction	Proceeds from government awards used for construction	5,130		2,615		Proceeds from government awards used for construction	—		5,130
Net cash used in investing activities		(1,041,727)		(83,680)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	462,188		(49,802)
Financing activities:	Financing activities:					Financing activities:
Proceeds from issuance of long-term debt		—		690,000
Principal payments on debt obligations and finance leases	Principal payments on debt obligations and finance leases	(5,139)		(1,707)		Principal payments on debt obligations and finance leases	(846)		(3,817)
Payment of debt issuance costs		—		(17,749)
Tax withholding on stock-based awards	Tax withholding on stock-based awards	(14,296)		(563)		Tax withholding on stock-based awards	(5,976)		(14,094)
Other		—		(371)
Net cash provided by (used in) financing activities		(19,435)		669,610

Net cash used in financing activities						Net cash used in financing activities	(6,822)		(17,911)
Net change in cash, cash equivalents and restricted cash	Net change in cash, cash equivalents and restricted cash	(746,743)		656,394		Net change in cash, cash equivalents and restricted cash	510,857		53,258
Cash, cash equivalents and restricted cash beginning balance	Cash, cash equivalents and restricted cash beginning balance	1,181,157		532,440		Cash, cash equivalents and restricted cash beginning balance	143,509		1,181,157
Cash, cash equivalents and restricted cash ending balance	Cash, cash equivalents and restricted cash ending balance	$	434,414	$	1,188,834	Cash, cash equivalents and restricted cash ending balance	$	654,366	$	1,234,415

Reconciliation of cash, cash equivalents and restricted cash:	Reconciliation of cash, cash equivalents and restricted cash:					Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	$	427,969	$	1,179,371	Cash and cash equivalents	$	651,215	$	1,233,300
Restricted cash, current	Restricted cash, current	5,915		339		Restricted cash, current	2,552		587
Restricted cash, non-current	Restricted cash, non-current	530		9,124		Restricted cash, non-current	599		528
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	434,414	$	1,188,834	Total cash, cash equivalents and restricted cash	$	654,366	$	1,234,415

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business: MP Materials Corp., including its subsidiaries (the “Company” or “MP Materials”), is the largest producer of rare earth materials in the Western Hemisphere. ~~We own~~The Company, which is headquartered in Las Vegas, Nevada, owns and ~~operate~~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. ~~The Company is headquartered in Las Vegas, Nevada. References herein to the “Company,” “we,” “our,” and “us,” refer to~~ MP Materials ~~Corp. and its subsidiaries.~~

We currently ~~produce~~produces a rare earth concentrate that ~~we sell~~is principally sold pursuant to ~~an offtake agreement~~the Offtake Agreement to Shenghe ~~Resources (Singapore) International Trading Pte. Ltd. (“Shenghe”~~(as such terms are defined in Note 13, “Related-Party Transactions,”), a majority-owned subsidiary of Leshan Shenghe Rare Earth Co., Ltd. (“Leshan Shenghe”) whose ultimate parent is Shenghe Resources Holding Co., Ltd., a leading global rare earth company listed on the Shanghai Stock Exchange. We are currently recommissioning, upgrading and enhancing the processing facility at Mountain Pass to provide for the separationrelated party of the ~~individual~~Company, that, in turn, typically sells that product to refiners in China. These refiners separate the constituent rare earth elements contained in ~~our~~the Company’s concentrate ~~(referred~~and sell the separated products to astheir customers.

Upon completing commissioning of the ~~“Stage~~Stage II optimization ~~project” or “Stage~~project (“Stage II”), ~~that will allow us to sell~~the Company anticipates producing and selling separated rare earth ~~oxides directly~~products, including neodymium-praseodymium (“NdPr”) oxide, to ~~end users. Additionally,~~customers globally. In February 2023, the Company 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 the Company to Japanese customers. Further, in connection with the ~~first quarter~~Distribution Agreement, the Company and Sumitomo intend to collaborate on the supply of ~~2022, we began construction on our~~rare earth metals and other products.

In addition, the Company is constructing its initial rare earth metal, alloy and magnet manufacturing facility in Fort Worth, Texas (the “Fort Worth Facility”) ~~as a part of our Stage III downstream expansion strategy~~, where it anticipates manufacturing, among other products, neodymium-iron-boron (“~~Stage III”~~NdFeB”)~~. For more information on our relationship and agreements with Shenghe, see~~ ~~Note 3, “Relationship and Agreements with Shenghe,”~~ ~~and~~ ~~Note 14, “Related-Party Transactions.”~~

In permanent magnets. Furthermore, in April 2022, the Company 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~~These developments are a part of the ~~terms of a binding agreement announced by the Company in December 2021.~~Company’s Stage III downstream expansion strategy (“Stage III”).

Operating segments are defined as components of an enterprise about which separate financial information is available and evaluated regularly by the chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s ~~chief operating decision maker~~CODM views the Company’s operations and manages the business as one reportable segment.

The cash flows and profitability of the Company’s operations are significantly affected by the market price of rare earth products. The prices of rare earth products are affected by numerous factors beyond the Company’s control. The products of the Company are sold globally, with a primary focus in the Asian market due to the refining capabilities of the region. Rare earth products are critical inputs in hundreds of existing and emerging clean-tech applications including electric vehicles and wind turbines as well as drones and defense applications.

Basis of Presentation: The unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods. These unaudited Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

NOTE 2—SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The unaudited Condensed Consolidated Financial Statements include the accounts of MP Materials Corp. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates: The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the unaudited Condensed Consolidated Financial Statements, and

T able of Contents

(iii) the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results may differ from those estimates.

T ~~able of Contents~~

Concentration of Risk: Financial instruments that potentially subject the Company to credit risk consist principally of cash, ~~and~~ cash equivalents and short-term investments, and trade accounts receivable. The Company believes that its credit risk is limited because the Company’s current contracts are with companies ~~with~~that have a reliable payment history. The Company does not believe that it is exposed to any significant risks related to its cash accounts, money market funds, or short-term investments.

As of ~~September 30, 2022,~~March 31, 2023, Shenghe ~~a related party of~~was the ~~Company and our~~Company’s principal customer and accounted for more than 90% of product sales. Rare earth concentrate is not quoted on any major commodities market or exchange and demand for rare earth concentrate is currently constrained to a relatively limited number of refiners, a significant majority of which are based in China. Uncertainty exists as to the market price of rare earth oxide (“REO”), as evidenced by the volatility experienced in 2022 and continued into 2023 due to concerns over the global economic conditions and actual or perceived concerns over increases in the supply of rare earth products. Furthermore, while revenue is generated in the United States, Shenghe conducts its primary operations in China and may transport and sell products in the Chinese market. Therefore, the Company’s revenue is affected by Shenghe’s ultimate realized prices in China, including the impact of changes in the exchange rate between the Chinese Yuan and the U.S. dollar. In addition, there is an ongoing economic conflict between China and the United States that has previously resulted in tariffs and trade barriers that may negatively affect the Company’s business and results of operations. See Note ~~3, “Relationship and Agreements with Shenghe,~~13, “Related-Party Transactions,” for additional information.

The impact of the COVID-19 pandemic ~~remains on-going~~ and ~~continues~~its effects continue to ~~impact~~evolve. Since the ~~global economy. Varying degrees of preventative measures are still in place in China and other parts~~onset of the world, including city-wide lockdowns, travel restrictions, closures of non-essential businesses and other quarantine measures. In particular, preventative measures remain prevalent in China as a result ofpandemic, the ~~Chinese government’s “Zero-COVID” policy. Since the first quarter of 2020, we have~~Company has 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. ~~Congestion and slowdowns have affected and may continue to affect the capacity at ports to receive deliveries of products or the loading of shipments onto vessels.~~ Despite these factors, ~~we have~~the Company has not experienced a reduction in production or sales due to the COVID-19 ~~pandemic; however,~~pandemic. However, the COVID-19 pandemic has contributed to certain cost and schedule pressures onfor capital projects and may impact the reliability of transportation, particularly as the Company expects a significant increase in inbound logistics of raw materials to be consumed in Stage II ~~optimization project.~~ operations.

The Company has worked proactively and diligently to adjust working schedules and hours to optimize logistics and shipping, which has thus far prevented a significant negative impact on our product sales and has mitigated certain impacts on Stage II construction and recommissioning progress.

~~As the situation~~ continues to ~~evolve,~~monitor the global situation, including ~~as a result~~the impacts of new and potential future variants of COVID-19, ~~the possibility of federal or state mandates on vaccinations,~~ or other factors that may affect international shipping, logistics, and ~~logistics~~supply chain, or involve responses to government actions such as strikes or other ~~disruptions, it~~disruptions. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic on the Company’s business, results of operations, production and sales volumes, or growth projects. ~~Accordingly, the extent and duration~~

Stock-Based Compensation: The cost of ~~any business disruptions, and related financial impact, cannot be estimated at this time.~~

~~Cash, Cash Equivalents and Short-term Investments:~~ ~~Cash and cash equivalents consist~~employee services received in exchange for an award of ~~all cash balances and highly liquid investments, including U.S. treasury and agency securities, with a maturity of three months or less at the time of purchase.~~

The Company’s short-term investments consist of U.S. treasury and agency securities that have original maturities greater than three months at the time of purchase. These investments have been classified and accounted for as available-for-sale securities and the Company reevaluates the classification each reporting period. The Company classifies its available-for-sale securities as either current or non-currentequity instruments is based on ~~each instrument’s underlying contractual maturity date and~~ the ~~Company’s expectations~~grant-date fair value of ~~sales and redemptions within~~ the ~~next twelve months. See~~award. The fair value of Stock Awards (as defined in Note ~~4, “Cash, Cash Equivalents and Investments,~~10, “Stock-based Compensation,” ~~for additional information.~~

~~Available-for-sale securities are recorded at~~) is equal to the fair value ~~each reporting period. For unrealized losses in securities that~~of the ~~Company intends to hold and will not more likely than not be required to sell before recovery,~~Company’s stock on the ~~Company further evaluates whether declines in~~grant date. The fair value ~~below amortized~~of performance awards that include performance and/or market conditions is determined using a Monte Carlo simulation technique. The Monte Carlo simulation requires the use of inputs and assumptions such as the grant-date closing stock price, expected volatility, correlation coefficient to relevant peer groups or indices, risk-free interest rate and dividend yield.

Compensation cost ~~are due to credit or non-credit related factors. The Company considers credit related impairments to be changes~~for Stock Awards with graded vesting schedules is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in ~~value that are driven by~~substance, multiple awards, which results in accelerated recognition of compensation cost. Compensation cost for performance awards with cliff vesting schedules is recognized on a ~~change in~~straight-line basis over the ~~creditor’s ability to meet its payment obligations, and records an allowance and recognizes a corresponding loss when the impairment~~requisite service period. Compensation cost is ~~incurred.~~

Unrealized non-credit related losses and unrealized gains are reported, net of income taxes, in “Accumulated other comprehensive income or loss” within the Company’s unaudited Condensed Consolidated Balance Sheets, until realized. Realized gains and losses are determinednot adjusted based on the specific identification method and are reported in “Other income, net” within the Company’s unaudited Condensed Consolidated Statements of Operations upon realization. Premiums and discounts are amortized or accreted over the lifeactual achievement of the ~~related available-for-sale security as an adjustment to yield using~~market-based performance goals. The Company accounts for forfeitures in the ~~straight-line method. Interest income is recognized when earned. These amounts are reported~~period in “Other income, net” within the Company’s unaudited Condensed Consolidated Statements of Operations. Accrued interest receivable is included in “Accounts receivable (including related party)” within the Company’s unaudited Condensed Consolidated Balance Sheets.

which they occur based on actual forfeitures. See also T ~~able of Contents~~Note 10, “Stock-based Compensation.”

Recently Issued Accounting Pronouncements: ~~There~~During the three months ended March 31, 2023, there were no ~~new~~ accounting pronouncements ~~recently issued or effective during~~adopted by the ~~three and nine months ended September 30, 2022,~~Company that had ~~or would be~~a material impact on the Company's unaudited Condensed Consolidated Financial Statements. Additionally, as of March 31, 2023, there were no accounting pronouncements pending adoption that are expected to have a material impact on the ~~Company’s~~Company's unaudited Condensed Consolidated Financial Statements.

Reclassifications: Certain amounts in prior periods have been reclassified to conform to the current year presentation.

~~NOTE 3—RELATIONSHIP AND AGREEMENTS WITH SHENGHE~~

~~Offtake Agreement~~

In March 2022, the Company entered into an offtake agreement with Shenghe (the “Offtake Agreement”), which became effective upon the termination of the A&R Offtake Agreement (as discussed and defined below). The initial term of the Offtake Agreement is two years, with the option to extend the term at the Company’s discretion for an additional one-year period.

Pursuant to the Offtake Agreement, and subject to certain exclusions, Shenghe shall purchase on a “take or pay” basis the rare earth concentrate produced by the Company as the exclusive distributor in China, with certain exceptions for the Company’s direct sales globally. In addition, at the discretion of the Company, Shenghe may be required to purchase on a “take or pay” basis certain non-concentrate rare earth products, although the Company may sell all non-concentrate rare earth products in its sole discretion to customers or end users in any jurisdiction. Under the Offtake Agreement, Shenghe will be paid a variable commission on net proceeds to the Company.

Similar to the A&R Offtake Agreement, the sales price of rare earth concentrate sold to Shenghe is based on an agreed-upon price per metric ton, subject to certain quality adjustments depending on the measured characteristics of the product, with an adjustment for the ultimate market price of the product realized by Shenghe upon sales to their customers. The sales price and other terms applicable to a quantity of offtake products are set forth in monthly purchase agreements between the Company and Shenghe.

~~Original Commercial Agreements~~

In May 2017, the Company entered into a set of commercial arrangements with Shenghe, which included a technical services agreement (the “TSA”) and an offtake agreement (the “Original Offtake Agreement”). The Original Offtake Agreement required Shenghe to advance the Company an initial $50.0 million (the “Initial Prepayment Amount”) to fund the restart of operations at the mine and the TSA required Shenghe to fund any additional operating and capital expenditures required to bring Mountain Pass to full operability. Shenghe also agreed to provide additional funding of $30.0 million to the Company pursuant to a separate letter agreement dated June 20, 2017 (the “Letter Agreement”) (the “First Additional Advance”), in connection with our acquisition of Mountain Pass. In addition to the repayment of the First Additional Advance, pursuant to the Letter Agreement, the Initial Prepayment Amount increased by $30.0 million. We refer to the aggregate prepayments made by Shenghe pursuant to the Original Offtake Agreement and the Framework Agreement (defined below), as adjusted for Gross Profit Recoupment (defined below) amounts and any other qualifying repayments to Shenghe, inclusive of the $30.0 million increase to the Initial Prepayment Amount, as the “Prepaid Balance.”

Under the Original Offtake Agreement, we sold to Shenghe, and Shenghe purchased on a firm “take or pay” basis, all of the rare earth products produced at Mountain Pass. Shenghe marketed and sold these products to customers, and retained the gross profits earned on subsequent sales. The gross profits were credited against the Prepaid Balance, and provided the means by which we repaid, and Shenghe recovered, such amounts (the “Gross Profit Recoupment”).

