UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission File Number 001-34827

Molycorp, Inc.

(Exact name of registrant as specified in its charter)

Delaware		27-2301797
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
5619 Denver Tech Center Parkway, Suite 1000
Greenwood Village, Colorado		80111
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

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

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting company o
				(Do not check if a smaller reporting company)

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

As of August 10, 2011, the registrant had 83,896,189 shares of common stock, par value $0.001 per share, outstanding.

 

 

MOLYCORP, INC.

INDEX

		PAGE
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets			3
Condensed Consolidated Statements of Operations			4
Condensed Consolidated Statement of Stockholders’ Equity			5
Condensed Consolidated Statements of Cash Flows			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			22
Item 3. Quantitative and Qualitative Disclosures About Market Risk			40
Item 4. Controls and Procedures			41
Part II. OTHER INFORMATION
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 3. Defaults Upon Senior Securities			41
Item 4. (Removed and Reserved)			42
Item 5. Other Information			42
Item 6. Exhibits			44
Exhibit 10.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

MOLYCORP, INC.

(A Company in the Development Stage)

Consolidated Balance Sheets (Unaudited)

(In thousands, except share and per share amounts)

		June 30, 2011				December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents		$	680,282			$	316,430
Trade accounts receivable			43,230				16,421
Inventory (Note 4e)			72,281				18,822
Deferred charges (Note 4m)			7,568				—
Prepaid expenses and other assets			6,745				1,759
Total current assets			810,106				353,432
Non-current assets:
Deposits		$	15,500			$	26,200
Property, plant and equipment, net (Note 4g)			286,389				93,966
Deferred tax assets (Note 4m)			27,519				—
Inventory (Note 4e)			1,051				5,212
Intangible assets, net (Note 4i)			957				639
Other assets			144				111
Total non-current assets			331,560				126,128
Total assets		$	1,141,666			$	479,560
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable		$	80,335			$	13,009
Accrued expenses (Note 4j)			7,658				4,225
Income taxes payable			14,131				—
Debt (Note 4l)			2,610				—
Short-term borrowing — related party (Note 9)			2,384				3,085
Current portion of asset retirement obligation (Note 4k)			394				393
Total current liabilities			107,512				20,712
Non-current liabilities:
Asset retirement obligation (Note 4k)		$	12,840			$	12,078
Debt (Note 4l)			195,073				—
Other non-current liabilities			148				257
Total non-current liabilities			208,061				12,335
Total liabilities		$	315,573			$	33,047
Commitments and contingencies (Note 6)
Equity:
Common stock, $0.001 par value; 350,000,000 shares authorized at June 30, 2011 (Note 4n)			84				82
Preferred stock, $0.001 par value; 5,000,000 shares authorized at June 30, 2011 (Note 4n)			2				—
Additional paid-in capital			865,811				539,866
Accumulated other comprehensive income			1,193				—
Deficit accumulated during the development stage			(51,166	)			(93,435	)
Total Molycorp stockholders’ equity			815,924				446,513
Noncontrolling interest (Note 5)			10,169				—
Total equity			826,093				446,513
Total liabilities and equity		$	1,141,666			$	479,560

See accompanying notes to the consolidated financial statements.

MOLYCORP, INC.

(A Company in the Development Stage)

Consolidated Statements of Operations (Unaudited)

(In thousands, except share and per share amounts)

																		Total from
		Three Months Ended								Six Months Ended								June 12, 2008
		June 30,								June 30,								(Inception) Through
		2011				2010				2011				2010				June 30, 2011
Sales		$	99,615			$	1,904			$	125,876			$	4,922			$	170,263
Operating costs and expenses:
Cost of goods sold			(42,923	)			(5,576	)			(59,600	)			(11,526	)			(132,003	)
Selling, general and administrative			(13,817	)			(4,254	)			(22,156	)			(8,734	)			(56,203	)
Stock-based compensation			(412	)			(15,133	)			(3,311	)			(15,133	)			(32,441	)
Depreciation and amortization			(283	)			(61	)			(366	)			(156	)			(895	)
Accretion expense			(240	)			(216	)			(474	)			(479	)			(2,642	)
Operating income (loss)			41,940				(23,336	)			39,969				(31,106	)			(53,921	)
Other income (expense):
Other income (expense)			133				45				(35	)			66				355
Interest income, net			70				—				210				—				275
			203				45				175				66				630
Income (loss) before income taxes			42,143				(23,291	)			40,144				(31,040	)			(53,291	)
Income tax benefit			6,612				—				6,413				—				6,413
Net income (loss)			48,755				(23,291	)			46,557				(31,040	)			(46,878	)
Net (income) loss attributable to noncontrolling interest			(968	)			—				(968	)			—				(968	)
Net income (loss) attributable to Molycorp stockholders		$	47,787			$	(23,291	)		$	45,589			$	(31,040	)		$	(47,846	)
Net income (loss)		$	48,755			$	(23,291	)		$	46,557			$	(31,040	)		$	(46,878	)
Other comprehensive income:
Foreign currency translation adjustments			1,324				—				1,324				—				1,324
Comprehensive income (loss)		$	50,079			$	(23,291	)		$	47,881			$	(31,040	)		$	(45,554	)
Comprehensive income (loss) attributable to:
Molycorp stockholders		$	48,980			$	(23,291	)		$	46,782			$	(31,040	)		$	(46,653	)
Noncontrolling interest			1,099				—				1,099				—				1,099
		$	50,079			$	(23,291	)		$	47,881			$	(31,040	)		$	(45,554	)
Weighted average shares outstanding (Common shares) (1)
Basic			83,847,119				49,666,732				83,054,811				48,165,914				53,957,611
Diluted			84,413,499				49,666,732				83,339,566				48,165,914				53,957,611
Income (loss) per share of common stock (Note 4o):
Basic		$	0.52			$	(0.47	)		$	0.50			$	(0.64	)		$	(0.97	)
Diluted		$	0.52			$	(0.47	)		$	0.50			$	(0.64	)		$	(0.97	)

See accompanying notes to the consolidated financial statements.

MOLYCORP, INC

(A Company in the Development Stage)

Consolidated Statement of Stockholders’ Equity (Unaudited)

(In thousands, except share and per share amounts)

										Series A Mandatory
										Convertible Preferred																Deficit
		Common Stock								Stock												Accumulated				Accumulated
																		Additional				Other				During the				Total
																		Paid-In				Comprehensive				Development				Molycorp				Noncontrolling				Total
		Shares				Amount				Shares				Amount				Capital				Income				Stage				Stockholders				interest				Equity
Balance at December 31, 2010			82,291,200			$	82				—			$	—			$	539,866			$	—			$	(93,435	)		$	446,513			$	—			$	446,513
Sale of Series A mandatory convertible preferred stock at $100.00 per share, net of underwriting fees and other offering costs			—				—				2,070,000				2				199,640				—				—				199,642				—				199,642
Stock-based compensation			10,735				—				—				—				3,386				—				—				3,386				—				3,386
Issuance of shares for interest in Molycorp Silmet			1,593,419				2				—				—				72,653				—				—				72,655				9,070				81,725
Component of convertible debt			—				—				—				—				36,227				—				—				36,227				—				36,227
Deferred taxes on component of convertible debt			—				—				—				—				14,039				—				—				14,039				—				14,039
Net income			—				—				—				—				—				—				45,589				45,589				968				46,557
Preferred dividends			—				—				—				—				—				—				(3,320	)			(3,320	)			—				(3,320	)
Other comprehensive income			—				—				—				—				—				1,193				—				1,193				131				1,324
Balance at June 30, 2011			83,895,354			$	84				2,070,000			$	2			$	865,811			$	1,193			$	(51,166	)		$	815,924			$	10,169			$	826,093

See accompanying notes to the consolidated financial statements.