~~Framework Agreement and Restructured Commercial Agreements~~

In May 2020, the Company entered into a framework agreement and amendment (the “Framework Agreement”) with Shenghe and Leshan Shenghe that restructured the commercial arrangements and provided for, among other things, a revised funding amount and schedule to settle Shenghe’s prepayment obligations to the Company, as well as an amendment to the Original Offtake Agreement, as discussed below.

Pursuant to the Framework Agreement, the Company entered into an amended and restated offtake agreement with Shenghe on May 19, 2020 (the “A&R Offtake Agreement”), which, upon effectiveness, superseded and replaced the Original Offtake Agreement. Pursuant to the Framework Agreement, Shenghe funded the remaining portion of the Initial Prepayment Amount and agreed to fund an additional $35.5 million advance (the “Second Additional Advance” and together with the Initial Prepayment Amount, inclusive of the $30.0 million increase pursuant to the Letter Agreement, the “Offtake Advances”), which amounts were fully funded in June 2020.

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The A&R Offtake Agreement maintained the key take-or-pay, amounts owed on actual and deemed advances from Shenghe, and other terms of the Original Offtake Agreement, with the following changes, among other items: (i) as to the offtake products subject to the A&R Offtake Agreement, provided that if we sold such offtake products to a third party, then, until the Prepaid Balance was reduced to zero, we would pay an agreed percentage of our revenue from such sales to Shenghe, to be credited against the amounts owed on Offtake Advances; (ii) provided that the sales price to be paid by Shenghe for our rare earth products (a portion of which reduces the Prepaid Balance rather than being paid in cash) would be based on market prices (net of taxes, tariffs and certain other agreed charges) less applicable discounts; and (iii) obliged us to pay Shenghe, on an annual basis, an amount equal to our annual net income, less any amounts recouped through the Gross Profit Recoupment mechanism over the course of the year, until the Prepaid Balance was reduced to zero.

The sales price and other terms applicable to a quantity of offtake products were set forth in monthly purchase agreements between the Company and Shenghe. In March 2022, the Company made a $2.9 million payment to Shenghe pursuant to item (iii) discussed above. Upon payment by the Company, the Prepaid Balance was repaid in full, and the A&R Offtake Agreement was terminated.

NOTE 4—3—CASH, CASH EQUIVALENTS AND INVESTMENTS

The following table presents the Company’s cash, cash equivalents and short-term investments:


		September 30, 2022								December 31, 2021									March 31, 2023								December 31, 2022
(in thousands)	(in thousands)	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value		(in thousands)	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value		Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Cash:	Cash:																	Cash:
Demand deposits	Demand deposits	$	18,630	$	—	$	—	$	18,630	$	26,536	$	—	$	—	$	26,536	Demand deposits	$	24,572	$	—	$	—	$	24,572	$	7,373	$	—	$	—	$	7,373
Cash equivalents:	Cash equivalents:																	Cash equivalents:
Money market funds	Money market funds	243,602		—		—		243,602		1,152,761		—		—		1,152,761		Money market funds	626,643		—		—		626,643		64,855		—		—		64,855
U.S. agency securities	U.S. agency securities	49,985		5		—		49,990		—		—		—		—		U.S. agency securities	—		—		—		—		63,605		1		(2)		63,604
U.S. Treasury securities	U.S. Treasury securities	115,724		23		—		115,747		—		—		—		—		U.S. Treasury securities	—		—		—		—		795		—		—		795
Total cash equivalents	Total cash equivalents	409,311		28		—		409,339		1,152,761		—		—		1,152,761		Total cash equivalents	626,643		—		—		626,643		129,255		1		(2)		129,254
Total cash and equivalents	Total cash and equivalents	427,941		28		—		427,969		1,179,297		—		—		1,179,297		Total cash and equivalents	651,215		—		—		651,215		136,628		1		(2)		136,627
Short-term investments:	Short-term investments:																	Short-term investments:
U.S. agency securities	U.S. agency securities	225,463		8		(3)		225,468		—		—		—		—		U.S. agency securities	482,012		201		(12)		482,201		979,878		361		(17)		980,222
U.S. Treasury securities	U.S. Treasury securities	610,983		56		(219)		610,820		—		—		—		—		U.S. Treasury securities	35,644		—		(14)		35,630		65,586		1		(91)		65,496
Total short-term investments	Total short-term investments	836,446		64		(222)		836,288		—		—		—		—		Total short-term investments	517,656		201		(26)		517,831		1,045,464		362		(108)		1,045,718
Total cash, cash equivalents and short-term investments	Total cash, cash equivalents and short-term investments	$	1,264,387	$	92	$	(222)	$	1,264,257	$	1,179,297	$	—	$	—	$	1,179,297	Total cash, cash equivalents and short-term investments	$	1,168,871	$	201	$	(26)	$	1,169,046	$	1,182,092	$	363	$	(110)	$	1,182,345

The Company does not intend to sell, nor is it more likely than not that the Company will be required to sell, any investments in unrealized loss positions before recovery of their amortized cost basis. WeThe Company did not recognize any credit losses related to ~~our~~its available-for-sale investments during the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. The unrealized losses on ~~our~~the Company’s available-for-sale investments were primarily due to unfavorable changes in interest rates subsequent to initial purchase. None of the available-for-sale investments held as of ~~September 30, 2022,~~March 31, 2023, were in a continuous unrealized loss position for greater than 12 months and the unrealized losses and the related risk of expected credit losses were not material. We

The Company recognized ~~$0.1~~$0.5 million of gross realized gains and ~~$0.2~~$0.1 million of gross realized losses during the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023. Additionally, the Company recognized $13.3 million of interest and investment income on its available-for-sale securities and other money market funds for the three months ended March 31, 2023. These amounts are included in “Other income, net” within the Company’s unaudited Condensed Consolidated Statements of Operations.

As of ~~September 30, 2022, all outstanding~~March 31, 2023, the fair values of available-for-sale ~~securities~~investments, by remaining contractual maturity, were ~~due within one year.~~as follows:


(in thousands)
Due within one year	$	494,930
Due after one year through two years	22,901
Total	$	517,831

T ~~able of Contents~~

NOTE 5—4—INVENTORIES

The Company’s inventories consisted of the following:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(in thousands)	(in thousands)					(in thousands)
Materials and supplies(1)	Materials and supplies(1)	$	27,892	$	10,711	Materials and supplies(1)	$	31,402	$	28,590
In-process	In-process	31,057		25,574		In-process	28,929		27,212
Finished goods	Finished goods	2,696		2,407		Finished goods	1,473		1,752
Total inventory		$	61,645	$	38,692
Total current inventories						Total current inventories	61,804		57,554
Add: Non-current portion(2)						Add: Non-current portion(2)	6,844		5,744
Total inventories						Total inventories	$	68,648	$	63,298

(1)Includes materials ~~acquired during the third quarter of 2022~~ to support activities pertaining to the Company’s rare earth metal, alloy and magnet manufacturing facility as a part of Stage III.

~~During~~(2)Represents stockpiled ore that is not expected to be processed within the ~~second quarter~~next 12 months.

T able of 2021, the Company recognized a non-cash write-down of a portion of its legacy low-grade stockpile inventory of $1.8 million, after determining that it contained a significant amount of alluvial material that did not meet the Company’s requirement for mill feed and, as a result, was deemed unusable. The write-down is included in the unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2021, as “Write-down of inventories.” No write-down of inventories was recorded for the three and nine months ended September 30, 2022.Contents

NOTE 6—5—PROPERTY, PLANT AND EQUIPMENT

The Company’s property, plant and equipment consisted of the following:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(in thousands)	(in thousands)					(in thousands)
Land and land improvements	Land and land improvements	$	16,231	$	7,925	Land and land improvements	$	16,112	$	16,102
Buildings and building improvements	Buildings and building improvements	9,263		8,791		Buildings and building improvements	15,856		15,111
Machinery and equipment	Machinery and equipment	67,479		61,822		Machinery and equipment	275,541		186,388
Assets under construction	Assets under construction	352,646		134,327		Assets under construction	323,444		338,482
Mineral rights	Mineral rights	438,395		437,376		Mineral rights	438,395		438,395
Property, plant and equipment, gross	Property, plant and equipment, gross	884,014		650,241		Property, plant and equipment, gross	1,069,348		994,478
Less: Accumulated depreciation and depletion	Less: Accumulated depreciation and depletion	(53,981)		(39,629)		Less: Accumulated depreciation and depletion	(67,108)		(58,735)
Property, plant and equipment, net	Property, plant and equipment, net	$	830,033	$	610,612	Property, plant and equipment, net	$	1,002,240	$	935,743

Additions to Property, Plant and Equipment: The Company capitalized expenditures related to property, plant and equipment of ~~$250.1~~$74.3 million and ~~$93.8~~$68.0 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, including amounts not yet paid (see Note ~~15,~~14, “Supplemental Cash Flow Information”). The capitalized expenditures ~~for the nine months ended September 30, 2022,~~ related to machinery, equipment, and assets under construction to support the Company’s Stage II optimization project, and assets under construction for its rare earth metal, alloy and magnet manufacturing facility as a part of Stage ~~III, including~~III. Additionally, the capitalized expenditures for the three months ended March 31, 2022, included the purchase of approximately 18 acres of land in Fort Worth, Texas ~~in February 2022~~. ~~The capitalized expenditures for~~

Placement of Certain Stage II Assets into Service: At the ~~nine months ended September 30, 2021, mostly related~~end of the first quarter of 2023, the Company transferred certain of its assets totaling $86.4 million and pertaining to ~~vehicles, machinery, equipment, and~~its Stage II optimization project from assets under construction to ~~support the Stage II optimization project~~buildings, machinery and ~~other capital projects at Mountain Pass.~~equipment, with $85.7 million relating to machinery and equipment.

Government Awards: In November 2020, the Company was awarded a Defense Production Act Title III technology investment agreement (“TIA”) from the Department of Defense (“DOD”) to establish domestic processing for separated light rare earth elements in the amount of $9.6 million. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ pursuant to the TIA, the Company ~~has~~had received ~~$5.1 million~~zero and ~~$2.6~~$5.1 million, respectively, in reimbursements from the DOD. ~~The funds received reduced the carrying amount of certain fixed assets associated with the Company’s Stage II optimization project, which are currently included in “Assets under construction.”~~ As of ~~September 30, 2022,~~March 31, 2023, the Company is entitled to receive an additional $0.1 million from the DOD under the TIA.

In February 2022, the Company was awarded a $35.0 million contract by the DOD’s Office of Industrial Base Analysis and Sustainment ~~Program~~program to design and build a facility to process heavy rare earth elements (“HREE”) at Mountain Pass (the “HREE Production Project Agreement”). ~~The~~As of March 31, 2023, the Company ~~must utilize the~~has not yet received any funds to acquire property and equipment that will contribute to commercial-scale production of separated HREE at Mountain Pass. The Company will be paid fixed amounts upon the completion of certain project milestones. In exchange for these funds,from the DOD ~~will have certain rights to technical data following the completion of the project. The funds received pursuant to~~under the HREE Production Project ~~Agreement will~~

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~~reduce the carrying amount of the fixed assets associated with the Company’s HREE separations facility, which will tie into the Company’s other Stage II facilities.~~

~~Change in Estimates of Asset Retirement Costs:~~ As a result of a decrement to the Company’s asset retirement obligations (“ARO”) during the third quarter of 2022, the carrying amount of the Company’s total property, plant and equipment was reduced by $10.4 million, the majority of which pertained to buildings, machinery and equipment, and assets under construction, in the amounts of $0.6 million, $2.7 million and $6.7 million, respectively. Additionally, the Company’s depreciation expense for the three and nine months ended September 30, 2022, was reduced by $2.7 million, reflecting the excess of the decrement over the carrying amount of the related property, plant and equipment. See ~~Note 8, “Asset Retirement and Environmental Obligations,”~~ ~~for further information on the decrement.~~Agreement.

The Company’s depreciation and depletion expense were as follows:


		For the three months ended September 30,				For the nine months ended September 30,					For the three months ended March 31,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022
Depreciation expense~~(1)~~	Depreciation expense~~(1)~~	$	(656)	$	2,109	$	3,702	$	5,528	Depreciation expense~~(1)~~	$	5,245	$	2,101
Depletion expense	Depletion expense	$	2,664	$	4,754	$	8,808	$	13,971	Depletion expense	$	2,800	$	3,069

~~(1)As noted above, during~~The Company recognized $2.5 million of demolition costs for the three months ended ~~September 30, 2022, we recorded a reduction to depreciation expense, reflecting~~March 31, 2023, which are included in “Loss on sale or disposal of long-lived assets, net” within the ~~excess~~Company’s unaudited Condensed Consolidated Statements of Operations, incurred in connection with demolishing and removing certain old facilities from the ~~ARO decrement over~~Mountain Pass site that have not been used in the ~~carrying amount of the related property, plant and equipment, as a result of changes in our estimates of cash flows underlying our ARO.~~

Company’s operations. There were no impairments recognized for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

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NOTE 7—6—DEBT OBLIGATIONS

The Company’s ~~current and non-current portions of~~ long-term debt ~~were~~was as follows:

September 30, 2022 December 31, 2021
(in thousands)
Long-term debt
Convertible Notes due 2026 $ 690,000 $ 690,000
Less: Unamortized debt issuance costs (12,437) (15,073)
Net carrying amount 677,563 674,927
Less: Current installments of long-term debt — —
Long-term debt, net of current portion $ 677,563 $ 674,927
Long-term debt to related party
Offtake Advances $ — $ 16,599
Less: Unamortized debt discount — (517)
Net carrying amount — 16,082
Less: Current installments of long-term debt to related party — (16,082)
Long-term debt to related party, net of current portion $ — $ —


	March 31, 2023		December 31, 2022
(in thousands)
Long-term debt
Convertible Notes due 2026	$	690,000	$	690,000
Less: Unamortized debt issuance costs	(10,674)		(11,556)
Long-term debt, net	$	679,326	$	678,444

Convertible Notes

In March 2021, the Company issued $690.0 million aggregate principal amount of 0.25% unsecured green convertible senior notes that mature, unless earlier converted, redeemed or repurchased, on April 1, 2026 (the “Convertible Notes”), at a price of par. Interest on the Convertible Notes is payable on April 1st and October 1st of each year, beginning on October 1, 2021. The Convertible Notes may, at the Company’s election, be settled in cash, shares of common stock of the Company, or a combination thereof. The Company has the option to redeem the Convertible Notes, in whole or in part, beginning on April 5, 2024.

The Convertible Notes are convertible into shares of the Company’s common stock at an initial conversion price of $44.28 per share, or 22.5861 shares, per $1,000 principal amount of notes, subject to adjustment upon the occurrence of certain corporate events. However, in no event will the conversion price exceed 28.5714 shares of common stock per $1,000 principal

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amount of notes. As of ~~September 30, 2022,~~March 31, 2023, based on the conversion price, the maximum number of shares that could be issued to satisfy the conversion feature of the Convertible Notes was 19,714,266. The Convertible Notes’ if-converted value did not exceed its principal amount as of ~~September 30, 2022.~~March 31, 2023.