MOLYCORP, INC

(A Company in the Development Stage)

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

										Total from
		Six Months Ended								June 12, 2008
		June 30,								(Inception) Through
		2011				2010				June 30, 2011
Cash flows from operating activities:
Net income (loss)		$	46,557			$	(31,040	)		$	(46,878	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			5,421				2,408				16,268
Accretion of asset retirement obligation			474				479				2,642
Deferred income tax benefit			(13,481	)			—				(13,481	)
Non-cash inventory write-downs			1,585				915				23,602
Non-cash share-based compensation expense			3,386				15,133				32,516
Impairment of fixed assets			—				—				3,114
Other operating adjustments			(113	)			13				(170	)
Increase (decrease) in cash, excluding the effects of acquisitions and dispositions, resulting from changes in:
Accounts receivable			(20,711	)			444				(37,683	)
Inventory			(12,593	)			(366	)			(36,462	)
Prepaid expenses and other			(417	)			(994	)			(1,440	)
Accounts payable			14,194				1,489				18,379
Asset retirement obligation			(339	)			(304	)			(1,358	)
Accrued expenses			7,395				(2,931	)			13,881
Net cash provided by/(used in) operating activities			31,358				(14,754	)			(27,070	)
Cash flows from investing activities:
Acquisition of the Mountain Pass facility			—				—				(82,150	)
Cash paid in connection with acquisitions, net of cash acquired			(20,021	)			—				(20,021	)
Proceeds from sale of investment in joint venture			—				—				9,700
Deposits			10,700				—				(15,500	)
Capital expenditures			(79,291	)			(7,260	)			(120,026	)
Other assets			(33	)			—				(144	)
Proceeds from sale of assets			—				9				14
Net cash used in investing activities			(88,645	)			(7,251	)			(228,127	)
Cash flows provided by financing activities:
Capital contributions from original stockholders			—				15,000				125,004
Repayments of short-term borrowings — related party			(1,688	)			—				(2,795	)
Repayments of debt			(2,958	)			—				(2,958	)
Net proceeds from sale of common stock in conjunction with the initial public offering			—				—				378,633
Net proceeds from sale of preferred stock			199,642				—				199,642
Net proceeds from sale of convertible notes			223,100				—				223,100
Payment of financing costs			(22	)			—				(207	)
Payment of preferred dividends			(3,320	)			—				(3,320	)
Proceeds from exercise of stock options			—				300				350
Proceeds from short-term borrowings — related party			—				5,008				11,645
Proceeds from debt			6,288				—				6,288
Net cash provided by financing activities			421,042				20,308				935,382
Effect of exchange rate changes on cash			97				—				97
Net change in cash and cash equivalents			363,852				(1,697	)			680,282
Cash and cash equivalents at beginning of the period			316,430				6,929				—
Cash and cash equivalents at end of period		$	680,282			$	5,232			$	680,282
Supplemental disclosure of non-cash activities:
Change in accrued capital expenditures		$	34,540			$	1,126
Net cash paid for taxes		$	505			$	—

See accompanying notes to the consolidated financial statements.

MOLYCORP, INC.
(A Company in the Development Stage)

Notes to Condensed Consolidated Financial Statements
June 30, 2011
(Unaudited)

(1) Company Background

Molycorp, Inc. was formed on March 4, 2010 for the purpose of continuing the business of Molycorp, LLC in corporate form. On April 15, 2010, the members of Molycorp, LLC contributed either (a) all of their member interests in Molycorp, LLC or (b) all of their equity interest in entities that held member interests in Molycorp, LLC (and no other assets or liabilities) to Molycorp, Inc. in exchange for Molycorp, Inc. Class A common stock. Accordingly, Molycorp, LLC and its wholly-owned subsidiary, Molycorp Minerals, LLC (“Molycorp Minerals”) became subsidiaries of Molycorp, Inc. (the “Corporate Reorganization”). On June 15, 2010, Molycorp LLC was merged with and into Molycorp Minerals. Molycorp, Inc., together with its consolidated subsidiaries, is referred to herein as the “Company” or “Molycorp.”

The Company acquired the Mountain Pass, California rare earth deposit and associated assets (the “Mountain Pass facility”) and assumed certain liabilities from Chevron Mining, Inc. (“Chevron”) on September 30, 2008.

The Mountain Pass facility is located in San Bernardino County, California and is the only significant developed rare earth resource in the western world. Rare earth elements (“REEs”) are a group of specialty elements with unique properties that make them critical to many existing and emerging applications including:

	•		clean-energy technologies such as hybrid and electric vehicles, wind turbines and compact florescent lighting;
	•		high-technology applications including cell phones, personal digital assistant devices, digital music players, hard disk drives used in computers, computing devices, “ear bud” speakers and microphones, as well as fiber optics, lasers and optical temperature sensors;
	•		critical defense applications such as guidance and control systems, communications, global positioning systems, radar and sonar; and
	•		advanced water treatment applications including those for industrial, military, homeland security, domestic and foreign aid use.

The REE group includes 17 elements, namely the 15 lanthanide elements, which are lanthanum, cerium, praseodymium, promethium (which does not occur naturally), neodymium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, and lutetium, and two elements that have similar chemical properties to the lanthanide elements — yttrium and scandium. The oxides produced from processing REEs are collectively referred to as rare earth oxides (“REOs”). Bastnasite is a mineral that contains REEs.

Operations at the Mountain Pass facility began in 1952 under Molybdenum Corporation of America (“MCA”). MCA was purchased by Union Oil of California (“Unocal”) in 1977. In 2002, mining operations were suspended at the Mountain Pass facility primarily due to softening prices for REOs and a lack of additional tailings disposal capacity. Chevron Corporation purchased Unocal in 2005.

Prior to the acquisition, operations at the Mountain Pass facility had been suspended with the exception of a pilot processing project to recover neodymium from lanthanum stockpiles produced prior to Chevron’s ownership of the Mountain Pass facility. The neodymium from lanthanum (“NFL”) pilot processing project was undertaken to improve the facility’s REE processing techniques. From June 12, 2008 (Inception) through March 31, 2010, revenue was generated primarily from the sale of products associated with the NFL pilot processing project, which concluded in February 2010. In April 2010, the Company commenced the second pilot processing campaign to recover cerium, lanthanum, neodymium, praseodymium and samarium/europium/gadolinium concentrate from bastnasite concentrate stockpiles.

On April 1, 2011, Molycorp completed the acquisition of a 90.023% controlling stake in AS Silmet (now known as Molycorp Silmet AS), one of only two rare earth processing facilities in Europe. Additionally, on April 15, 2011, Molycorp completed the acquisition of Santoku America, Inc. (now known as Molycorp Metals and Alloys, Inc.), the only producer of rare earth alloys in the United States (see Note 5).

(2) Basis of Presentation

The Company’s acquisition of the Mountain Pass facility has been accounted for as an acquisition of net assets and not a business combination. As described below, the Company’s current business plan includes investing substantial capital to restart mining operations, construct and refurbish processing facilities and other infrastructure, and to expand into metal and alloy production. Molycorp will continue as a development stage company until these activities have been completed, which is currently expected to be by the end of 2012.

The Company’s acquisitions of Molycorp Metals and Alloys, Inc. (“Molycorp Metals and Alloys” or “MMA”) and of a controlling interest in Molycorp Silmet AS (“Molycorp Silmet”) in April 2011 have been accounted for as business combinations.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and Regulation S-X promulgated under the Securities Exchange Act of 1934. While the December 31, 2010 balance sheet information was derived from the Company’s audited financial statements, for interim periods, GAAP and Regulation S-X do not require all information and notes that are required in the annual financial statements, and all disclosures required by GAAP for annual financial statements have not been included. Therefore, the accompanying unaudited condensed consolidated financial statements should be read in conjunction with Molycorp’s Form 8-K filed on August 5, 2011 with respect to the revised Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2011, and cumulatively for the period from June 12, 2008 (Inception) through March 31, 2011, and the revised Company’s consolidated financial statements as of and for the year ended December 31, 2010, and cumulatively for the period from June 12, 2008 (Inception) through December 31, 2010, for an overstatement of Work in Process (WIP) inventory.

The accompanying unaudited condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, and which, in the opinion of management, are necessary for the fair presentation of Molycorp’s financial position, results of operations and cash flows at June 30, 2011, and for all periods presented. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its consolidated subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

(3) Capital Requirements

Most of the facilities and equipment acquired with the Mountain Pass facility are at least 20 years old and must be modernized or replaced. Under its initial modernization and expansion plan (Project Phoenix Phase 1), the Company intends to spend approximately $531 million through 2012 to restart mining operations, construct and refurbish processing facilities and other infrastructure at the Mountain Pass facility and expand into metal and alloy production. Capital expenditures, on an accrual basis, under this plan totaled $31.4 million in 2010 and $106.4 million during the six months ended June 30, 2011. In January 2011, the Company’s Board of Directors approved a second-phase capacity expansion plan (Project Phoenix Phase 2). Upon the completion of this capacity expansion plan, by the end of 2013, Molycorp expects to have the ability to produce up to approximately 40,000 mt of REO per year at its Mountain Pass facility, or approximately double the amount the Company will be able to produce upon completion of its initial expansion and modernization plan. Management has estimated that Molycorp will incur approximately $250 million, excluding capitalized interest, of capital costs in connection with the second-phase capacity expansion plan in addition to the $531 million, excluding capitalized interest, estimated for the initial modernization and expansion effort.

The Company expects to finance its remaining capital expenditures under the initial modernization and expansion and the second-phase capacity expansion plans as well as its working capital requirements, with its available cash balances as of June 30, 2011, and anticipated revenue from operations. Additionally, the Company may elect to satisfy certain capital expenditure requirements through vendor financing, leasing or other financing arrangements.

On December 10, 2010, Molycorp entered into a memorandum of understanding with Sumitomo Corporation (“Sumitomo”), pursuant to which Sumitomo agreed to, among other things, purchase $100 million of the Company’s common stock and arrange for $30 million of debt financing. Sumitomo is currently conducting a due diligence review and the consummation of these transactions with Sumitomo is subject to the satisfaction of numerous conditions and finalization of definitive agreements.

Prior to securing proceeds for its capital plans through its IPO, the issuance of its 5.5% Series A Mandatory Convertible Preferred Stock (the “Convertible Preferred Stock”) (Note 4n) and its 3.25% Convertible Senior Notes due 2016 (the “Notes”) (Note 4l), the Company submitted a Part I application for a loan guarantee with the U.S. Department of Energy, (“DOE”), in June 2010 for up to $280 million. On July 21, 2010, the DOE deemed the Company’s application eligible for submission of a Part II application, which was submitted on December 31, 2010. Due to program and resource constraints, the application under Section 1705 of the DOE loan guarantee program “LGP” was put on hold on May 10, 2011. At that time, the DOE advised Molycorp that its project may be eligible for funding under Section 1703 of the LGP. The Company has elected to withdraw its application under the DOE loan guarantee program due to its success in raising capital through the Convertible Preferred Stock and the Notes offerings.

(4) Summary of Significant Accounting Policies

(a) Use of Estimates

The preparation of the financial statements, in accordance with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on the Company’s historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ significantly from these estimates under different assumptions and conditions.

Significant estimates made by management in the accompanying financial statements include the collectability of accounts receivable, the recoverability of inventory, the useful lives and recoverability of long-lived assets such as property, plant and equipment, and the adequacy of the Company’s asset retirement obligations.

(b) Revenue and Cost of Goods Sold

Revenue is recognized when persuasive evidence of an arrangement exists, the risks and rewards of ownership have been transferred to the customer, which is generally when title passes, the selling price is fixed or determinable, and collection is reasonably assured. Title generally passes upon shipment of product from the Company’s production facilities. Prices are generally set at the time of, or prior to, shipment. Transportation and distribution costs are incurred only on sales for which the Company is responsible for delivering the product.

Cost of goods sold includes the cost of production as well as write-downs to the extent of inventory costs in excess of market values. Primary production costs include labor, supplies, maintenance costs, depreciation, and plant overhead.

(c) Cash and Cash Equivalents

Cash and cash equivalents consist of cash and liquid investments with an original maturity of three months or less. At June 30, 2011, cash and cash equivalents included $664 million of funds held in money market accounts.

(d) Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company reviews its allowance for doubtful accounts on a quarterly basis. As of June 30, 2011 and December 31, 2010, an allowance for doubtful accounts was not required.

(e) Inventories

Inventories consist of raw materials, work-in-process, finished goods, stockpiles of bastnasite and lanthanum concentrate, and materials and supplies. Inventory cost is determined using the lower of weighted average cost or estimated net realizable value. Inventory expected to be sold in the next 12 months is classified as a current asset in the consolidated balance sheets.

Molycorp evaluates its production levels and costs to determine if any should be deemed abnormal, and therefore excluded from inventory costs. For the three months ended June 30, 2011 and 2010, Molycorp determined that $0.9 million and $3.6 million, respectively, of production costs would have been allocated to additional metric tons produced, assuming Molycorp had been operating at normal production rates. For the six months ended June 30, 2011 and 2010, and cumulatively for the period from June 12, 2008 (Inception) through June 30, 2011, Molycorp determined that $3.5 million, $6.0 million and $17.0 million, respectively, of production costs would have been allocated to additional metric tons produced, assuming Molycorp had been operating at normal production rates. As a result, these costs were excluded from inventory and instead expensed during the applicable periods. The assessment of normal production levels is judgmental and is unique to each quarter. Molycorp models normal production levels and evaluates historical ranges of production in assessing what is deemed to be normal.

Write-downs to estimated net realizable value are charged to cost of goods sold. Many factors influence the market prices for REOs and, in the absence of established prices contained in customer contracts, management uses an independent pricing source to evaluate market prices for REOs at the end of each quarter. For the three months ended June 30, 2011 and 2010, the Company recognized write-downs of zero and $0.3 million, respectively, as a result of production costs in excess of certain REO market prices. For the six months ended June 30, 2011 and 2010, and cumulatively for the period from June 12, 2008 (Inception) through June 30, 2011, the Company recognized write-downs of $0.6 million, $0.9 million, and $21.6 million, respectively, as a result of production costs in excess of certain REO market prices. In addition, the Company recognized a $1.0 million write-down of work in process inventory based on estimated REO quantities for the three months ended June 2011.

The Company evaluates the carrying value of materials and supplies inventories each quarter giving consideration to slow-moving items, obsolescence, excessive levels, and other factors and recognizes related write-downs as necessary.

At June 30, 2011 and December 31, 2010, inventory consisted of the following (in thousands):

		June 30,				December 31,
		2011				2010
Current:
Concentrate stockpiles		$	6,272			$	4,206
Raw materials			29,689				—
Work in process			11,317				3,582
Finished goods			22,645				9,307
Materials and supplies			2,358				1,727
Total current		$	72,281			$	18,822
Long-term:
Concentrate stockpiles		$	995			$	5,108
Finished goods			56				104
Total long-term		$	1,051			$	5,212

(f) Deposits

The Company has $15.5 million in deposits reported as Non-current assets on the Consolidated Balance Sheet as of June 30, 2011. The deposits consist of $14.0 million under an escrow arrangement for the Company’s facilities agreement with Kern River Gas Transmission Company and $1.5 million related to the Company’s construction insurance program. During the second quarter of 2011, the Company collected an $18.2 million deposit which was no longer required to secure surety bonds obtained for the California state and regional agencies relating to the Mountain Pass facility closure and reclamation obligations.