Interest expense related to the Convertible Notes was as follows:


		For the three months ended September 30,				For the nine months ended September 30,					For the three months ended March 31,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022
Coupon interest	Coupon interest	$	431	$	431	$	1,293	$	886	Coupon interest	$	431	$	431
Amortization of debt issuance costs	Amortization of debt issuance costs	881		876		2,637		1,799		Amortization of debt issuance costs	882		877
Convertible Notes interest expense	Convertible Notes interest expense	$	1,312	$	1,307	$	3,930	$	2,685	Convertible Notes interest expense	$	1,313	$	1,308

The debt issuance costs are being amortized to interest expense over the term of the Convertible Notes at an effective interest rate of 0.51%. The remaining term of the Convertible Notes was ~~3.5~~3.0 years as of ~~September 30, 2022.~~

~~Offtake Advances~~

Under the A&R Offtake Agreement, a portion of the sales prices of products sold to Shenghe was paid in the form of debt reduction, rather than cash. In addition, the Company had to pay the following amounts to Shenghe in cash to reduce the debt obligation until repaid in full: (i) an agreed-upon percentage of sales of products to parties other than Shenghe under the A&R Offtake Agreement; (ii) 100% of net profits from asset sales; and (iii) 100% of net income determined under GAAP, less the tax-effected amount of total non-cash recoupment from sales of products to Shenghe. For the three and nine months ended September 30, 2022, zero and $14.2 million, respectively, of the sales prices of products sold to Shenghe was paid in the form of debt reduction (see ~~Note 15, “Supplemental Cash Flow Information”~~), as compared to $15.9 million and $36.8 million, for the three and nine months ended September 30, 2021, respectively. During the three and nine months ended September 30, 2022, the Company made payments to Shenghe of zero and $0.2 million, respectively, based on sales to other parties, as compared to $0.1 million and $0.2 million, respectively, for the three and nine months ended September 30, 2021. No amounts were required to be paid based on asset sales.

The A&R Offtake Agreement did not have a stated rate (and was non-interest-bearing), and repayment was contingent on a number of factors, including market prices realized by Shenghe, the Company’s sales to other parties, asset sales, and the Company’s annual net income. The imputed interest rate was a function of this discount taken together with our expectations about the timing of the anticipated reductions of the principal balance. The Company had determined that it would recognize adjustments from these estimates following a prospective method where the Company updated its estimate of the effective interest rate in future periods based on revised estimates of the timing of remaining principal reductions at that time. The effective rate applicable from the June 5, 2020, inception to full repayment, was between 4.41% and 24.75%.

~~As discussed in~~ ~~Note 3, “Relationship and Agreements with Shenghe,”~~ ~~the Company made a $2.9 million payment to Shenghe in~~ March ~~2022. Upon payment by the Company, the Prepaid Balance was repaid in full, and the A&R Offtake Agreement was terminated.~~

~~Paycheck Protection Loan~~

In April 2020, the Company obtained a loan of $3.4 million pursuant to the Paycheck Protection Program under the CARES Act, (the “Paycheck Protection Loan”). In June 2021, the Company received notification from the Small Business Administration that the Paycheck Protection Loan and related accrued interest was forgiven. Consequently, during the nine months ended September 30, 2021, the Company recorded a gain on forgiveness of the Paycheck Protection Loan in the amount of $3.4 million, which is included in “Other income, net” within our unaudited Condensed Consolidated Statements of Operations.

~~Tariff-Related Rebates~~

In May 2020, the government of the People’s Republic of China suspended certain tariffs that had been charged to consignees of our product on imports, and provided such relief retroactive to March 2020. In addition, Shenghe began negotiating for tariff rebates from sales prior to March 2020, which affected Shenghe’s realized prices, and thus the Prepaid Balance. These, in turn, affected the Company’s realized prices on prior sales. While additional tariff rebates were possible, the Company did not have insight into Shenghe’s negotiations or their probability of success, and such negotiations were outside of the Company’s control. Thus, the Company fully constrained estimates of any future tariff rebates that may have been realized

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~~at that time.~~

In January 2021, the Company received information from Shenghe regarding its successful negotiation of additional tariff rebates. Consequently, the Company revised its estimates of variable consideration and recognized $2.0 million of revenue for the nine months ended September 30, 2021. Additionally, for the nine months ended September 30, 2021, the Company recorded a reduction in the principal balance of the debt obligation and the corresponding debt discount of $2.2 million and $0.2 million, respectively.31, 2023.

Equipment Notes

The Company has entered into several financing agreements for the purchase of equipment, including trucks, tractors, loaders, graders, and various other machinery. The Company’s equipment notes, which are secured by the purchased equipment, have terms of between 4 to 5 years and interest rates of between 0.0% and 6.5% per annum.

The current and non-current portions of the equipment notes, which are included within the unaudited Condensed Consolidated Balance Sheets in “Other current liabilities” and “Other non-current liabilities,” respectively, were as follows:


		September 30, 2022		December 31, 2021			March 31, 2023		December 31, 2022
(in thousands)	(in thousands)					(in thousands)
Equipment notes	Equipment notes					Equipment notes
Current	Current	$	2,423	$	2,566	Current	$	2,327	$	2,392
Non-current	Non-current	5,340		7,095		Non-current	4,187		4,743
		$	7,763	$	9,661		$	6,514	$	7,135

As of ~~September 30, 2022,~~March 31, 2023, none of the agreements or indentures governing ~~our~~the Company’s indebtedness contain financial covenants.

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NOTE 8—7—ASSET RETIREMENT AND ENVIRONMENTAL OBLIGATIONS

Asset Retirement Obligations

The Company estimates ~~ARO~~asset retirement obligations based on the requirements to reclaim certain land ~~and facilities~~areas associated with ~~mining activity~~mineral extraction activities and certain related facilities at Mountain Pass. Minor reclamation activities related to discrete portions of the Company’s operations are ongoing. As of ~~September 30, 2022,~~March 31, 2023, the Company estimated a significant portion of the cash outflows for ~~the~~ major reclamation ~~and~~activities including the retirement of Mountain Pass will be incurred beginning in ~~2057.~~

~~In June 2021, San Bernardino County approved the Company’s re-zoning request for certain of its properties such that certain of the Company’s processing~~2056 and separations facilities would be zoned for industrial end uses as opposed to the prior “resource conservation” designation. In September 2022, and as a result of the re-zoning of this land, the Company received final approval from San Bernardino County and the Division of Mine Reclamation (California) on a revised reclamation plan. The revision removed from the regulatory oversight under The Surface Mining and Reclamation Act of 1975 the majority of the buildings and equipment used in the processing and separations facilities, including the land underlying such buildings and equipment.

As a result of the final county approval, in the third quarter of 2022, the Company revised its estimated cash flows pertaining to the settlement of the reclamation and removal activities associated with Mountain Pass, including removing the previous estimates of the cash flows associated with the processing and separations facilities that no longer require reclamation. The changes in estimates resulted in an ARO decrement of $13.1 million, of which $10.4 million reduced the carrying amounts of the associated property, plant and equipment, and $2.7 million, reflecting the excess of the decrement over the carrying amount of the related property, plant and equipment, was recorded as a reduction to depreciation expense for the three and nine months ended September 30, 2022.

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~~The following is a summary of the Company’s ARO:~~

September 30, 2022 December 31, 2021
(in thousands)
Beginning balance $ 17,757 $ 25,646
Obligations settled (123) (199)
Accretion expense 879 1,876
Additional ARO — 213
Revisions in estimated cash flows (13,114) (9,779)
Ending balance $ 5,399 $ 17,757
2057.

As of ~~September 30, 2022,~~March 31, 2023, the credit-adjusted risk-free rate ranged between 6.5% and 12.0% depending on the timing of expected settlement and when the ~~layer or~~ increment was recognized. There ~~were no significant increments for the three and nine months ended September 30, 2022, and there~~ were no significant increments or decrements for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2023 and 2022.

The balance as of ~~September 30, 2022,~~both March 31, 2023, and December 31, ~~2021,~~2022, included current portions of $0.2 ~~million and $0.1 million, respectively.~~million. The total estimated future undiscounted cash flows required to satisfy the Company’s asset retirement obligations were ~~$50.4~~$50.3 million and ~~$167.3~~$50.4 million as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, respectively.

Environmental Obligations

The Company ~~assumed~~has certain environmental remediation liabilities related to the monitoring of groundwater contamination. The Company engaged an environmental consultant to develop a remediation plan and remediation cost projections based upon that plan. Utilizing the remediation plan developed by the environmental consultant, ~~management~~the Company developed an estimate of future cash payments for the remediation plan.

As of ~~September 30, 2022, management~~March 31, 2023, the Company estimated the cash outflows related to these environmental activities will be incurred annually over the next 25 years. The Company’s environmental remediation liabilities are measured at the expected value of future cash outflows discounted to their present value using a discount rate of 2.93%. There were no significant changes in the estimated remaining remediation costs for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022.

The total estimated aggregate undiscounted cost of ~~$27.3~~$27.0 million and ~~$27.7~~$27.2 million as of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021,~~2022, respectively, ~~was~~ principally related to water monitoring ~~and treatment~~ activities required by state and local agencies. Based on ~~management’s best~~the Company’s estimate of the cost and timing and the assumption that payments are considered to be fixed and reliably determinable, the Company has discounted the liability. The balance as of ~~September 30, 2022,~~both March 31, 2023, and December 31, ~~2021,~~2022, included current portions of $0.5 million.

Financial Assurances

The Company is required to provide the applicable government agencies with financial assurances relating to the closure and reclamation obligations. As of ~~September 30, 2022,~~both March 31, 2023, and December 31, ~~2021,~~2022, the Company had financial assurance requirements of ~~$43.4~~$43.5 million, ~~and $39.0 million, respectively,~~ which were satisfied with surety bonds placed with ~~the~~ California state and regional agencies.

NOTE 9—8—INCOME TAXES

The Company calculates the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pretax book income or loss. The tax effects of discrete items, including but not limited to, excess tax benefits associated with stock-based compensation, valuation allowance adjustments based on new evidence, and enactment of tax laws, are reported in the interim period in which they occur. The effective tax rate (income taxes as a percentage of income or loss before income taxes) including discrete items was ~~24.9%~~17.3% and 24.5% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, as compared to 17.1% and 18.4% for the three and nine months ended September 30, 2021,~~ respectively. ~~Our~~The Company’s effective income tax rate can vary from period to period depending on, among other factors, percentage depletion, executive compensation deduction limitations, ~~other permanent book/tax items,~~the Section 45X Advanced Manufacturing Production Credit, and changes to ~~our~~its valuation allowance against deferred tax assets. Certain of these and other factors, including ~~our~~the Company’s history and projections of pretax earnings, are considered in assessing ~~our~~its ability to realize ~~our~~its net deferred tax assets.

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Statements. ~~We are continuing~~The Company expects to ~~evaluate~~benefit from the ~~impact~~Section 45X Advanced Manufacturing Production Credit, which provides a credit equal to 10% of the ~~clean energy incentives.~~costs incurred with respect to the production of certain critical minerals, including NdPr oxide.

NOTE ~~10—~~9—COMMITMENTS AND CONTINGENCIES

Litigation: The Company may become party to lawsuits, administrative proceedings and government investigations, including environmental, regulatory, and other matters, in the ordinary course of business. Large, and sometimes unspecified, damages or penalties may be sought in some matters, and certain matters may require years to resolve. The Company is not aware of any pending or threatened litigation that would have a material adverse effect on its unaudited Condensed Consolidated Financial Statements.

In January 2019, a former employee filed a complaint with the California Labor & Workforce Development Agency alleging numerous violations of California labor law, and subsequently filed a representative action against the Company. In October 2021, we entered into a memorandum of understanding to settle the lawsuit in the amount of $1.0 million, including legal fees, which is included in “Selling, general and administrative” within the unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021. In August 2022, the court granted final approval of the class settlement, and in September 2022, the Company paid the settlement amount.

NOTE ~~11—~~10—STOCK-BASED COMPENSATION

2020 Incentive Plan: In November 2020, the Company’s stockholders approved the MP Materials Corp. 2020 Stock Incentive Plan (the “2020 Incentive Plan”), which permits the Company to issue stock options (incentive and/or non-qualified); stock appreciation ~~rights;~~rights (“SARs”); restricted stock, restricted stock units (“RSUs”) and other stock ~~awards;~~awards (collectively, the “Stock Awards”); and performance ~~awards.~~awards, which vest contingent upon the attainment of either or a combination of market- or performance-based goals. As of ~~September 30, 2022,~~March 31, 2023, the Company has not issued any stock options or SARs and there were ~~6,454,233~~6,326,026 shares available for future grants under the 2020 Incentive Plan.

Market-Based PSUs: In February 2023, pursuant to the 2020 Incentive Plan, the Company’s Compensation Committee of the Board of Directors adopted a performance share plan (the “2023 Performance Share Plan”). Pursuant to the 2023 Performance Share Plan, for the three months ended March 31, 2023, the Company granted 62,709 of market-based performance stock units (“PSUs”) at target, all of which cliff vest after a requisite performance and service period of three years. The PSUs have the potential to be earned at between 0% and 200% of the number of awards granted depending on the level of growth of the Company’s total shareholder return (“TSR”) as compared to the TSR of the S&P 400 Index and the S&P 400 Materials Group over the performance period. The fair value of the market-based PSUs was determined using a Monte Carlo simulation technique.

Stock-Based Compensation: During the three and nine months ended September 30, 2022, the Company recognized $7.8 million and $25.0 million, respectively, of stock-based compensation expense, as compared to $4.5 million and $14.7 million for the three and nine months ended September 30, 2021, respectively, which is principally included in the unaudited Condensed Consolidated Statements of Operations in “Selling, general and administrative.” Additionally, during the three and nine months ended September 30, 2022, the Company capitalized $0.3 million and $1.0 million, respectively, of stock-based compensation to “Property, plant and equipment, net.” NoThe Company’s stock-based compensation was ~~capitalized to “Property, plant and equipment, net” during the three and nine months ended September 30, 2021.~~recorded as follows:


	For the three months ended March 31,
(in thousands)	2023		2022
Cost of sales	$	1,122	$	715
Selling, general and administrative	5,774		8,968
Advanced projects, start-up, development and other	117		90
Total stock-based compensation expense	$	7,013	$	9,773

Stock-based compensation capitalized to property, plant and equipment, net	$	745	$	406

NOTE ~~12—~~11—FAIR VALUE MEASUREMENTS

~~ASC~~Accounting Standards Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”), establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:


			Level 1			Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

			Level 2			Quoted prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, quoted prices or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability and model-based valuation techniques (e.g., the Black-Scholes model) for which all significant inputs are observable in active markets.

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			Level 3			Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy. The following methods and assumptions are used to estimate the fair value of each class of financial instruments for which it is practicable to estimate. The fair value of the Company’s accounts receivable, accounts payable, short-term debt and accrued liabilities approximates the carrying amounts because of the immediate or short-term maturity of these financial instruments.