(g) Property, Plant and Equipment, net

Property, plant and equipment associated with the acquisitions of the Mountain Pass facility, Molycorp Silmet and MMA was recorded at estimated fair value as of the respective acquisition date. Expenditures for new property, plant and equipment and improvements that extend the useful life or functionality of the asset are capitalized. The Company capitalized $73.0 million and $5.0 million in plant modernization costs for the three months ended June 30, 2011 and 2010, respectively, and $114.2 million and $8.4 million in plant modernization costs for the six months ended June 30, 2011 and 2010, respectively. Our anticipated project cost through 2012 to restart the mining operations, construct and refurbish processing facilities and to expand into the production of metals and alloys is $531 million, which includes a $20 million increase, approved by the Board of Directors in January 2011 over our previous estimate. The increase is due to the increased scope of the project including the acceleration of the construction of the new crushing and milling facility and other design changes to allow a faster conversion to 40,000 mt per year than would otherwise be possible.

Mineral properties at June 30, 2011 and December 31, 2010, represent the purchase price allocated to mineral resources associated with the Mountain Pass facility and mineral property development costs.

At June 30, 2011 and December 31, 2010, property, plant and equipment consisted of the following (in thousands):

		June 30,				December 31,
		2011				2010
Land		$	3,860			$	800
Land improvements			15,748				15,415
Buildings and improvements			18,053				6,892
Plant and equipment			90,635				19,560
Vehicles			1,055				1,049
Computer software			2,173				1,563
Furniture and fixtures			279				170
Construction in progress			145,894				34,809
Mineral properties			23,968				23,968
Property, plant and equipment at cost			301,665				104,226
Less accumulated depreciation			(15,276	)			(10,260	)
Property, plant and equipment, net		$	286,389			$	93,966

In accordance with ASC 360, Property Plant and Equipment, long-lived assets such as property, plant, and equipment, mineral properties and purchased intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. There were no events or changes in circumstances indicating that the carrying amount of the Company’s long-lived assets as of June 30, 2011 may not be recoverable.

(h) Mineral Properties and Development Costs

Mineral properties and development costs, which are referred to collectively as mineral properties, include acquisition costs, drilling costs, and the cost of other development work, all of which are capitalized. The Company amortizes mineral properties using the units of production method over estimated proven and probable reserves. Molycorp’s proven and probable reserves are based on extensive drilling, sampling, mine modeling, and mineral recovery from which economic feasibility has been determined. The reserves are estimated based on information available at the time the reserves are calculated. Proven and probable reserves are based on estimates, and no assurance can be given that the indicated levels of recovery of REOs will be realized or that production costs and estimated future development costs will not exceed the net realizable value of the products. Reserve estimates may require revisions based on actual production experience. Market price fluctuations of REOs, as well as increased production costs or reduced recovery rates, could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves.

(i) Intangible Assets

At June 30, 2011 and December 31, 2010, amortizable intangible assets consisted of the following (in thousands):

		June 30,				December 31,
		2011				2010
Trade name		$	786			$	786
Other			558				—
Gross carrying amount			1,344				786
Less accumulated amortization			(387	)			(147	)
Net carrying amount		$	957			$	639

Amortization expense for the three months ended June 30, 2011 and 2010 was $222,250 and $16,250, respectively. Amortization expense for the six months ended June 30, 2011 and 2010, and cumulatively for the period from June 12, 2008 (Inception) through June 30, 2011 was $238,620, $32,500 and $385,950, respectively. Amortization expense for the next five years and thereafter is expected to be as follows (in thousands):

2012		$	128
2013			128
2014			128
2015			128
2016			128
Thereafter			317
Total		$	957

(j) Accrued Expenses

Accrued expenses at June 30, 2011 and December 31, 2010 consisted of the following (in thousands):

		June 30,				December 31,
		2011				2010
Defined contribution plan		$	562			$	1,199
Accrued payroll and related benefits			2,373				1,185
Accrued tolling fees			—				404
Sales and use tax			1,797				532
Bonus accrual			587				554
Other accrued expenses			2,339				351
Total accrued expenses		$	7,658			$	4,225

(k) Asset Retirement Obligation

The Company accounts for reclamation costs, along with other costs related to the closure of the Mountain Pass facility, in accordance with ASC 410-20, Asset Retirement Obligations. This standard requires the Company to recognize asset retirement obligations at estimated fair value in the period in which the obligation is incurred. The Company recognized an asset retirement obligation and corresponding asset retirement cost of $13.3 million in connection with the Mountain Pass facility acquisition. The liability was initially measured at fair value and is subsequently adjusted for accretion expense and changes in the amount or timing of the estimated cash flows. The asset retirement cost was capitalized as part of the carrying amount of the related long-lived assets and is being depreciated over the assets’ remaining useful lives.

Depreciation expense associated with the asset retirement cost was $0.3 million and $0.2 million for the three months ended June 30, 2011 and 2010, respectively. Depreciation expense associated with the asset retirement cost was $0.5 million, $0.5 million and $4.4 million for the six months ended June 30, 2011 and 2010, and cumulatively for the period from June 12, 2008 (Inception) through June 30, 2011, respectively. The following table presents the activity in our asset retirement obligation (in thousands):

						Year Ended
		Six Months Ended				December 31,
		June 30, 2011				2010
Balance at beginning of period		$	12,471			$	14,202
Obligations settled			(339	)			(632	)
Accretion expense			474				912
Revisions in estimated cash flows			628				(1,939	)
Gain on settlement			—				(72	)
Balance at end of period		$	13,234			$	12,471

The Company is required to provide the applicable governmental agencies with financial assurances relating to its closure and reclamation obligations. As of June 30, 2011, the Company had financial assurance requirements of $27.4 million which were satisfied with surety bonds placed with the California state and regional agencies.

(l) Debt

On June 15, 2011, the Company completed the issuance and sale of $230.0 million in aggregate principal amount (net proceeds of $223.1 million after deducting the initial purchasers’ discounts and commissions) of the Notes in an offering exempt from the registration requirements of the Securities Act of 1933 (the “Securities Act”). The Notes were offered only to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Notes are senior unsecured obligations of the Company and bear interest at a rate of 3.25% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, commencing on December 15, 2011. The Notes are convertible at any time into shares of Molycorp’s common stock, cash, or a combination thereof, at Molycorp’s election. The initial conversion rate is 14.0056 shares of Molycorp common stock per $1,000 principal amount of the Notes (equivalent to an initial conversion price of approximately $71.40 per share of Molycorp’s common stock), subject to customary adjustments. The Notes mature on June 15, 2016, unless earlier repurchased or converted in accordance with their terms prior to that date. Molycorp does not have the right to redeem the Notes prior to maturity.

The Company separately accounts for the liability and equity components of convertible debt instruments (the Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The equity component of the Notes is included in the additional paid-in capital section of stockholders’ equity on the consolidated balance sheet and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the Notes. As of June 30, 2011, Molycorp recognized a liability component related to the Notes of $187.2 million, which includes accretion of $0.3 million of the original issue discount, and an equity component of $36.2 million. Transaction costs related to the issuance of the Notes have been allocated to the liability and equity components in proportion to the allocation of proceeds to the components, and accounted for as debt issuance costs (recognized as interest expense over the life of the Notes using the effective interest method) and equity issuance costs (charged against equity), respectively.

Additional debt was assumed as part of the Molycorp Silmet acquisition. The following table provides a summary of the current and noncurrent portion of the debt outstanding as of June 30, 2011 (in thousands).

		At June 30, 2011
		Current				Non-Current
Notes 3.25%, net of discount due June 2016		$	—			$	187,158
Bank loans 2.69% - 3.88% due February 2012 — September 2017			1,010				7,892
Bank overdraft 3.00% due 2011			1,594				—
Total debt			2,604				195,050
Capital lease obligations 1.88% due April 2012			6				23
Total debt and capital lease obligations		$	2,610			$	195,073

Scheduled minimum debt repayments in thousands are $2,610 for the remainder of 2011, $1,734 in 2012, $1,602 in 2013, $1,602 in 2014, $1,526 in 2015, and $235,188 thereafter.