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Cash, Cash Equivalents and Restricted Cash

The Company’s cash, cash equivalents and restricted cash are classified within Level 1 of the fair value hierarchy. The carrying amounts reported in the unaudited Condensed Consolidated Balance Sheets approximate the fair value of cash, cash equivalents and restricted cash due to the short-term nature of these assets.

Short-term Investments

The fair value of the Company’s short-term investments, which are classified as available-for-sale securities, is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.

Convertible Notes

The fair value of the Company’s Convertible Notes is estimated based on quoted prices in active markets and is classified as a Level 1 measurement.

~~Offtake Advances~~

The Company’s Offtake Advances were classified within Level 3 of the fair value hierarchy as of December 31, 2021, because there were unobservable inputs that followed an imputed interest rate model to calculate the amortization of the embedded debt discount, which was recognized as non-cash interest expense, by estimating the timing of anticipated payments and reductions of the debt principal balance. This model-based valuation technique, for which there were unobservable inputs, was used to estimate the fair value of the liability classified within Level 3 of the fair value hierarchy as of December 31, 2021.

Equipment Notes

The Company’s equipment notes are classified within Level 2 of the fair value hierarchy because there are inputs that are directly observable for substantially the full term of the liability. Model-based valuation techniques for which all significant inputs are observable in active markets were used to calculate the fair values of liabilities classified within Level 2 of the fair value hierarchy.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The carrying amounts and estimated fair values by input level of the Company’s financial instruments were as follows:

September 30, 2022
(in thousands)
Carrying
Amount
Fair Value Level 1 Level 2 Level 3
Financial assets:
Cash and cash equivalents $ 427,969 $ 427,969 $ 427,969 $ — $ —
Short-term investments $ 836,288 $ 836,288 $ 836,288 $ — $ —
Restricted cash $ 6,445 $ 6,445 $ 6,445 $ — $ —
Financial liabilities:
Convertible Notes $ 677,563 $ 628,763 $ 628,763 $ — $ —
Equipment notes $ 7,763 $ 7,232 $ — $ 7,232 $ —


		December 31, 2021											March 31, 2023
(in thousands)	(in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3		(in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,179,297	$	1,179,297	$	1,179,297	$	—	$	—	Cash and cash equivalents	$	651,215	$	651,215	$	651,215	$	—	$	—
Short-term investments												Short-term investments	$	517,831	$	517,831	$	517,831	$	—	$	—
Restricted cash	Restricted cash	$	1,860	$	1,860	$	1,860	$	—	$	—	Restricted cash	$	3,151	$	3,151	$	3,151	$	—	$	—
Financial liabilities:	Financial liabilities:											Financial liabilities:
Convertible Notes	Convertible Notes	$	674,927	$	880,026	$	880,026	$	—	$	—	Convertible Notes	$	679,326	$	652,485	$	652,485	$	—	$	—
Offtake Advances		$	16,082	$	16,501	$	—	$	—	$	16,501
Equipment notes	Equipment notes	$	9,661	$	9,737	$	—	$	9,737	$	—	Equipment notes	$	6,514	$	6,350	$	—	$	6,350	$	—

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	December 31, 2022
(in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial assets:
Cash and cash equivalents	$	136,627	$	136,627	$	136,627	$	—	$	—
Short-term investments	$	1,045,718	$	1,045,718	$	1,045,718	$	—	$	—
Restricted cash	$	6,882	$	6,882	$	6,882	$	—	$	—
Financial liabilities:
Convertible Notes	$	678,444	$	610,650	$	610,650	$	—	$	—
Equipment notes	$	7,135	$	6,807	$	—	$	6,807	$	—

NOTE ~~13—~~12—EARNINGS PER SHARE

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method or the if-converted method, as applicable.

The following table reconciles the weighted-average common shares outstanding used in the calculation of basic EPS to the weighted-average common shares outstanding used in the calculation of diluted EPS:

For the three months ended September 30, For the nine months ended September 30,
2022 2021 2022 2021
Weighted-average shares outstanding, basic 176,543,624 176,053,586 176,476,276 172,577,303
Assumed conversion of public warrants(1)
— — — 3,787,498
Assumed conversion of Convertible Notes 15,584,409 15,584,409 15,584,409 10,789,206
Assumed conversion of restricted stock 840,786 1,283,194 944,925 1,214,349
Assumed conversion of restricted stock units 441,038 294,124 433,329 271,017
Weighted-average shares outstanding, diluted 193,409,857 193,215,313 193,438,939 188,639,373

~~(1)~~Warrants to purchase 11,499,968 shares of the Company’s common stock at $11.50 per share were issued in connection with Fortress Value Acquisition Corp.’s initial public offering pursuant to a warrant agreement, dated April 29, 2020, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent. The warrants were redeemed through a cashless exercise in the second quarter of 2021.


	For the three months ended March 31,
	2023	2022
Weighted-average shares outstanding, basic	176,881,723	176,355,566
Assumed conversion of Convertible Notes	15,584,409	15,584,409
Assumed conversion of restricted stock	723,145	1,148,539
Assumed conversion of RSUs	424,262	401,816

Weighted-average shares outstanding, diluted	193,613,539	193,490,330

The following table presents the calculation of basic and diluted EPS for the Company’s common stock:


		For the three months ended September 30,				For the nine months ended September 30,					For the three months ended March 31,
(in thousands, except share and per share data)	(in thousands, except share and per share data)	2022		2021		2022		2021		(in thousands, except share and per share data)	2023		2022
Calculation of basic EPS:	Calculation of basic EPS:									Calculation of basic EPS:
Net income	Net income	$	63,177	$	42,763	$	221,997	$	86,048	Net income	$	37,447	$	85,551
Weighted-average shares outstanding, basic	Weighted-average shares outstanding, basic	176,543,624		176,053,586		176,476,276		172,577,303		Weighted-average shares outstanding, basic	176,881,723		176,355,566
Basic EPS	Basic EPS	$	0.36	$	0.24	$	1.26	$	0.50	Basic EPS	$	0.21	$	0.49

Calculation of diluted EPS:	Calculation of diluted EPS:									Calculation of diluted EPS:
Net income	Net income	$	63,177	$	42,763	$	221,997	$	86,048	Net income	$	37,447	$	85,551
Interest expense, net of tax(1):	Interest expense, net of tax(1):									Interest expense, net of tax(1):
Convertible Notes	Convertible Notes	985		1,084		2,967		2,190		Convertible Notes	1,086		988
Diluted income	Diluted income	$	64,162	$	43,847	$	224,964	$	88,238	Diluted income	$	38,533	$	86,539
Weighted-average shares outstanding, diluted	Weighted-average shares outstanding, diluted	193,409,857		193,215,313		193,438,939		188,639,373		Weighted-average shares outstanding, diluted	193,613,539		193,490,330
Diluted EPS	Diluted EPS	$	0.33	$	0.23	$	1.16	$	0.47	Diluted EPS	$	0.20	$	0.45

(1)The three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ were tax-effected at a rate of ~~24.9%,~~17.3% and 24.5%~~, 17.1% and 18.4%~~, respectively.

NOTE ~~14—~~13—RELATED-PARTY TRANSACTIONS

~~Product Sales~~Offtake Agreement: In March 2022, the Company entered into an offtake agreement (the “Offtake Agreement”) with Shenghe Resources (Singapore) International Trading Pte. Ltd. (“Shenghe”), a majority-owned subsidiary of Leshan Shenghe

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Rare Earth Co., Ltd. (“Leshan Shenghe”) whose ultimate parent is Shenghe Resources Holding Co., Ltd., a leading global rare earth company listed on the Shanghai Stock Exchange. The Offtake Agreement became effective upon the termination of the A&R Offtake Agreement (as discussed and ~~Cost~~defined below). The initial term of ~~Sales:~~ ~~The~~the Offtake Agreement is two years, with the option to extend the term at the Company’s discretion for an additional one-year period.

Pursuant to the Offtake Agreement, and subject to certain exclusions, Shenghe is obligated to purchase on a “take or pay” basis the rare earth concentrate produced by the Company ~~and~~as the exclusive distributor in China, with certain exceptions for the Company’s direct sales globally. In addition, at the discretion of the Company, Shenghe ~~enter into sales agreements in which Shenghe purchases the Company’s~~may be required to purchase on a “take or pay” basis certain non-concentrate rare earth products, ~~at sale prices~~although the Company may sell all non-concentrate rare earth products in its sole discretion to customers or end users in any jurisdiction. Under the Offtake Agreement, Shenghe will be paid a variable commission on net proceeds to the Company.

The sales price of rare earth concentrate sold to Shenghe is based on an agreed-upon price per metric ton, subject to certain quality adjustments depending on the measured characteristics of the product, with an adjustment for the ultimate market price of the product realized by Shenghe upon sales to their customers. ~~Product~~The sales ~~from these~~price and other terms applicable to a quantity of offtake products are set forth in monthly purchase agreements between the Company and Shenghe.

Tolling Agreement with Shenghe were $114.9 million and $401.5 million for the three and nine months ended September 30, 2022, respectively, as compared to $97.3 million and $229.2 million for the three and nine months ended September 30, 2021, respectively. Additionally, inVREX: In March ~~2022,~~2023, the Company entered into a ~~sales~~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, the Company would deliver NdPr oxide to VREX which VREX would then process into NdPr metal for delivery to the Company’s customers globally. During the term of the Tolling Agreement, the Company will pay VREX a processing fee per unit of rare earth metal produced. The Company 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. As of March 31, 2023, there have not yet been any transactions as contemplated under the Tolling Agreement.

Product Sales and Cost of Sales: Product sales from sales agreements with Shenghe for rare earth products were $89.1 million and $155.0 million for the three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2022, the Company also entered into sales agreements with Shenghe for non-concentrate products, including certain stockpiles of rare earth ~~fluoride (“REF”). Sales of REF,~~fluoride. These sales, which are included in the unaudited Condensed Consolidated Statements of Operations in “Other sales (including related party),” were ~~$8.5~~$4.1 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022.

Cost of sales, which includes shipping and freight, related to these agreements with Shenghe was ~~$21.8~~$22.7 million and ~~$65.4~~$22.6 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, as compared to $21.5 million and $57.2 million for the three and nine months ended September 30, 2021,~~ respectively.

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Purchases of Materials and Supplies: The Company purchases certain reagent products ~~(produced~~(generally produced by an unrelated third-party manufacturer) used in the flotation process as well as other materials from Shenghe in the ordinary course of business. Total purchases were ~~$15.3~~$0.9 million and ~~$18.5~~$1.2 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, as compared to $1.2 million and $3.3 million for the three and nine months ended September 30, 2021,~~ respectively.

Accounts Receivable: As of ~~September 30, 2022,~~March 31, 2023, and December 31, ~~2021, $13.7~~2022, $18.8 million and ~~$49.9~~$29.8 million, respectively, of the accounts receivable ~~respectively, and~~ as stated onin the unaudited Condensed Consolidated Balance Sheets, were receivable from and pertained to sales made to Shenghe in the ordinary course of business.

~~Indebtedness:~~ ~~The Company’s related-party debt is described in~~ ~~Note 7, “Debt Obligations.”~~

NOTE ~~15—~~14—SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental cash flow information and non-cash investing and financing activities were as follows:

For the nine months ended September 30,
(in thousands) 2022 2021
Supplemental cash flow information:
Cash paid for interest $ 1,140 $ 1,116
Cash payments related to income taxes $ 16,827 $ 1
Supplemental non-cash investing and financing activities:
Property, plant and equipment acquired with seller-financed equipment notes $ — $ 9,407
Property, plant and equipment purchased but not yet paid $ 35,779 $ 7,416
Revenue recognized in exchange for debt principal reduction $ 13,566 $ 38,858
Paycheck Protection Loan forgiveness(1)
$ — $ 3,401
Decrease in estimates of asset retirement costs $ 10,395 $ —

~~(1)As discussed in~~ ~~Note 7, “Debt Obligations.”~~


	For the three months ended March 31,
(in thousands)	2023		2022
Supplemental cash flow information:
Cash paid for interest	$	105	$	83
Cash payments related to income taxes	$	—	$	2,500
Change in construction payables	$	(130)	$	13,096
Supplemental non-cash investing and financing activities:


Revenue recognized in exchange for debt principal reduction	$	—	$	13,566

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.~~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. ~~In addition, see~~See also “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., including its subsidiaries (“we,” “our,” and “us”), is the largest producer of rare earth materials in the Western Hemisphere. ~~The Company owns~~We own and ~~operates~~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 ~~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~~is principally sold pursuant to ~~an offtake agreement (the “Offtake Agreement”), which became effective upon~~ the ~~termination of the A&R~~ Offtake Agreement to Shenghe (as such terms are defined in Note ~~3, “Relationship and Agreements with Shenghe,~~13, “Related-Party Transactions,” 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,~~that, in turn, typically sells that product to refiners in China. These refiners separate the constituent ~~REE~~rare earth elements (“REE”) contained in our concentrate and sell the separated products to their customers.

Upon ~~completion~~completing commissioning of ~~our~~the Stage II optimization project (“Stage II”), we anticipate producing and selling separated rare earth ~~oxides~~products, including neodymium-praseodymium (“~~REO”~~NdPr”)~~, including NdPr oxide, and selling these products directly to end users, at which time~~ oxide. In addition, we ~~may no longer sell our concentrate.~~

~~In February 2022, we commenced construction of~~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 ~~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”).

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 ~~use~~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 September 30,				Change				For the nine months ended September 30,				Change					For the three months ended March 31,				Change
(in whole units or dollars, except percentages)	(in whole units or dollars, except percentages)	2022		2021		$		%		2022		2021		$		%		(in whole units or dollars, except percentages)	2023		2022		$		%
REO production volume (MTs)	REO production volume (MTs)	10,886		11,998		(1,112)		(9)	%	32,014		32,152		(138)		—	%	REO production volume (MTs)	10,671		10,828		(157)		(1)	%
REO sales volume (MTs)	REO sales volume (MTs)	10,676		12,814		(2,138)		(17)	%	32,382		32,484		(102)		—	%	REO sales volume (MTs)	10,215		11,706		(1,491)		(13)	%
Realized price per REO MT	Realized price per REO MT	$	11,636	$	7,693	$	3,943	51	%	$	13,130	$	7,043	$	6,087	86	%	Realized price per REO MT	$	9,365	$	13,818	$	(4,453)	(32)	%
Production cost per REO MT	Production cost per REO MT	$	1,653	$	1,449	$	204	14	%	$	1,661	$	1,484	$	177	12	%	Production cost per REO MT	$	1,978	$	1,594	$	384	24	%

REO Production Volume

We measure our REO-equivalent production volume for a given period in ~~metric tons (“MTs”),~~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. Our REO production volume for the three months ended March 31, 2023, included certain concentrate that is stored in bulk silos as mechanically dried and/or roasted concentrate.

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-REO minerals, loss-on-ignition, and residual moisture from the production process. We target REO content of greater than 60% per dry MT of concentrate (referred to as “REO grade”). The elemental distribution of REO in our concentrate is relatively consistent over time and production lot. We consider this the natural distribution, as it reflects the distribution of elements contained, on average, in our ore. ~~As noted above, upon completion of Stage II, we expect to refine our rare earth concentrate to produce separated rare earths, including NdPr oxide.~~

REO Sales Volume

Our REO sales volume for a given period is calculated in MTs. A unit, or MT, is considered sold for purposes of this key performance indicator once we recognize revenue on its ~~sale.~~sale as determined in accordance with generally accepted accounting principles in the United States (“GAAP”). Our REO sales volume is a key measure of our ability to convert our production into revenue. Our REO sales volume for the three months ended March 31, 2023, included both traditional concentrate as well as roasted concentrate.

Realized Price per REO MT

We calculate the realized price per REO MT for a given period as the quotient of: (i) our ~~Total Value Realized (see below)~~product sales, which is determined in accordance with GAAP, for a given period and (ii) our REO sales volume for the same period. ~~We define~~Realized price per

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REO MT is an important measure of the market price of our concentrate product. Historically, we used Total Value Realized, which iswas a non-GAAP financial measure defined as our product sales adjusted for the revenue impact of tariff rebates related to prior period ~~sales.~~

~~Realized price per REO MT is an important measure of~~sales, as the ~~market price of our product. Accordingly, we calculate realized price per REO MT to reflect a consistent basis between periods by eliminating the revenue impact of tariff-related rebates. See the~~ ~~“Non-GAAP Financial Measures”~~ ~~section below for a reconciliation of our Total Value Realized, which is a non-GAAP financial measure, to our product sales, which is determined~~numerator in ~~accordance with generally accepted accounting principles in the United States (“GAAP”), as well as~~ the calculation of realized price per REO MT. As we no longer expect to receive any additional tariff rebates, we no longer utilize Total Value Realized in the calculation of realized price per REO MT.

Production Cost per REO MT

We calculate the production cost per REO MT for a given period as the quotient of: (i) our Production Costs (see below) for a given period and (ii) our REO sales volume for the same period. We define Production Costs, which is a non-GAAP financial measure, as our cost of sales (excluding depletion, depreciation and amortization) less stock-based compensation expense included in cost of sales, shipping and freight costs, and costs attributable to certain other ~~sales, for a given period.~~sales.

Production cost per REO MT is a key indicator of our concentrate production efficiency. As a significant portion of our cash costs of Stage I production are fixed, our production cost per REO MT is influenced by mineral recovery, REO grade, plant feed rate and production uptime. See the “Non-GAAP Financial Measures” section below for a reconciliation of our Production Costs, which is a non-GAAP financial measure, to our cost of sales (excluding depletion, depreciation and amortization), which is determined in accordance with GAAP, as well as the calculation of production cost per REO MT.

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~~Key~~ Factors Affecting Our Performance

We believe we are uniquely positioned to capitalize on the key trends of electrification and supply chain security, particularly as domestic EV production grows. Our continued success depends to a significant extent on our ability to take advantage of the following opportunities and meet the challenges associated with them.

Demand for REE

The key demand driver for REE is their use in a diverse array of growing end markets, ~~including:~~including clean-energy and transportation technologies, ~~(e.g., traction motors in EVs~~consumer and ~~generators in wind power turbines); high-technology~~medical applications, ~~(e.g., miniaturization of smart phones and other mobile devices, fiber optics, lasers, robotics, medical devices, etc.);~~ critical defense ~~applications (e.g., guidance and control~~ systems, ~~global positioning systems, radar and sonar, drones, etc.);~~ and essential industrial ~~infrastructure (e.g., advanced catalyst applications in oil refining and pollution-control systems in traditional internal-combustion automobiles, etc.).~~infrastructure. We believe ~~these drivers will fuel~~we benefit from the continued growth of the rare earth market, particularly the market for NdPr and permanent ~~magnets.~~

~~We believe we benefit~~magnets, and from several demand tailwinds for ~~REE, and particularly for NdPr.~~REE. These include the trend toward electrification; geographic supply chain diversification, particularly in relation to ~~China,~~China; the U.S. government ~~strategy~~initiatives to restore domestic supply of key ~~minerals,~~minerals; and the increasing acceptance of environmental, social and governance mandates.

However, changes in technology ~~may~~could also drive down the use of REE, including NdPr, in the components in which they are now used, or lead to a decline in reliance on such components altogether. Such actual, or perceived, decreases in demand for REE, could result in a decline in the market price of REE, including NdPr, and/or result in pricing volatility. We also operate in a competitive industry, and many of our key competitors are based in China, where competitors may not be subject to the same rigorous environmental standards and production costs are typically lower than in the United States.

Maximizing Production Efficiency

In ~~2021,~~2022, REO production ~~was approximately~~remained 3.5x greater than the highest ~~ever~~ production in a twelve-month period achieved at Mountain Pass by the former operator prior ~~operator~~to the implementation of ~~Mountain Pass using principally~~Stage I. This was achieved by optimizing the ~~same capital equipment. We achieved these results through an optimized~~ reagent scheme, ~~lower~~reducing process temperatures, ~~better management of the~~improving tailings facility management, and ~~a commitment~~committing to operational excellence, ~~driving~~that has allowed us to sustain approximately 95% uptime. ~~We also believe that our~~Our Stage I optimization ~~initiatives~~project enabled us to achieve what we believe to be world-class production cost levels for rare earth concentrate.

The success of our business reflects our ability to continue to manage our costs. Our production achievements in Stage I have provided economies of scale to lower production costs per ~~unit~~MT of REO produced in concentrate. Furthermore, we designed our Stage II ~~is designed to enable us to continue to manage our cost structure for separating REE through an optimized facility~~ process ~~flow. The reintroduction of the oxidizing roasting step will allow us~~flow to capitalize on the inherent advantages of the bastnaesite ore at Mountain Pass, ~~which~~that is ~~uniquely suitable~~well-suited to low-cost refining by selectively eliminating the need to carry cerium, a lower-value ~~cerium~~mineral, through the separations process. ~~The recommissioning of our natural gas-powered combined heat and power (“CHP”) plant, which was completed in December 2021, removed our reliance on the regional electric power grid. Further,~~Additionally, our location offers ~~significant~~ transportation advantages that create meaningful cost efficiencies in securing incoming supplies and shipping of our final products.

We currently operate a single site in a single location, and any stoppage in activity, including for reasons outside of our control, could adversely impact our production, results of operations and cash flows. In addition, several of our current and potential competitors are government supported and may have access to substantially ~~greater~~more capital, which may allow them to make similar or greater efficiency improvements or undercut market prices for our product.

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Development of Our REE Refining, ~~Capabilities~~Metal Alloy, and ~~Other Opportunities~~Magnet-Making Capabilities

Stage II ~~is focused on advancing~~advances our operations from the production of rare earth concentrate to the separation of individual REE. ~~Construction is nearing completion and commissioning activities have commenced.~~ The project ~~incorporates~~incorporated upgrades and enhancements to the ~~existing~~prior facility process flow to reliably produce separated REE at a ~~lower~~low cost and with ~~an expected smaller environmental footprint per unit~~the intent of ~~REO produced than previously achieved. As part of Stage II,~~minimizing our impact on the environment. More specifically, we ~~are reintroducing~~have reintroduced an oxidizing roasting circuit, ~~reorienting~~reoriented portions of the plant process flow, ~~increasing~~increased product finishing capacity, ~~improving~~improved wastewater management, and ~~making~~made other improvements to materials handling and storage. Significant commissioning activities commenced in the fourth quarter of 2022 beginning with the concentrate drying and roasting circuits, and continued into the first quarter of 2023 with most of the remaining circuits. Upon ~~completion~~reaching run-rate production of REE in Stage II, we expect to be a global low-cost, high-volume producer of NdPr oxide, which represents a majority of the value contained in our concentrate.

~~Further,~~Partially supported by a $35.0 million award from the Department of Defense’s Office of Industrial Base Policy, Industrial Base Analysis and Sustainment program, we are ~~pursuing vertical integration opportunities~~currently advancing the facilitating works, engineering and procurement on a processing and separations facility for heavy rare earth elements (“HREE”) (the “HREE Facility”), which will be built at Mountain Pass and will be integrated into the rest of our Stage I and Stage II facilities. The HREE Facility is expected to support the separating of HREE contained in the Mountain Pass ore as well as from third-party feedstocks.

In addition, we are currently constructing the Fort Worth Facility, and developing engineering and manufacturing technology to process NdPr oxide into metal alloys and magnets, ~~and~~while incorporating magnet recycling ~~capability. Our~~capabilities. These initiatives support our long-term plans to ~~expand our presence as~~become a leading global source for rare earth ~~magnets began with our recent announcement to build the Fort Worth Facility.~~magnets. We believe integration into magnet production will provide some protection from commodity pricing volatility, while also enhancing our business profile as the producer of a

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critical industrial output in addition to a producer of resources. We expect our Stage III efforts to continue to benefit from geopolitical developments, including initiatives to repatriate critical materials supply chains.

In February 2022, we were awarded a $35.0 million contract by the Department of Defense’s Office of Industrial Base Analysis and Sustainment Program to design and build a facility to process heavy rare earth elements (“HREE”). Successful completion of this project will establish the first processing and separation facility of its kind for HREEs in support of commercial and defense applications in the United States. The HREE processing and separations facility will be built at Mountain Pass and tie into our other Stage II facilities.

Our Mineral Reserves

Our ore body has proven over more than 60 years of operations to be one of the world’s largest and highest-grade rare earth resources. As of ~~September 30, 2021,~~December 31, 2022, SRK Consulting (U.S.), Inc., an independent consulting firm that we retained to assess our reserves, ~~estimates~~estimated total proven and probable reserves of ~~2.1~~1.96 million short tons of REO contained in ~~30.4~~29.30 million short tons of ore at Mountain Pass, with an average ore grade of ~~6.36%~~6.32%. These estimates use an estimated economical cut-off of 2.49% total rare earth oxide. Based on these estimated reserves and our expected annual production rate of REO upon ~~completion~~completing the commissioning of Stage II, ~~as of September 30, 2021,~~ our expected mine life was approximately ~~35 years.~~34 years as of December 31, 2022. Over time, we expect to be able to continue to grow our expected mine life through additional exploratory drilling and improved processing ~~capabilities.~~capabilities, which may result in changes to various assumptions underlying our mineral reserve estimate.

Mining activities in the United States are heavily regulated, particularly in California. Regulatory changes may make it more challenging for us to access our reserves. In addition, new mineral deposits may be discovered elsewhere, which could make our operations less competitive.

~~COVID-19 Pandemic~~

The COVID-19 pandemic remains on-going and continues to impact the global economy. Varying degrees of preventative measures are still in place in China and other parts of the world, including city-wide lockdowns, travel restrictions, closures of non-essential businesses and other quarantine measures. In particular, preventative measures remain prevalent in China as a result of the Chinese government’s “Zero-COVID” policy. Since the first quarter of 2020, 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. Congestion and slowdowns have affected and may continue to affect the capacity at ports to receive deliveries of products or the loading of shipments onto vessels. 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 on the Stage II optimization project. The Company has worked proactively and diligently to adjust working schedules and hours to optimize logistics and shipping, which has thus far prevented a significant negative impact on our product sales and has mitigated certain impacts on Stage II construction and recommissioning progress.

As the situation continues to evolve, including as a result of new and potential future variants of COVID-19, the possibility of federal or state mandates on vaccinations, or other factors that may affect international shipping and logistics 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 the Company’s business, results of operations, production and sales volumes, or growth projects. Accordingly, the extent and duration of any business disruptions, and related financial impact, cannot be estimated at this time.

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Results of Operations

Comparison of the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

The following table summarizes our results of operations:


		For the three months ended September 30,				Change				For the nine months ended September 30,				Change					For the three months ended March 31,				Change
(in thousands, except percentages)	(in thousands, except percentages)	2022		2021		$		%		2022		2021		$		%		(in thousands, except percentages)	2023		2022		$		%
Revenue:	Revenue:																	Revenue:
Product sales	Product sales	$	124,231	$	98,581	$	25,650	26	%	$	425,169	$	230,842	$	194,327	84	%	Product sales	$	95,666	$	161,755	$	(66,089)	(41)	%
Other sales	Other sales	214		1,173		(959)		(82)	%	9,096		2,001		7,095		355	%	Other sales	34		4,503		(4,469)		(99)	%
Total revenue	Total revenue	124,445		99,754		24,691		25	%	434,265		232,843		201,422		87	%	Total revenue	95,700		166,258		(70,558)		(42)	%

Operating costs and expenses:	Operating costs and expenses:																	Operating costs and expenses:
Cost of sales(1)	Cost of sales(1)	22,417		21,907		510		2	%	67,682		57,798		9,884		17	%	Cost of sales(1)	24,216		23,173		1,043		5	%
Selling, general and administrative	Selling, general and administrative	17,604		14,881		2,723		18	%	56,391		40,986		15,405		38	%	Selling, general and administrative	19,403		20,308		(905)		(4)	%
Advanced projects, development and other		2,743		1,327		1,416		107	%	6,229		2,436		3,793		156	%
Advanced projects, start-up, development and other																		Advanced projects, start-up, development and other	8,280		1,818		6,462		355	%
Depreciation, depletion and amortization	Depreciation, depletion and amortization	2,096		6,951		(4,855)		(70)	%	12,763		19,767		(7,004)		(35)	%	Depreciation, depletion and amortization	8,122		5,260		2,862		54	%
Accretion of asset retirement and environmental obligations	Accretion of asset retirement and environmental obligations	418		595		(177)		(30)	%	1,255		1,780		(525)		(29)	%	Accretion of asset retirement and environmental obligations	227		418		(191)		(46)	%
Write-down of inventories		—		—		—		n.m.		—		1,809		(1,809)		(100)	%
Loss on sale or disposal of long-lived assets, net																		Loss on sale or disposal of long-lived assets, net	2,490		257		2,233		869	%
Total operating costs and expenses	Total operating costs and expenses	45,278		45,661		(383)		(1)	%	144,320		124,576		19,744		16	%	Total operating costs and expenses	62,738		51,234		11,504		22	%
Operating income	Operating income	79,167		54,093		25,074		46	%	289,945		108,267		181,678		168	%	Operating income	32,962		115,024		(82,062)		(71)	%
Interest expense, net	Interest expense, net	(1,224)		(2,624)		1,400		(53)	%	(4,455)		(6,417)		1,962		(31)	%	Interest expense, net	(1,359)		(1,905)		546		(29)	%
Other income, net	Other income, net	6,168		97		6,071		6259	%	8,574		3,656		4,918		135	%	Other income, net	13,693		194		13,499		n.m.