(m) Income Taxes and Valuation Allowance

Prior to the Corporate Reorganization, the taxable income and losses of Molycorp, LLC were reported on the income tax returns of its members. Molycorp, Inc. is subject to federal and state income taxes and files consolidated income tax returns. Molycorp recognizes income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax liability or asset is expected to be settled or recognized. Molycorp records a valuation allowance if, based on available information, it is deemed more likely than not that its deferred income tax assets will not be realized in full. As of June 30, 2011, the Company’s net income of $11.6 million since the Corporate Reorganization included $31.1 million in certain stock-based compensation expense, which is a permanent difference between its income for financial reporting and tax purposes. Other permanent differences include legal and due diligence fees related to the acquisitions that were completed in April 2011, as well as costs related to the registration of common stock sold by certain stockholders in secondary offerings completed during the first and second quarters of 2011. Molycorp has generated net deferred income tax assets of $27.5 million, net of a $3.9 million valuation allowance, as of June 30, 2011.

Prior to the second quarter of 2011, Molycorp had a history of losses and, as a result, it recognized a full valuation allowance against its net deferred tax assets. At June 30, 2011 a significant portion of its deferred tax assets related to tax benefits attributable to mineral basis and the Notes.

Each quarter, the Company evaluates the need to retain all or a portion of the valuation allowance on its deferred tax assets. During the three months ended June 30, 2011, Molycorp determined that it is more likely than not that it will realize its deferred tax assets, including the NOLs. In making this determination, management analyzed, among other things, the Company’s recent history of earnings and cash flows, forecasts of future earnings, the nature and timing of future deductions and benefits represented by the deferred tax assets and liabilities. The reversal of the valuation allowance resulted in a current period net income tax benefit of $18.7 million and an increase in the non-current deferred tax assets on the condensed consolidated balance sheet as of June 30, 2011. The release of the valuation allowance on our mineral basis deferred tax asset of $17.3 million is being recorded as a discrete income tax benefit in the quarter because we are relying on future income to support the realization of the deferred tax asset. Of the remaining $5.3 million of valuation allowance on our other deferred tax assets, $1.4 million has been released and recorded as an income tax benefit in the quarter because we are relying on current year income to support the realization of this deferred tax asset. The remaining $3.9 million of valuation allowance will be released during the third and fourth quarter of 2011 is based on current year income.

The net tax effect of the elimination in consolidation of all intercompany balances and transactions resulted in a deferred charge and income tax payable of $7.6 million.

(n) Stockholders’ Equity

As of June 30, 2011 and December 31, 2010, the Company had 83,895,354 and 82,291,200 shares of common stock outstanding, respectively.

On February 16, 2011, Molycorp completed a public offering of its 5.50% Series A Mandatory Convertible Preferred Stock (“Convertible Preferred Stock”), $0.001 par value per share. In connection with this offering, the Company issued 1,800,000 shares of Convertible Preferred Stock for $100.00 per share. In addition, Molycorp granted the underwriters an option to purchase up to 270,000 additional shares of Convertible Preferred Stock to cover over-allotments. The underwriters exercised their option to purchase the additional shares of Convertible Preferred Stock on March 16, 2011. Each share of the Convertible Preferred Stock will automatically convert on March 1, 2014 into between 1.6667 and 2.0000 shares of Molycorp’s common stock, subject to anti-dilution adjustments. At any time prior to March 1, 2014, holders may elect to convert each share of the Convertible Preferred Stock into shares of common stock at the minimum conversion rate of 1.6667 shares of common stock per share of Convertible Preferred Stock, subject to anti-dilution adjustments. Dividends on the Convertible Preferred Stock are payable on a cumulative basis when, as and if declared by the Company’s Board of Directors (“Board”) or an authorized committee of such Board, at an annual rate of 5.50% on the liquidation preference of $100.00 per share. The Company may pay declared dividends in cash, common stock or any combination of cash and common stock, subject to certain limitations, on March 1, June 1, September 1 and December 1 of each year, starting on June 1, 2011 and to, and including, March 1, 2014. The Convertible Preferred Stock is not redeemable. Molycorp received net proceeds from the Convertible Preferred Stock offering totaling $199.6 million after underwriter discounts and commissions and offering expenses paid by Molycorp, Inc.

On April 1, 2011, Molycorp acquired 80% of the outstanding shares of Molycorp Silmet from AS Silmet Grupp in exchange for 1,593,419 shares of Molycorp common stock, which had a fair value of approximately $72.7 million based on the closing price of the Company’s common stock on the acquisition date, net of an estimated discount that a market participant would require given that issuance of the shares Molycorp transferred in consideration to AS Silmet Grupp was not registered under the Securities Act and such shares are subject to certain lock up provisions, which limit AS Silmet Grupp’s ability to sell these shares.

On May 4, 2011, the Company declared a cash dividend of $1.604 per share on the Convertible Preferred Stock. The aggregate dividend of $3.3 million was paid on June 1, 2011 to holders of record at the close of business on May 15, 2011.

(o) Earnings per Share

Basic earnings per share is computed by dividing the Company’s net income attributed to common stockholders by the weighted average number of shares of common stock outstanding during the period. For the three and six months ended June 30, 2011, the cumulative undeclared and paid dividends on the Convertible Preferred Stock were subtracted from the net income in the period for the purpose of computing the basic earnings per share.

										Total from
										June 12, 2008
		Three Months				Six Months				(Inception)
		Ended				Ended				Through
(In thousands, except share and per share amounts)		June 30, 2011				June 30, 2011				June 30, 2011
Net income (loss) attributed to Molycorp stockholders		$	47,787			$	45,589			$	(47,846	)
Cumulative undeclared and paid dividends on preferred stock			(4,269	)			(4,269	)			(4,269	)
Income (loss) attributed to common stockholders			43,518				41,320				(52,115	)
Weighted average common shares outstanding — basic			83,847,119				83,054,811				53,957,611
Basic earnings (loss) per share		$	0.52			$	0.50			$	(0.97	)
Weighted average common shares outstanding — dilutive			84,413,499				83,339,566				53,957,611
Dilutive earnings (loss) per share		$	0.52			$	0.50			$	(0.97	)

Diluted earnings per share reflect the dilutive impact of potential common stock and unvested restricted shares of common stock in the weighted average number of common shares outstanding during the period, if dilutive. For this purpose, the “treasury stock method” and “if converted method,” as applicable, are used.

Under the treasury stock method, assumed proceeds upon the exercise of stock options are assumed to be used to purchase common stock at the average market price of the shares during the period. Also under the treasury stock method, fixed awards and nonvested shares, such as restricted stock, are considered options for purposes of computing diluted earnings per share. As of June 30, 2011 and December 31, 2010, all potential common stock under the treasury stock method were antidilutive in nature; consequently, the Company does not have any adjustments between earnings per share and diluted earnings per share related to stock options and restricted stock awards.

In applying the if-converted method, conversion is not assumed for purposes of computing diluted earnings per share if the effect would be antidilutive. Convertible preferred stock (such as the Convertible Preferred Stock) is antidilutive whenever the amount of the dividend declared in or accumulated for the current period including the deemed dividend in the period from a beneficial conversion feature per common share obtainable on conversion exceeds basic earnings per share. The Convertible Preferred Stock was antidilutive as of June 30, 2011. Convertible debt (such as the Notes) is antidilutive whenever its interest including any deemed interest from a beneficial conversion feature and nondiscretionary adjustments, net of tax, per common share obtainable on conversion exceeds basic earnings per share. As of June 30, 2011, the Notes were dilutive under the if-converted method; therefore, the shares of common stock obtainable on conversion of the Notes were included in the computation of diluted earnings per share.

(p) Comprehensive Income (Loss)

In addition to Net income (loss), Comprehensive income (loss) includes changes in equity for the three and six months ended June 30, 2011 due to foreign currency translation adjustments.