Income before income taxes	Income before income taxes	84,111		51,566		32,545		63	%	294,064		105,506		188,558		179	%	Income before income taxes	45,296		113,313		(68,017)		(60)	%
Income tax expense	Income tax expense	(20,934)		(8,803)		(12,131)		138	%	(72,067)		(19,458)		(52,609)		270	%	Income tax expense	(7,849)		(27,762)		19,913		(72)	%
Net income	Net income	$	63,177	$	42,763	$	20,414	48	%	$	221,997	$	86,048	$	135,949	158	%	Net income	$	37,447	$	85,551	$	(48,104)	(56)	%

Adjusted EBITDA		$	91,372	$	68,287	$	23,085	34	%	$	333,581	$	147,734	$	185,847	126	%
Adjusted Net Income		$	68,119	$	48,213	$	19,906	41	%	$	241,771	$	97,585	$	144,186	148	%
Adjusted EBITDA(2)																		Adjusted EBITDA(2)	$	58,700	$	132,257	$	(73,557)	(56)	%
Adjusted Net Income(2)																		Adjusted Net Income(2)	$	51,327	$	94,043	$	(42,716)	(45)	%
Free Cash Flow(2)																		Free Cash Flow(2)	$	(18,971)	$	71,169	$	(90,140)	n.m.

n.m. - Not meaningful.

(1)Excludes depreciation, depletion and amortization.

(2)See the “Non-GAAP Financial Measures” section below.

Revenue consists primarily of product sales, which pertain to our sales of rare earth concentrate, including roasted concentrate, principally to Shenghe under the amended and restated offtake agreement (“A&R Offtake ~~Agreement~~Agreement”) for sales between January ~~2021~~2022 and February 2022, or the Offtake Agreement for sales beginning in March 2022. The sales price of rare earth concentrate sold to Shenghe under both agreements is based on an agreed-upon price per MT, subject to certain quality adjustments depending on the measured characteristics of the product, with an adjustment for the ultimate market price of the product realized by Shenghe upon sales to their customers, including the impact of changes in the exchange rate between the Chinese Yuan and the U.S. dollar.

The ~~increase~~decrease in product sales for the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the prior year period, was driven by ~~a higher~~lower realized price per REO MT, which ~~increased~~decreased by ~~51%~~32%, ~~reflecting higher demand for rare earth products. The increase was partially offset by~~and lower REO sales volume, which decreased by ~~17%, as compared to the prior year period.~~13%. Realized price per REO ~~production volume~~MT for the three months ended ~~September 30, 2022, decreased by 9% due primarily to lower ore feed grade and mineral recoveries,~~March 31, 2023, reflects a significantly softer pricing environment for rare earth products, as compared to the prior year period ~~despite higher year-over-year ore feed rates.~~

when recent pricing peaked. As noted above in the “Factors Affecting Our Performance” section, market prices for rare earth products may be volatile due to actual or perceived changes in supply or demand. The ~~increase in product~~lower sales volume per REO MT for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the prior year period, was ~~driven by a higher realized price per~~primarily due to the timing of shipments as REO ~~MT, which increased by 86%, reflecting higher demand for rare earth products.~~production volumes were largely flat year over year.

Historically, given our take-or-pay offtake arrangement with Shenghe, our REO sales volume ~~and~~has generally tracked our REO production ~~volume were relatively unchanged for~~volumes over time despite period-to-period differences caused by the ~~nine months ended September 30, 2022,~~timing of shipments. However, as ~~compared to the prior year period. For the nine months ended September 30, 2022, higher ore feed rates largely offset lower ore feed grade, as compared to the prior year period.~~we

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accelerate commissioning activities for Stage II, we expect that significant volumes of REO ~~sales volume varies period-to-period based on the timing of shipments, but generally tracks our REO production volumes over time given our take-or-pay offtake arrangement with Shenghe.~~produced from Stage I operations will be retained for separation rather than sold as concentrate. See also the “Quarterly Performance Trend” section below.

The ~~increase~~decrease in other sales for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the prior year period, was driven by ~~$8.5~~$4.1 million of revenue related to a sales agreement with Shenghe entered into in March 2022 for certain stockpiles of rare earth ~~fluoride (“REF”).~~fluoride.

Cost of sales (excluding depreciation, depletion and amortization) consists of production- and processing-related labor costs (including wages and salaries, benefits, and bonuses), mining and processing supplies (such as reagents), parts and labor for the maintenance of our mining fleet and processing facilities, other facilities-related costs (such as property taxes and utilities), packaging materials, and shipping and freight costs.

Cost of sales for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, increased year over year primarily due to ~~increases~~an increase in production cost per REO MT from ~~$1,449~~$1,594 for the three months ended ~~September 30, 2021,~~March 31, 2022, to ~~$1,653~~$1,978 for the three months ended ~~September 30, 2022, and $1,484 for the nine months ended September 30, 2021, to $1,661 for the nine months ended September 30, 2022.~~March 31, 2023. The ~~increases~~increase in production cost per REO MT ~~were~~was principally driven by higher ~~materials, supplies and~~ payroll costs, including anthe continued increase in employee headcount to support the expansion of operations, ~~as well as higher energy~~and to a lesser extent, materials and supplies costs, ~~incurred following the restart~~which increased slightly. The increase in cost of ~~our CHP plant~~sales was partially offset by lower year-over-year REO sales volume, and lower shipping and freight costs, which are included in ~~January 2022. These increases in~~cost of sales but excluded from production cost per REO MT. Shipping and freight costs ~~offset production efficiencies achieved during the three and nine months ended September 30, 2022. Cost of sales~~decreased by $1.0 million for the three months ended September 30, 2022, were also impacted by lower year-over-year REO sales volume. Additionally, shipping and freight costs increased by $1.0 million and $3.5 million for the three and nine months ended September 30, 2022, respectively,March 31, 2023, as compared to the prior year ~~periods.~~period, partially due to the lower REO sales volume.

Notwithstanding the increase in employee headcount discussed above and the impact of costs associated with recommissioning the CHP plant, we believe our production cost per REO MT has stabilized in the short-term, with operating efficiencies helping to offset the impact of inflationary pressure on materials, supplies, energy and labor. In addition, we continue to anticipate efficiency opportunities as we increase REO production volumes in our milling and flotation circuit over time. Production cost per REO MT varies ~~period-to-period~~period to period based on the timing of scheduled outages of our production facilities for ~~maintenance as well as anticipated tie-ins of certain other Stage II-related facilities in the next year.~~maintenance. See also the “Quarterly Performance Trend” section below.

Selling, general and administrative expenses consist primarily of accounting, finance and administrative personnel costs, including stock-based compensation expense related to these personnel; professional services (including legal, regulatory, audit and others); certain engineering expenses; insurance, license and permit costs; facilities rent and other costs; office supplies; general facilities expenses; and certain environmental, health, and safety ~~expenses; and gain or loss on sale or disposal of long-lived assets.~~expenses.

Selling, general and administrative expenses for the three ~~and nine~~ months ended September 30, 2022, reflect an increase in stock-based compensation expense of $3.0 million and $10.7 million, respectively, primarily from a grant of restricted stock units made to our chief executive officer during the fourth quarter of 2021. Excluding stock-based compensation expense, selling, general and administrative expenses for the three months ended September 30, 2022,March 31, 2023, decreased by ~~$0.3~~$0.9 million, or 3%4%, ~~primarily due~~as compared to ~~a legal settlement of $1.0 million, including legal fees, recorded in~~ the prior year period, driven by lower stock-based compensation expense, which decreased by $3.2 million when compared to the prior year period due primarily to the accelerated recognition of stock-based compensation on virtually all of our stock awards. This decrease was offset by ~~an increase~~year-over-year increases in personnel costs ~~in the current year period. Excluding~~(other than stock-based compensation ~~expense, selling, general and administrative expenses for the nine months ended September 30, 2022,~~expense), which increased ~~by $4.7~~$1.7 million, ~~or 16%, primarily due to increases in personnel costs~~ and other general and administrative ~~costs.~~costs required to further build out our corporate infrastructure in support of our downstream expansion.

Advanced projects, start-up, development and other consists principally of costs incurred in connection with research and development of new processes or to significantly enhance our existing ~~processes, certain government contracts, and~~processes; start-up costs associated with restarting an existing facility or commissioning a new facility, circuit or process of our production, manufacturing, or separations facilities prior to achievement of commercial production; as well as costs incurred to support growth ~~and development~~ initiatives or pursue other opportunities.

Advanced projects, start-up, development and other for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, increased year over year primarily due to a $3.2 million increase in start-up costs, which primarily relate to certain ~~start-up~~ costs that do not qualify for capitalization, ~~associated with~~such as salaries and wages, outside services, parts, and training, used or consumed directly in the commissioning and starting up of our Stage II ~~optimization project~~circuits and ~~our Stage III initiatives. In addition, the year-over-year~~facilities that are not yet in commercial production. The remaining increase ~~for the nine months ended September 30, 2022, includes one-time start-up~~primarily relates to costs ~~associated with restart of our CHP plant.~~incurred to support growth initiatives or pursue other opportunities.

Depreciation, depletion and amortization primarily consists of depreciation of property, plant and equipment and depletion of mineral rights. The year-over-year ~~decrease~~increase in depreciation, depletion and amortization for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, primarily reflects ~~a reduction~~an increase in depreciation of ~~$2.7~~$3.1 million ~~as a result of a decrement to our asset retirement obligation (“ARO”) (see~~ ~~Note 8, “Asset Retirement and Environmental Obligations,”~~ ~~in the notes to the unaudited Condensed Consolidated Financial Statements for more information), as well as decreases in depletion of $2.1~~

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~~million and $5.2 million, respectively,~~ resulting from ~~a revision to extend~~the placement of several new circuits and facilities associated with our ~~estimate of the remaining useful life of the mineral rights~~Stage II optimization project into service at the ~~beginning~~end of the fourth quarter of ~~2021.~~2022.

Accretion of asset retirement and environmental obligations is based on the estimated future cash flows required to reclaim ~~our mine pit~~certain land areas associated with mineral extraction activities and certain related facilities at Mountain Pass and to monitor groundwater contamination, respectively. Accretion of asset retirement and environmental obligations for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, decreased year over year primarily as a result of a significant decrement to ~~the Company’s ARO~~our asset retirement obligation during ~~the fourth quarter of 2021. The ARO decrement recorded in~~ the third quarter of 2022, ~~(noted above) will further reduce~~which reduced the accretion of our ~~ARO~~asset retirement obligation in ~~future~~subsequent periods.

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Loss on sale or disposal of long-lived assets, net consists of gains or losses on the sale or disposal of property, plant and equipment, as well as demolition costs. The year-over-year increase in loss on sale or disposal of long-lived assets, net, for the ~~nine~~three months ended ~~September 30, 2021, pertains~~March 31, 2023, principally relates to ~~a non-cash write-down of a portion of our legacy low-grade stockpile inventory during the second quarter of 2021. See~~ ~~Note 5, “Inventories,”~~demolition costs incurred in ~~the notes~~connection with demolishing and removing certain out-of-use older facilities and infrastructure from Mountain Pass to ~~the unaudited Condensed Consolidated Financial Statements for more information.~~accommodate future expansion in rare earth processing.

Interest expense, net principallyconsists of expense associated with the 0.25% per annum interest rate and amortization of the debt issuance costs on our Convertible Notes (as defined in the “Liquidity and Capital Resources” section below)~~; the~~ and amortization of the discount on ~~our~~a previous debt obligation to ~~Shenghe; and the expense associated with the 0.25% per annum interest rate on our Convertible Notes,~~Shenghe, offset by interest capitalized. Interest expense, net for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, decreased year over year due to the full repayment of the ~~Offtake Advances~~debt obligation to Shenghe in the first quarter of ~~2022, offset by the timing of the issuance of the Convertible Notes in March 2021.~~2022.

Other income, net consists of interest and investment income and non-operating gains or losses. Other income, net for the three ~~and nine~~ months ended ~~September 30, 2022,~~March 31, 2023, increased year over year as a result of interest and investment income earned on our short-term investments, which were purchased starting in the second quarter of 2022. ~~The year-over-year increase in other~~Interest and investment income ~~net for the nine months ended September 30, 2022, was offset by a non-cash gain recognized during the second quarter of 2021 as a result~~is principally generated from accretion of the ~~Small Business Administration’s approval to forgive the Paycheck Protection Loan, which had a principal amount of $3.4 million.~~discount on such investments.

Income tax expense consists of an estimate of U.S. federal and state income taxes in the jurisdictions in which we conduct business, adjusted for federal, state and local allowable income tax benefits, the effect of permanent differences and any valuation allowance against deferred tax assets. The effective tax rate (income taxes as a percentage of income or loss before income taxes) was ~~24.9%~~17.3% and 24.5% for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~respectively, as compared to 17.1% and 18.4%~~respectively. The effective tax rate for the three ~~and nine~~ months ended ~~September 30, 2021.~~March 31, 2023, differed from the statutory tax rate of 21% primarily due to excess tax benefits associated with stock-based compensation. The effective tax ~~rates~~rate for the three months ended March 31, 2022, differed from the statutory tax rate of 21% primarily due to state income tax expense and a deduction limitation on ~~officer’s~~officers’ compensation, partially offset by the California competes tax credit awarded to us in the fourth quarter of ~~2021 and a partial release of the valuation allowance against deferred tax assets in the third quarter of 2022.~~2021.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 which, among other things, implements a 15% minimum tax on book income of certain large corporations, a 1% excise tax on net stock repurchases, and provides several tax incentives to promote clean energy for tax years beginning after December 31, 2022. ~~At this time, we~~We do not expect the minimum tax or excise tax to have a material impact on our unaudited Condensed Consolidated Financial Statements. We ~~are continuing~~expect to ~~evaluate~~benefit from the ~~impact~~Section 45X Advanced Manufacturing Production Credit, which provides a credit equal to 10% of the ~~clean energy incentives.~~costs incurred with respect to the production of certain critical minerals, including NdPr oxide.

Quarterly Performance Trend

While our business is not highly seasonal in nature, we sometimes experience a timing lag between production and sales, which may result in volatility in our results of operations between periods. In addition, quarterly production is impacted by the timing of scheduled outages of our production facilities for maintenance, which typically occur in the second and fourth quarter. As noted above, as we evolve as a business and transition from a producer of rare earth concentrate to a producer of separated rare earth products, the metrics that management anticipates using to evaluate the business may change or be revised.