(q) Foreign Currency

The functional currency for Molycorp Silmet is the Euro. All monetary assets and liabilities recorded in Euro are translated at the current exchange rates and the resulting adjustments are charged or credited directly to cumulative translation adjustments which is a component of other comprehensive income in equity. Revenues and expenses in Euro are translated at the average exchange rates for the period; equity is translated at historical rates.

(5) Acquisitions

The following table summarizes the purchase prices and opening balance sheets for the acquisition of Molycorp Metals and Alloys and the 90.023% controlling interest in Molycorp Silmet:

						Molycorp
		Molycorp Silmet				Metals and Alloys
Effective acquisition date for financial reporting purposes:		April 1, 2011				April 15, 2011
		(in thousands)
Purchase consideration:
Cash consideration		$	9,021			$	17,500
Fair value of common stock			72,653				—
Total purchase consideration		$	81,674			$	17,500
The fair values of the assets and liabilities acquired:
Cash		$	105			$	6,395
Accounts receivable and other current assets			8,626				5,474
Inventory			26,700				11,327
Property and equipment, net			77,947				3,930
Intangible assets subject to amortization			525				—
Liabilities			(19,975	)			(9,626	)
Long-term debt and capital lease obligations			(3,184	)			—
Noncontrolling interest			(9,070	)			—
Total purchase consideration		$	81,674			$	17,500

The purchase price allocations above are based on preliminary assumptions and valuations for each acquisition. These valuations are subject to change as the Company obtains additional information on the assets acquired and liabilities assumed during each acquisition measurement period (up to one year from the acquisition date).

The fair value of the assets acquired includes trade receivables of $5.0 million for Molycorp Silmet and $4.9 million for MMA; these trade receivables are all considered collectible.

The fair value of the noncontrolling interest in Molycorp Silmet was estimated by applying the noncontrolling interest percentage to the preliminary net assets determination.

The amounts of Molycorp Silmet’s ‘and MMA’s (“acquirees”) revenue, earnings and earnings per share included in the Company’s condensed consolidated statements of operations since the acquisition date, and the revenue, earnings and earnings per share of the combined entity had the acquisition date been January 1, 2011, and January 1, 2010, are as follows:

										Net Income
										Attributable To
(In thousands, except per share amounts)		Revenue				Net Income				Molycorp				EPS Basic
Actual April 1, 2011 to June 30, 2011 (acquirees)		$	39,267			$	8,020			$	7,052			$	0.08
Supplemental proforma January 1, 2011 to June 30, 2011 (combined entity)		$	159,350			$	55,463			$	54,495			$	0.60
Supplemental proforma January 1, 2010 to June 30, 2010 (combined entity)		$	32,598			$	(29,598	)		$	(29,618	)		$	(0.61	)

The 2011 revenue of the acquirees and of the combined entity excludes $19.6 million of intercompany sales. The 2011 earnings of the acquirees and of the combined entity were adjusted to exclude $9.2 million of intercompany sales and $1.8 million of non-recurring acquisition-related costs the Company incurred to acquire Molycorp Silmet and MMA, and to reverse $1.1 million of purchase price variance MMA capitalized during the first quarter of 2011. The 2010 earnings of the combined entity were adjusted to reverse $2.0 million of purchase price variance MMA capitalized during the first two quarters of 2010.

Molycorp Silmet

On April 1, 2011, Molycorp acquired 80% of the outstanding shares of AS Silmet (now Molycorp Silmet) from AS Silmet Grupp in exchange for 1,593,419 shares of Molycorp common stock contractually valued at $80 million based on the average closing price of the Company’s common stock as reported by The New York Stock Exchange for the 20 consecutive trading days immediately preceding April 1, 2011, the acquisition date. Under ASC 805, Business Combinations, the consideration transferred in a business combination is measured at fair value on the acquisition date. Generally, the acquisition-date fair value of shares of common stock transferred by the acquirer is the closing price of that stock on the same date adjusted by a discount that a market participant would require as a result of any restrictions on the sale or transferability of the stock. The fair value of common stock of $72.7 million disclosed in the table above is based on the closing price of the Company’s common stock on the acquisition date, net of an estimated discount that a market participant would require given that issuance of the shares of common stock Molycorp transferred in consideration to AS Silmet Grupp was not registered under the Securities Act and such shares are subject to certain lock up provisions, which limit AS Silmet Grupp’s ability to sell these shares.

AS Silmet Grupp retained a 9.977% ownership interest in Molycorp Silmet. Molycorp acquired the other 10.023% from Treibacher Industrie AG for $9.0 million in cash. The Molycorp Silmet acquisition provides Molycorp with a European base of operations and significantly increases the Company’s current rare earth production capacity by approximately 3,000 mt REO equivalent. Molycorp Silmet sources a portion of rare earth feed stocks for production of its products primarily from Molycorp’s Mountain Pass facility. The main focus of this newly acquired business is on the production of rare earth oxides and metals, including didymium metal, a critical component in the manufacture of neodymium-iron-boron permanent rare earth magnets. Molycorp Silmet’s manufacturing operation is located in Sillamäe, Estonia.

In connection with the acquisition of the 90.023% controlling interest in Molycorp Silmet, the Company incurred $1.2 million of acquisition-related costs, which are included in selling, general and administrative expenses for the three and six-month periods ended June 30, 2011, respectively.

Molycorp Metals and Alloys

On April 15, 2011, Molycorp completed the acquisition from Santoku Corporation (“Santoku”) of all the issued and outstanding shares of capital stock of Santoku America, Inc., which is now known as Molycorp Metals and Alloys, an Arizona-based corporation, in an all-cash transaction for $17.5 million. The acquisition provides Molycorp with access to certain intellectual properties relative to the development, processing and manufacturing of neodymium and samarium magnet alloy products. As part of the stock purchase agreement, Santoku will provide consulting services to Molycorp for the purpose of maintaining and enhancing the quality of MMA’s products. On the same date, Molycorp and Santoku entered into five-year marketing and distribution agreements for the sale and distribution of neodymium and samarium magnet alloy products produced by each party. Additionally, the parties entered into a rare earth products purchase and supply agreement through which MMA will supply Santoku with certain rare earth alloys for a two-year period at prices equal to the feedstock cost plus the applicable product premium as such terms are defined in the agreement.

In connection with the acquisition, the Company incurred $0.6 million of acquisition-related costs, which are included in selling, general and administrative expenses for the three and six-month periods ended June 30, 2011, respectively

(6) Commitments and Contingencies

(a) Future Operating Lease Commitments

The Company has certain operating leases for office space and certain equipment. Remaining annual minimum payments under these leases at June 30, 2011 were $0.2 million in 2011, $0.2 million in 2012, $0.2 million in 2013, $0.2 million in 2014, $0.2 million in 2015 and $0.2 million thereafter, totaling $1.2 million.

(b) Plant Modernization and Expansion Commitments

In connection with the Mountain Pass facility modernization and expansion and future operations, the Company entered into contractual commitments for the purchase of materials and services from various vendors. Future payments for these commitments are estimated at $187.9 million due in 1 year and $50.0 million due in 2-3 years.

(c) Labor Contract

Certain Mountain Pass facility employees are covered by a collective bargaining agreement with the United Steelworkers of America that expires on March 15, 2012. At June 30, 2011, 85 employees, or approximately 49% of the Company’s workforce at Mountain Pass, California, were covered by this collective bargaining agreement.

(d) Reclamation Surety Bonds

At June 30, 2011, Molycorp had placed $27.4 million of surety bonds with California state and regional agencies to secure its Mountain Pass facility closure and reclamation obligations.

(e) Licenses and Permits

The Company is subject to numerous and detailed federal, state and local environmental laws, regulations and permits including health and safety, environmental, and air quality. The Company is subject to strict conditions, requirements and obligations relating to various environmental and health and safety matters in connection with the current permits, and the Company may be subject to additional conditions, requirements and obligations associated with its permits and future operations. Certain conditions could be imposed in order to maintain the required permits including requirements to conduct additional environmental studies and collect and present data to government authorities pertaining to the potential impact of current and future operations upon the environment. Accordingly, the required permits may not be maintained or renewed in a timely fashion if at all, or may be renewed upon conditions that restrict the Company’s ability to conduct its operations economically. Any failure, significant delay or significant change in conditions that is required to maintain or renew permits, could have a material adverse effect on the Company’s business, results of operations and financial condition.