The following table presents our key performance indicators for the quarterly periods indicated:


		FY2022						FY2021								FY2020					FY2023		FY2022								FY2021
(in whole units or dollars)	(in whole units or dollars)	Q3		Q2		Q1		Q4		Q3		Q2		Q1		Q4		Q3		(in whole units or dollars)	Q1		Q4		Q3		Q2		Q1		Q4		Q3		Q2		Q1
REO production volume (MTs)	REO production volume (MTs)	10,886		10,300		10,828		10,261		11,998		10,305		9,849		9,337		10,197		REO production volume (MTs)	10,671		10,485		10,886		10,300		10,828		10,261		11,998		10,305		9,849
REO sales volume (MTs)	REO sales volume (MTs)	10,676		10,000		11,706		9,674		12,814		9,877		9,793		10,320		9,429		REO sales volume (MTs)	10,215		10,816		10,676		10,000		11,706		9,674		12,814		9,877		9,793
Realized price per REO MT	Realized price per REO MT	$	11,636	$	13,918	$	13,818	$	10,101	$	7,693	$	7,343	$	5,891	$	4,070	$	3,393	Realized price per REO MT	$	9,365	$	8,515	$	11,636	$	13,918	$	13,818	$	10,101	$	7,693	$	7,343	$	5,891
Production cost per REO MT	Production cost per REO MT	$	1,653	$	1,750	$	1,594	$	1,525	$	1,449	$	1,538	$	1,475	$	1,589	$	1,389	Production cost per REO MT	$	1,978	$	1,928	$	1,653	$	1,750	$	1,594	$	1,525	$	1,449	$	1,538	$	1,475

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Liquidity and Capital Resources

Liquidity refers to our ability to generate sufficient cash flows to meet the cash requirements of our business operations, including working capital and capital expenditure needs, contractual obligations, debt service and other commitments. In recent years, our principal sources of liquidity have been financing through the consummation of the business combination with Fortress Value Acquisition Corp. in November 2020, the issuance of the Convertible Notes in March 2021, and net cash from operating activities. As of ~~September 30, 2022,~~March 31, 2023, we had ~~$1,264.3~~$1,169.0 million of cash, cash equivalents and short-term investments and $690.0 million principal amount of long-term debt.

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Our results of operations and cash flows depend in large part upon the market prices of REO and particularly the price of rare earth concentrate. Rare earth concentrate is not quoted on any major commodities market or exchange and demand is currently constrained to a relatively limited number of refiners, a significant majority of which are based in China. Although we believe that our cash flows from operations and cash on hand are adequate to meet our liquidity requirements for the foreseeable future, uncertainty exists as to the market price of REO, as evidenced by the volatility experienced in 2022, especially in light of the ongoing COVID-19 pandemic, including the emergence of new and potential future variants. Volatility in the market price of REO continued into 2023 due to concerns over the global economic conditions and actual or perceived concerns over increases in the supply of rare earth products.

Our current working capital needs relate mainly to our mining and beneficiation operations. However, as we transition to selling separated REO and other rare earth products, and advance our Stage III magnetics initiatives, we anticipate our working capital needs will increase significantly. Our principal capital expenditure requirements relate mainly to completing the commissioning of our Stage II optimization project, constructing the HREE Facility, and ~~related HREE project and the development of~~developing the Fort Worth Facility, as well as ~~the~~ periodic replacement of mining or processing equipment. Our future capital requirements will also depend on several other factors, including future acquisitions and potential additional investments in further downstream production.

The completion of our mission to become a fully integrated domestic magnetics producer is expected to be capital intensive. In accelerating the strategic opportunity for the separation of HREE, enhancements were made to the initial scope of the Stage II project. Including these enhancements and other factors impacting the remaining cost of completion and including certain early design and procurement costs associated with the HREE ~~separation facility,~~Facility, and the development and construction costs of the Fort Worth Facility, as well as other growth and infrastructure investments at Mountain Pass, we expect to spend approximately ~~$350~~$300 million onof capital ~~assets~~costs in ~~2022.~~2023. We expect to ~~spend additional amounts in 2023 and 2024 for final payments related to the Stage II optimization project and~~incur further costs to complete the HREE ~~separation facility~~Facility and the Fort Worth ~~Facility.~~Facility in 2024, in addition to investing in other growth and maintenance projects.

Our estimated costs or estimated time to complete and commission these projects may increase, potentially significantly, due to factors outside of our control. While we believe that we have sufficient cash resources to fund these initiatives and operating working capital in the near term, we cannot assure this. If our available resources prove inadequate to fund our plans or commitments, we may be forced to revise our strategy and business plans or could be required, or elect, to seek additional funding through public or private equity or debt financings; however, such funding may not be available on terms acceptable to us, if at all. Any delays in our ongoing capital projects or substantial cost increases, including construction costs and related materials costs related to their execution, could significantly impact our ability to maximize our revenue opportunities and adversely impact our business and cash flows.

Debt and Other Long-Term Obligations

Convertible Notes: In March 2021, we issued $690.0 million aggregate principal amount of 0.25% unsecured green convertible senior notes that mature, unless earlier converted, redeemed or repurchased, on April 1, 2026 (the “Convertible Notes”), at a price of par. Interest on the Convertible Notes is payable on April 1st and October 1st of each year, beginning on October 1, 2021.

The Convertible Notes are convertible into shares of ~~the Company’s~~our common stock at an initial conversion price of $44.28 per share, or 22.5861 shares, per $1,000 principal amount of notes, subject to adjustment upon the occurrence of certain corporate events. However, in no event will the conversion price exceed 28.5714 shares of common stock per $1,000 principal amount of notes.

We aim to allocate an amount equal to the net proceeds from the Convertible Notes offering to existing or future investments in, or the financing or refinancing of, eligible “green projects.” Eligible green projects are intended to reduce ~~the Company’s~~our environmental impact and/or enable the production of low-carbon technologies. Pending such allocation of the net proceeds to eligible green projects, we ~~intend to~~may use the net proceeds from the Convertible Notes offering for general corporate purposes.

~~Offtake Advances:~~ In March 2022, the Company made a $2.9 million payment to Shenghe pursuant to an obligation under the A&R Offtake Agreement to pay Shenghe, on an annual basis, an amount equal to our annual net income, less any amounts recouped through the Gross Profit Recoupment mechanism over the course of the year, until the Prepaid Balance was reduced

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~~to zero (terms as discussed and defined in~~ ~~Note 3, “Relationship and Agreements with Shenghe,”~~ ~~in the notes to the unaudited Condensed Consolidated Financial Statements).~~

Upon payment by the Company, the Prepaid Balance was repaid in full, and the A&R Offtake Agreement was terminated. Prior to full repayment, the debt to Shenghe was satisfied primarily through product sales, where partial non-cash consideration was received by the Company in the form of debt reduction (generally equal to approximately 15% of the ultimate market value of the REO, excluding tariffs, duties and certain other charges).

Equipment Notes: We have previously entered into several financing agreements for the purchase of equipment, including trucks, tractors, loaders, graders, and various other ~~machinery, most recently in February 2021.~~machinery. As of ~~September 30, 2022,~~March 31, 2023, we had ~~$7.8~~$6.5 million in principal (and accrued interest) outstanding under the equipment notes.

Asset Retirement and Environmental Obligations: See Note 7, “Asset Retirement and Environmental Obligations,” in the notes to the unaudited Condensed Consolidated Financial Statements for our estimated cash requirements to settle asset retirement and environmental obligations.

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Cash Flows

The following table summarizes our cash flows:


		For the nine months ended September 30,				Change				For the three months ended March 31,						Change
(in thousands, except percentages)	(in thousands, except percentages)	2022		2021		$		%			(in thousands, except percentages)	2023		2022			$		%
Net cash provided by (used in):	Net cash provided by (used in):										Net cash provided by (used in):
Operating activities	Operating activities	$	314,419	$	70,464	$	243,955	346	%		Operating activities	$	55,491	$	120,971		$	(65,480)	(54)	%
Investing activities	Investing activities	$	(1,041,727)	$	(83,680)	$	(958,047)	1145	%		Investing activities	$	462,188	$	(49,802)		$	511,990	n.m.
Financing activities	Financing activities	$	(19,435)	$	669,610	$	(689,045)	n.m.			Financing activities	$	(6,822)	$	(17,911)		$	11,089	(62)	%

n.m. - Not meaningful.

Net Cash Provided by Operating Activities: Net cash provided by operating activities ~~increased~~decreased by ~~$244.0~~$65.5 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to the prior year period, reflecting the ~~increase~~decrease in product sales and ~~a net~~an increase ~~due to~~in inventories as we prepare for the ~~timing~~operation of ~~receipt or payment of working capital items, such as accounts receivable,~~our Stage II separations facilities. The decrease was partially offset ~~by increases in our cost~~as a result of ~~sales; selling, general and administrative expenses; and payments for income taxes of $16.8 million. In addition,~~excluding $13.6 million of our product sales ~~was excluded~~ from cash provided by operating activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2022, since that portion of the sales price was retained by Shenghe to reduce the debt obligation, with no similar amount in the current year period.

Net Cash Provided by (Used in) Investing Activities:Net cash provided by investing activities was $462.2 million for the three months ended March 31, 2023, compared to ~~$38.9~~net cash used in investing activities of $49.8 million in the prior year period.

~~Net Cash Used in Investing Activities:~~Net cash used in investing activities increased by $958.0 million for the nine months ended September 30, 2022, compared to the prior year period, reflecting purchases of short-term investments of $1,358.4 million and an increase in additions to property, plant and equipment relating The change related primarily to ~~our Stage II optimization project and our Fort Worth Facility, partially offset by proceeds from~~gross sales and maturities of short-term investments of ~~$525.9~~$857.5 million and ~~a $2.5~~purchases of short-term investments of $320.9 million ~~increase~~ in ~~proceeds from government awards used~~the current year period. Additions to property, plant and equipment for the three months ended March 31, 2023, increased by $19.5 million when compared to the prior year period, relating primarily to continued construction ~~specifically~~spend on our Stage II optimization ~~project.~~project and the Fort Worth Facility, which has ramped up significantly when comparing both periods.

Net Cash ~~Provided by (Used in)~~Used in Financing Activities: Net cash used in financing activities ~~was $19.4~~decreased by $11.1 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, as compared to ~~net cash provided by financing activities of $669.6 million in~~ the prior year ~~period. The current year~~ period, ~~consisted primarily of~~reflecting lower tax withholding on stock-based awards and lower principal payments on debt obligations and finance leases, ~~while~~principally due to a $2.9 million payment to Shenghe in the prior year period ~~consisted primarily of~~to fully satisfy the ~~net proceeds received from the issuance of the Convertible Notes in March 2021 of $672.3 million.~~debt obligation.

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Non-GAAP Financial Measures

We present ~~Total Value Realized, Production Costs,~~ Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Production Costs, and Free Cash Flow, which are non-GAAP financial measures that we use to supplement our results presented in accordance with GAAP. These measures may be similar to measures reported by other companies in our industry and are regularly used by securities analysts and investors to measure companies’ financial performance. ~~Total Value Realized, Production Costs,~~ Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Production Costs, and Free Cash Flow are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance or liquidity of other companies within our industry or in other industries.

~~Total Value Realized~~

As noted above, we no longer utilize Total Value Realized since we do not expect to receive any additional tariff rebates, which we use to calculate our key performance indicator, realized price per REO MT, is a non-GAAP financial measure. As mentioned above, realized price per REO MT is an important measure of the market price of our product. The following table presents a reconciliation of our Total Value Realized, topreviously adjusted from our product sales ~~which is~~as determined in accordance with ~~GAAP, as well as the calculation of realized price per REO MT:~~

For the three months ended September 30, For the nine months ended September 30,
(in thousands, unless otherwise stated) 2022 2021 2022 2021
Product sales $ 124,231 $ 98,581 $ 425,169 $ 230,842
Adjusted for:
Tariff rebate(1)
— — — (2,050)
Total Value Realized 124,231 98,581 425,169 228,792
Divided by:
REO sales volume (in MTs) 10,676 12,814 32,382 32,484
Realized price per REO MT (in dollars)(2)
$ 11,636 $ 7,693 $ 13,130 $ 7,043

~~(1)Represents non-cash revenue recognized in connection with a tariff rebate received relating to product sales from prior periods.~~

~~(2)May not recompute as presented due to rounding.~~

~~Production Costs~~

Production Costs, which we use to calculate our key performance indicator, production cost per REO MT, is a non-GAAP financial measure. As mentioned above, production cost per REO MT is a key indicator of our concentrate production efficiency. The following table presents a reconciliation of our Production Costs to our cost of sales (excluding depreciation, depletion and amortization), which is determined in accordance with GAAP, as well as the calculation of production cost per REO MT:

For the three months ended September 30, For the nine months ended September 30,
(in thousands, unless otherwise stated) 2022 2021 2022 2021
Cost of sales (excluding depreciation, depletion and amortization) $ 22,417 $ 21,907 $ 67,682 $ 57,798
Adjusted for:
Stock-based compensation expense(1)
(889) (542) (2,110) (2,438)
Shipping and freight(2)
(3,796) (2,795) (10,548) (7,076)
Other(3)
(89) — (1,225) (79)
Production Costs 17,643 18,570 53,799 48,205
Divided by:
REO sales volume (in MTs) 10,676 12,814 32,382 32,484
Production cost per REO MT (in dollars)(4)
$ 1,653 $ 1,449 $ 1,661 $ 1,484

~~(1)Pertains only to the amount of stock-based compensation expense included in cost of sales.~~

~~(2)Includes $1.3 million for the nine months ended September 30, 2022, of shipping and freight costs associated with sales of REF stockpiles.~~

~~(3)Amount for the nine months ended September 30, 2022, pertains primarily to costs (excluding shipping and freight) attributable to sales of REF stockpiles.~~

~~(4)May not recompute as presented due to rounding.~~

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GAAP.

Adjusted EBITDA

We calculate Adjusted EBITDA as our GAAP net income before interest expense, net; income tax expense or benefit; and depreciation, depletion and amortization; further adjusted to eliminate the impact of stock-based compensation expense; start-up costs; transaction-related ~~start-up~~ and other non-recurring costs; accretion of asset retirement and environmental obligations; gain or loss on sale or disposal of long-lived assets; ~~write-downs of inventories; tariff rebates;~~ and other income or loss. We present Adjusted EBITDA because it is used by management to evaluate our underlying operating and financial performance and trends. Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-recurring, non-cash or are not related to our underlying business performance. This non-GAAP financial measure is intended to supplement our GAAP results and should not be used as a substitute for financial measures presented in accordance with GAAP.

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The following table presents a reconciliation of our Adjusted EBITDA, which is a non-GAAP financial measure, to our net income, which is determined in accordance with GAAP:


		For the three months ended September 30,				For the nine months ended September 30,					For the three months ended March 31,
(in thousands)	(in thousands)	2022		2021		2022		2021		(in thousands)	2023		2022
Net income	Net income	$	63,177	$	42,763	$	221,997	$	86,048	Net income	$	37,447	$	85,551
Adjusted for:	Adjusted for:									Adjusted for:
Depreciation, depletion and amortization	Depreciation, depletion and amortization	2,096		6,951		12,763		19,767		Depreciation, depletion and amortization	8,122		5,260
Interest expense, net	Interest expense, net	1,224		2,624		4,455		6,417		Interest expense, net	1,359		1,905
Income tax expense	Income tax expense	20,934		8,803		72,067		19,458		Income tax expense	7,849		27,762
Stock-based compensation expense(1)	Stock-based compensation expense(1)	7,806		4,552		25,019		14,723		Stock-based compensation expense(1)	7,013		9,773
Transaction-related, start-up and other non-recurring costs(2)		1,885		1,914		4,341		3,219
Start-up costs(2)										Start-up costs(2)	4,564		1,508
Transaction-related and other non-recurring costs(3)										Transaction-related and other non-recurring costs(3)	3,322		17
Accretion of asset retirement and environmental obligations	Accretion of asset retirement and environmental obligations	418		595		1,255		1,780		Accretion of asset retirement and environmental obligations	227		418
Loss on sale or disposal of long-lived assets, net(3)		—		182		258		219
Write-down of inventories(4)		—		—		—		1,809
Tariff rebate(5)		—		—		—		(2,050)
Other income, net(6)		(6,168)		(97)		(8,574)		(3,656)
Loss on sale or disposal of long-lived assets, net										Loss on sale or disposal of long-lived assets, net	2,490		257
Other income, net										Other income, net	(13,693)		(194)
Adjusted EBITDA	Adjusted EBITDA	$	91,372	$	68,287	$	333,581	$	147,734	Adjusted EBITDA	$	58,700	$	132,257

(1)Principally included in “Selling, general and administrative” within our unaudited Condensed Consolidated Statements of Operations.