(7) Stock-Based Compensation

Molycorp accounts for stock-based compensation based upon the fair value of the awards at the time of grant. The expense associated with such awards is recognized over the service period associated with the issuance. There are no performance conditions associated with these awards.

Effective November 1, 2009, Molycorp, LLC issued 5,880,000 incentive shares to certain employees and independent directors of the Company. At the time of issuance, due to Molycorp, LLC’s option to repurchase vested shares of terminated participants at a price other than fair value, these incentive shares were classified as liabilities and were valued at zero using the intrinsic value method. On April 15, 2010, all holders of incentive shares contributed their incentive shares to Molycorp, Inc. in exchange for an aggregate of 3,012,420 shares of Class B common stock of Molycorp, Inc., 1,004,140 shares of which vested immediately with an additional 1,004,140 shares vesting on September 30, 2010 and the remaining 1,004,140 shares vesting on September 30, 2011. The shares of Class B common stock were non-transferable and the Company had the right to repurchase vested shares upon the termination of employment for any reason.

The shares of Class B common stock automatically converted into shares of common stock, based on a conversion factor, immediately prior to completion of the IPO. On August 3, 2010, Molycorp completed an IPO of common stock at an offering price of $14.00 per share. At that time, the shares of Class B common stock were converted into an aggregate of 2,232,740 shares of common stock, 744,247 of which remained vested with the remaining 1,488,493 vesting over a period of six months following the IPO. Stock-based compensation associated with these shares was zero and $2.6 million for the three months and the six months ended June 30, 2011, respectively, and $28.7 million for the year ended December 31, 2010

On November 4, 2010, the Compensation Committee of the Board of Directors of the Company approved the grant of 37,500 shares of restricted stock with a three-year cliff vesting period to certain executive officers and a director of the Company. The $1.4 million fair value of the awards was determined using the stock price on the date of grant and is recognized straight-line over the three-year vesting period. The stock-based compensation associated with these awards was $0.1 million and $0.2 million for the three months and six months ended June 30, 2011, respectively.

On January 13, 2011, the Company granted 9,557 shares of restricted stock and 32,637 restricted stock units with a three-year cliff vesting period to certain employees and executive officers of the Company. The total $1.9 million fair value of the restricted stock and restricted stock units was determined using the Company’s stock price on the date of grant and is recognized straight-line over the three-year vesting period. On the same day, the Company granted 52,819 stock options that vest in equal installments annually over a three-year period to certain employees and executive officers of the Company. The $1.4 million fair value of the stock options was determined using the Black Scholes option valuation model and the Company’s stock price on the date of grant and is recognized straight-line over the three year vesting period. The stock-based compensation associated with these awards was $0.3 million and $0.5 million for the three months and six months ended June 30, 2011, respectively.

During the second quarter of 2011, Molycorp granted 45,485 restricted stock units and 1,325 shares of restricted stock with a three-year cliff vesting period to certain employees, executive officers and non-employee directors of the Company. The total $2.6 million fair value of these restricted stock units was determined using the Company’s stock price on the date of grants and is recognized straight-line over the three-year vesting period. The stock-based compensation associated with these awards was $0.1 million for the three months and six months ended June 30, 2011.

The stock-based compensation associated with all awards issued since inception was $0.5 million and $3.4 million for the three months and six months ended June 30, 2011, respectively.

Approximately $41,800 and $76,800 of the stock-based compensation associated with these equity awards was capitalized into inventory for the three months and six months ended June 30, 2011, respectively.

(8) Concentrations

(a) Limited Number of Products

The Company’s current operations at the Mountain Pass facility are primarily limited to the production and sale of REOs from stockpiled concentrates and purchasing and reselling REOs from other producers. The Company does not have and will not have the capability to significantly alter its product mix from its Mountain Pass facility prior to completing the modernization and expansion project and the restart of mining operations. Sales, net of intercompany sales, for the Mountain Pass facility’s most significant products for the three and six months ended June 30, 2011 and 2010, in thousands, were as follows:

		Three
		Months				Six Months
		Ended				Ended
2011		June 30				June 30
Lanthanum products		$	14,948			$	26,414
Ceric Hydrate		$	18,806			$	26,674
Didymium products		$	20,828			$	25,521
Other cerium products		$	3,985			$	5,170

		Three
		Months				Six Months
		Ended				Ended
2010		June 30				June 30
Lanthanum products		$	1,787			$	4,538
Ceric Hydrate		$	—			$	—
Didymium products		$	—			$	105
Other cerium products		$	32			$	46

The tables above reflect revenues from the Mountain Pass facility’s most significant products and do not include revenues from Molycorp Silmet or MMA.

As a result of the acquisition of the 90.023% controlling interest in Molycorp Silmet on April 1, 2011, the Company added additional rare earth products and two new metal products, tantalum and niobium, to its product mix.

From the acquisition of MMA, which also occurred during the second quarter of 2011, the Company added neodymium iron boron (“NdFeB”) alloy and samarium cobalt (“SmCo”) alloy to its product mix.

(b) Limited Number of Customers

There is a limited market for the products currently produced and purchased by the Company. Sales to the Company’s largest customers, for the three and six months ended June 30, 2011 and 2010, in thousands, were as follows:

		Three
		Months				Six Months
		Ended				Ended
2011		June 30				June 30
Mitsubishi Unimetals USA		$	18,627			$	26,394
Hitachi Metals, Ltd.		$	18,328			$	24,113
W.R. Grace & Co. — Conn.		$	2,520			$	8,727
Santoku Corporation		$	8,320			$	8,320
Chuden Rare Earth Co., LTD		$	6,073			$	6,073

		Three Months				Six Months
		Ended				Ended
2010		June 30				June 30
W.R. Grace & Co. — Conn.		$	1,498			$	3,806

(c)		Geographic Locations

Currently, the Company’s only mining facility is the Mountain Pass, California facility, and the Company’s viability is based on the successful modernization and expansion of its operations. The deterioration or destruction of any part of the Mountain Pass facility, or legal restrictions related to current or anticipated operations at the Mountain Pass facility, may significantly hinder the Company’s ability to reach or maintain full planned production rates within the expected time frame, if at all.

Through the acquisition of the 90.023% controlling interest in Molycorp Silmet, the Company added a rare earth oxides and metals processing facility in in Sillamäe, Estonia. In addition, the Company acquired Molycorp Metals and Alloys, based in Arizona, which processes and manufactures neodymium and samarium alloy products.

(9) Related-Party Transactions

In February 2009, certain of the Company’s stockholders incurred certain costs in providing letters of credit and/or cash collateral to secure the surety bonds issued for the benefit of certain regulatory agencies related to the Company’s Mountain Pass facility closure and reclamation obligations. The total amount of collateral provided by stockholders was $18.2 million. Under the terms of the agreement with its stockholders, the Company agreed to pay each such stockholder a 5% annual return on the amount of collateral provided, and the stockholders were entitled to receive quarterly payments, delay payments, or receive payments-in-kind. In September 2010, the Company issued its own collateral in the amount of $18.2 million in replacement of the letters of credit and cash collateral provided by the stockholders. The Company paid fees due to stockholders in the amount of $0.8 million in September 2010.