(2)~~Amounts for the three and nine months ended September 30, 2022, are principally comprised of start-up~~Relates to certain costs that do not qualify for capitalization ~~which relate~~incurred in connection with the initial commissioning and starting up of our separations capability at Mountain Pass and our metal alloy and magnet-making capabilities at Fort Worth prior to the ~~restart~~achievement of commercial production. These costs include payroll of employees directly involved in such commissioning activities, training costs, costs of testing and commissioning the new circuits and processes, and other related costs. Given the nature and scale of the related costs and activities, management does not view these as normal, recurring operating expenses, but rather as non-recurring investments to develop such capabilities. Therefore, we believe it is useful and necessary for investors to understand our ~~CHP plant as well as certain costs associated with our Stage II optimization project~~core operating performance in current and ~~Stage III initiatives. Start-up costs are~~future periods by excluding the impact of these start-up costs.

(3)The majority of the amount for the three months ended March 31, 2023, is included in “Advanced projects, start-up, development and other” within our unaudited Condensed Consolidated Statements of ~~Operations. Amounts for the three~~Operations, and ~~nine months ended September 30, 2021, relate~~pertains to ~~advisory, consulting, accounting~~legal, professional services, and ~~legal expenses pertaining to~~other costs associated with non-recurring ~~transactions, and are primarily included in “Selling, general and administrative” within our unaudited Condensed Consolidated Statements of Operations.~~

~~(3)Included in “Selling, general and administrative” within our unaudited Condensed Consolidated Statements of Operations.~~

~~(4)Represents a non-cash write-down of a portion of our legacy low-grade stockpile inventory during the second quarter of 2021.~~

~~(5)Represents non-cash revenue recognized in connection with a tariff rebate received relating to product sales from prior periods.~~

~~(6)~~Amounts for the three and nine months ended September 30, 2022, are principally comprised of interest and investment income. Amount for the nine months ended September 30, 2021, principally represents a non-cash gain recognized as a result of the Small Business Administration’s approval to forgive the Paycheck Protection Loan.transactions.

Adjusted Net Income and Adjusted Diluted EPS

We calculate Adjusted Net Income as our GAAP net income excluding the impact of stock-based compensation expense; start-up costs; transaction-related ~~start-up~~ and other non-recurring costs; gain or loss on sale or disposal of long-lived assets; ~~write-downs of inventories; tariff rebates;~~ and other items that we do not consider representative of our underlying operations; adjusted to give effect to the income tax impact of such ~~adjustments; and the release of valuation allowance.~~adjustments. We calculate Adjusted Diluted EPS as our GAAP diluted earnings per share (“EPS”) excluding the per share impact, using GAAP diluted weighted-average shares outstanding as the denominator, of stock-based compensation expense; start-up costs; transaction-related ~~start-up~~ and other non-recurring costs; gain or loss on sale or disposal of long-lived assets; ~~write-downs of inventories; tariff rebates;~~ and other items that we do not consider representative of our underlying operations; adjusted to give effect to the income tax impact of such ~~adjustments; and the release of valuation allowance.~~adjustments. Adjusted Net Income and Adjusted Diluted EPS exclude certain expenses that are required in accordance with GAAP because they are non-recurring, non-cash, or not related to our underlying business

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performance. ~~These non-GAAP financial measures are intended to supplement our GAAP results and should not be used as a substitute for financial measures presented in accordance with GAAP.~~

Historically, the Company excluded the depletion on the mineral rights for the rare earth ores contained in our mine, which were recorded at fair value upon the acquisition of Secure Natural Resources LLC, from Adjusted Net Income and Adjusted Diluted EPS. Effective September 30, 2022, the Company no longer excludes depletion expense when calculating and presenting Adjusted Net Income and Adjusted Diluted EPS. For purposes of comparability, we have revised the prior year periods for this change.

To calculate the income tax impact of such adjustments on a year-to-date basis, we utilize an effective tax rate equal to our income tax expense excluding material discrete costs and benefits, with any impacts of changes in effective tax rate being recognized in the current period. We present Adjusted Net Income and Adjusted Diluted EPS because it is used by management to evaluate our underlying operating and financial performance and trends. These non-GAAP financial measures are intended to supplement our GAAP results and should not be used as a substitute for financial measures presented in accordance with GAAP.

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The following table presents a reconciliation of our Adjusted Net Income, which is a non-GAAP financial measure, to our net income, which is determined in accordance with GAAP:

For the three months ended September 30, For the nine months ended September 30,
(in thousands) 2022 2021 2022 2021
Net income $ 63,177 $ 42,763 $ 221,997 $ 86,048
Adjusted for:
Stock-based compensation expense(1)
7,806 4,552 25,019 14,723
Transaction-related, start-up and other non-recurring costs(2)
1,885 1,914 4,341 3,219
Loss on sale or disposal of long-lived assets, net(3)
— 182 258 219
Write-down of inventories(4)
— — — 1,809
Tariff rebate(5)
— — — (2,050)
Other(6)
(23) (97) (247) (3,656)
Tax impact of adjustments above(7)
(2,299) (1,101) (7,170) (2,727)
Release of valuation allowance(8)
(2,427) — (2,427) —
Adjusted Net Income $ 68,119 $ 48,213 $ 241,771 $ 97,585


	For the three months ended March 31,
(in thousands)	2023		2022
Net income	$	37,447	$	85,551
Adjusted for:
Stock-based compensation expense(1)	7,013		9,773
Start-up costs(2)	4,564		1,508
Transaction-related and other non-recurring costs(3)	3,322		17
Loss on sale or disposal of long-lived assets, net	2,490		257
Other	(20)		(194)
Tax impact of adjustments above(4)	(3,489)		(2,869)

Adjusted Net Income(5)	$	51,327	$	94,043

(1)Principally included in “Selling, general and administrative” within our unaudited Condensed Consolidated Statements of Operations.

~~(3)Included in “Selling, general and administrative” within our unaudited Condensed Consolidated Statements of Operations.~~transactions.

(4)~~Represents a non-cash write-down of a portion of our legacy low-grade stockpile inventory during the second quarter of 2021.~~

~~(5)Represents non-cash revenue recognized in connection with a tariff rebate received relating to product sales from prior periods.~~

~~(6)~~Amount for the nine months ended September 30, 2021, principally represents a non-cash gain recognized as a result of the Small Business Administration’s approval to forgive the Paycheck Protection Loan, which is included in “Other income, net” within our unaudited Condensed Consolidated Statements of Operations.

~~(7)~~Tax impact of adjustments is calculated using an adjusted effective tax rate, which excludes the impact of discrete tax costs and benefits, to each adjustment. The adjusted effective tax rates were ~~23.8%, 24.4%, 16.8%~~20.1% and ~~19.1%,~~25.3% for the three ~~and nine~~ months ended March 31, 2023 and 2022, respectively.

(5)Effective September 30, 2022, we no longer exclude depletion expense when calculating and ~~2021, respectively.~~

~~(8)Reflects~~presenting Adjusted Net Income. For purposes of comparability, we have revised the ~~impact of a release of a portion of our valuation allowance.~~prior year for this change.

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The following table presents a reconciliation of our Adjusted Diluted EPS, which is a non-GAAP financial measure, to our diluted EPS, which is determined in accordance with GAAP:

For the three months ended September 30, For the nine months ended September 30,
2022 2021 2022 2021
Diluted EPS $ 0.33 $ 0.23 $ 1.16 $ 0.47
Adjusted for:
Stock-based compensation expense 0.04 0.02 0.13 0.08
Transaction-related, start-up and other non-recurring costs(1)
0.01 0.01 0.02 0.02
Loss on sale or disposal of long-lived assets, net 0.00 0.00 0.00 0.00
Write-down of inventories(2)
0.00 0.00 0.00 0.01
Tariff rebate(3)
0.00 0.00 0.00 (0.01)
Other(4)
0.00 0.00 0.00 (0.02)
Tax impact of adjustments above(5)
(0.01) 0.00 (0.03) (0.02)
Release of valuation allowance(6)
(0.01) 0.00 (0.01) 0.00
Adjusted Diluted EPS $ 0.36 $ 0.26 $ 1.27 $ 0.53
Diluted weighted-average shares outstanding 193,409,857 193,215,313 193,438,939 188,639,373


	For the three months ended March 31,
	2023		2022
Diluted EPS	$	0.20	$	0.45
Adjusted for:
Stock-based compensation expense	0.04		0.05
Start-up costs	0.02		0.01
Transaction-related and other non-recurring costs	0.02		0.00
Loss on sale or disposal of long-lived assets, net	0.01		0.00

Tax impact of adjustments above(1)	(0.02)		(0.02)

Adjusted Diluted EPS(2)	$	0.27	$	0.49
Diluted weighted-average shares outstanding	193,613,539		193,490,330

(1)Amounts for the three and nine months ended September 30, 2022, are principally comprised of start-up costs that do not qualify for capitalization, which relate to the restart of our CHP plant as well as certain costs associated with our Stage II optimization project and Stage III initiatives. Amounts for the three and nine months ended September 30, 2021, relate to advisory, consulting, accounting and legal expenses pertaining to non-recurring transactions.

~~(2)Represents a non-cash write-down of a portion of our legacy low-grade stockpile inventory during the second quarter of 2021.~~

~~(3)Represents non-cash revenue recognized in connection with a tariff rebate received relating to product sales from prior periods.~~

~~(4)~~Amount for the nine months ended September 30, 2021, principally represents a non-cash gain recognized as a result of the Small Business Administration’s approval to forgive the Paycheck Protection Loan.

~~(5)~~Tax impact of adjustments is calculated using an adjusted effective tax rate, which excludes the impact of discrete tax costs and benefits, to each adjustment. The adjusted effective tax rates were ~~23.8%, 24.4%, 16.8%~~20.1% and ~~19.1%,~~25.3% for the three ~~and nine~~ months ended March 31, 2023 and 2022, respectively.

(2)Effective September 30, 2022, we no longer exclude depletion expense when calculating and ~~2021, respectively.~~presenting Adjusted Diluted EPS. For purposes of comparability, we have revised the prior year for this change.

~~(6)Reflects the impact of~~Production Costs

Production Costs, which we use to calculate our key performance indicator, production cost per REO MT, is a ~~release of~~non-GAAP financial measure. Production cost per REO MT is a ~~portion~~key indicator of our ~~valuation allowance.~~concentrate production efficiency. As mentioned above, in completing the transition to separated rare earth products, we may determine that production cost per REO MT, which is a metric focused solely on Stage I concentrate operations, and consequently, Production Costs, are no longer meaningful in

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evaluating and understanding our business or operating results. The following table presents a reconciliation of our Production Costs to our cost of sales (excluding depreciation, depletion and amortization), which is determined in accordance with GAAP, as well as the calculation of production cost per REO MT:


	For the three months ended March 31,
(in thousands, unless otherwise stated)	2023		2022
Cost of sales (excluding depreciation, depletion and amortization)	$	24,216	$	23,173
Adjusted for:
Stock-based compensation expense(1)	(1,122)		(715)
Shipping and freight	(2,288)		(3,244)
Other	(603)		(556)
Production Costs	20,203		18,658
Divided by:
REO sales volume (in MTs)	10,215		11,706
Production cost per REO MT (in dollars)	$	1,978	$	1,594

(1)Pertains only to the amount of stock-based compensation expense included in cost of sales.

Free Cash Flow

We calculate Free Cash Flow as net cash provided by operating activities less additions to property, plant and equipment, net of proceeds from government awards used for construction. We believe Free Cash Flow is useful for comparing our ability to generate cash with that of our peers. The presentation of Free Cash Flow is not meant to be considered in isolation or as an alternative to cash flows from operating activities and does not necessarily indicate whether cash flows will be sufficient to fund cash needs.

The following table presents a reconciliation of our Free Cash Flow, which is a non-GAAP financial measure, to our net cash provided by operating activities, which is determined in accordance with GAAP:


		For the nine months ended September 30,					For the three months ended March 31,
(in thousands)	(in thousands)	2022		2021		(in thousands)	2023		2022
Net cash provided by operating activities(1)	Net cash provided by operating activities(1)	$	314,419	$	70,464	Net cash provided by operating activities(1)	$	55,491	$	120,971
Additions to property, plant and equipment, net(2)	Additions to property, plant and equipment, net(2)	(209,202)		(83,805)		Additions to property, plant and equipment, net(2)	(74,462)		(49,802)
Free Cash Flow	Free Cash Flow	$	105,217	$	(13,341)	Free Cash Flow	$	(18,971)	$	71,169

(1)Under the terms of the A&R Offtake Agreement and pursuant to the accounting treatment thereof, $13.6 million ~~and $38.9 million~~ of our product sales for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 ~~and 2021, respectively,~~ were excluded from cash provided by operating activities since that portion of the sales price was retained by Shenghe to reduce the debt obligation.

(2)Amounts for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ are net of ~~$5.1 million~~zero and ~~$2.6~~$5.1 million, respectively, in proceeds from government awards used for construction, specifically our Stage II optimization project.

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Critical Accounting Policies

A complete discussion of our critical accounting policies is included in our Form 10-K for the year ended December 31, ~~2021.~~2022. There have been no significant changes in our critical accounting policies during the three months ended ~~September 30, 2022.~~March 31, 2023.

Recently Adopted and Issued Accounting Pronouncements

Recently adopted and issued accounting pronouncements are described in Note 2, “Significant Accounting Policies,” in the notes to the unaudited Condensed Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~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~~There have been no material changes in our market risk exposures for the three months ended ~~September 30, 2022,~~March 31, 2023, as compared to those discussed in our Form 10-K for the year ended December 31, ~~2021.~~2022.

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ITEM 4. CONTROLS AND PROCEDURES

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.~~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 ~~September 30, 2022,~~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.

T ~~able of Contents~~

ITEM 1A. RISK FACTORS

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.~~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, ~~2021.~~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 ~~September 30, 2022.~~March 31, 2023.

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ITEM 6. EXHIBITS


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.

3329

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

3430


			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			1916
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3227
Item 4. Controls and Procedures			3228

PART II—OTHER INFORMATION
Item 1. Legal Proceedings			3228
Item 1A. Risk Factors			3328


Item 4. Mine Safety Disclosures			3328

Item 6. Exhibits			3329
Signatures			3430