In June 2010, the Company entered into an inventory financing arrangement with Traxys North America LLC (“Traxys”), the parent of one of its stockholders, TNA Moly Group, LLC, under which it borrowed approximately $5.0 million, secured by certain product inventories. Borrowings under this arrangement required an initial interest rate of 6% based on three-month LIBOR plus a margin, which is subject to adjustment every three months. No adjustments have been made to the interest rate since the agreement was signed. At June 30, 2011 and December 31, 2010, interest payable associated with the arrangement totaled $11,000 and $9,000, respectively. Principal under this arrangement is payable from revenue generated from sales of the product inventories. During the third quarter of 2010, both parties agreed that 50% of all didymium oxide sales will be subject to this arrangement. The Company made principal payments of $0.9 million and $1.7 million for the three and six months ended June 30, 2011, respectively. The outstanding amounts payable to Traxys under this arrangement were $2.4 million reported on the Condensed Consolidated Balance Sheet as Short-term borrowing — related party and $0.1 million in Trade accounts payable related to the sales made, but not remitted to Traxys and affiliates as of June 30, 2011.

The Company and Traxys and affiliates jointly market and sell certain lanthanum oxide, cerium oxide and erbium oxide products. Per the terms of this arrangement, the Company and Traxys split gross margin equally once all costs associated with the sale are recovered by both parties. The Company has recorded a related party receivable from Traxys and affiliates of $45,000 as of June 30, 2011. The Company recorded an expense of $167,000 during the first quarter of 2011 and $65,000 during the second quarter of 2011 and had an outstanding related payable to Traxys and affiliates in the amount of $362,000 as of June 30, 2011. Revenues and expenses related to these settlements are presented on a net basis in Other Income on the Statement of Operations. In addition, for the three and six months ended June 30, 2011, the Company made purchases of lanthanum oxide from Traxys and affiliates in the amount of $1.9 million and $6.2 million, respectively.

(10) Segment Information

The Company is currently organized into three primary divisions or operating segments: Molycorp Minerals, Molycorp Silmet and Molycorp Metals and Alloys. Molycorp Minerals owns and operates the rare earth mine and processing facilities in Mountain Pass, California. Molycorp Silmet produces rare earth oxides and rare metals at the manufacturing facility located in Sillamäe, Estonia. MMA manufactures neodymium and samarium magnet alloy and other specialty alloy products in Tolleson, Arizona.

The accounting policies of these segments are the same as those described in the summary of significant accounting policies except that asset retirement obligations are recognized only for the Molycorp Minerals, certain government grants are recognized only for Molycorp Silmet, and annual profit earned by Molycorp Silmet is not taxed. In accordance with the Estonian Income Tax Act, only distribution of annual profit is subject to income tax.

Intersegment sales and transfers are based on similar arms-length transactions with third parties at the time of the sale.

Molycorp’s reportable segments are strategic business units that fit into the Company’s “mine-to-magnet” strategy to be the world’s most integrated producer of rare earth products, including oxides, metals, alloys and magnets. All three segments were acquired as a unit and management at the time of the acquisition was retained.

										Molycorp				Eliminations
Three Months Ended June 30, 2011		Molycorp				Molycorp				Metals and				and Other				Total
(In thousands)		Minerals				Silmet				Alloys				Adjustments				Molycorp
Sales:
Total		$	76,295			$	32,656			$	10,250			$	(19,586	)		$	99,615
Intersegment			(15,947	)			(3,639	)			—				19,586				—
Cost of goods sold
Total			(21,709	)			(20,472	)			(11,143	)			10,401				(42,923	)
Intersegment			2,770				7,631				—				(10,401	)			—
Selling, general and administrative expenses			(12,294	)			(1,411	)			(112	)			—				(13,817	)
Depreciation, amortization and accretion expense			(332	)			—				(191	)			—				(523	)
Stock-based compensation			(412	)			—				—				—				(412	)
Operating income (loss)			28,371				14,765				(1,196	)			—				41,940
Other income (expense)			304				(103	)			2				—				203
Income before income taxes		$	28,675			$	14,662			$	(1,194	)		$	—			$	42,143
Total assets at June 30, 2011		$	1,099,900			$	152,984			$	29,705			$	(140,923	)		$	1,141,666
Capital expenditures (accrual basis)		$	70,742			$	2,231			$	—			$	—			$	72,973

										Molycorp				Eliminations
Six Months Ended June 30, 2011		Molycorp				Molycorp				Metals and				and Other				Total
(In thousands)		Minerals				Silmet				Alloys				Adjustments				Molycorp
Sales:
Total		$	102,556			$	32,656			$	10,250			$	(19,586	)		$	125,876
Intersegment			(15,947	)			(3,639	)			—				19,586				—
Cost of goods sold
Total			(38,386	)			(20,472	)			(11,143	)			10,401				(59,600	)
Intersegment			2,770				7,631				—				(10,401	)			—
Selling, general and administrative expenses			(20,633	)			(1,411	)			(112	)			—				(22,156	)
Depreciation, amortization and accretion expense			(649	)			—				(191	)			—				(840	)
Stock-based compensation			(3,311	)			—				—				—				(3,311	)
Operating income (loss)			26,400				14,765				(1,196	)			—				39,969
Other income (expense)			276				(103	)			2				—				175
Income before income taxes		$	26,676			$	14,662			$	(1,194	)		$	—			$	40,144
Total assets at June 30, 2011		$	1,099,900			$	152,984			$	29,705			$	(140,923	)		$	1,141,666
Capital expenditures (accrual basis)		$	111,966			$	2,231			$	—			$	—			$	114,197

The total assets elimination of $141.0 million is comprised of $16.4 million of intercompany accounts receivable, $10.6 million of intercompany inventory and $114.0 million of intercompany investments.

(11) Subsequent Events

In July 2011, the Company declared a cash dividend of $1.375 per share on the Convertible Preferred Stock. The aggregate dividend of $2.8 million will be paid on September 1, 2011 to holders of record at the close of business on August 15, 2011.

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

In this Quarterly Report on Form 10-Q, unless the context requires otherwise, references to “Molycorp,” “we,” “our” or “us” refer to Molycorp, LLC, and its consolidated subsidiaries prior to our corporate reorganization (as described under the heading “Overview — Presentation” below) and Molycorp, Inc. and its consolidated subsidiaries after the corporate reorganization (as described below). As used herein, a ton is equal to 2,000 pounds, the term “mt” means a metric tonne (equal to 2,205 pounds), and the term “Rest of World” means the entire world except China. For definitions of certain rare earth-related and mining terms, see “Glossary of Selected Mining Terms.”

This Quarterly Report on Form 10-Q contains forward-looking statements that represent our beliefs, projections and predictions about future events or our future performance. You can identify forward-looking statements by terminology such as “may,” “will,” “would,” “could,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms or other similar expressions or phrases. These forward-looking statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results to differ materially from any future results, performance or achievement described in or implied by such statements.

Factors that may cause actual results to differ materially from expected results described in forward-looking statements include, but are not limited to: our ability to secure sufficient capital to implement our business plans; our ability to complete our Phase 1 modernization and expansion efforts and Phase 2 capacity expansion efforts and reach full planned production rates for REOs and other planned downstream products; the final costs of the Phase 1 modernization and expansion plan and Phase 2 capacity expansion, which may differ from estimated costs; uncertainties associated with our reserve estimates and non-reserve deposit information; uncertainties regarding global supply and demand for rare earths materials; our ability to successfully integrate recently acquired businesses; our ability to reach definitive agreements for a joint venture to manufacture neodymium-iron-boron permanent rare earth magnets and our supply and financing arrangement with Sumitomo; our ability to maintain appropriate relations with unions and employees; our ability to successfully implement our “mine-to-magnets” strategy; environmental laws, regulations and permits affecting our business, directly and indirectly, including, among others, those relating to mine reclamation and restoration, climate change, emissions to the air and water and human exposure to hazardous substances used, released or disposed of by us; and uncertainties associated with unanticipated geological conditions related to mining; and those risks discussed and referenced in the section entitled “Risk Factors” described in our Annual Report on Form 10-K for the year ended December 31, 2010 and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2011.

Any forward-looking statement you read in this Quarterly Report on Form 10-Q reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, operating results, growth strategy and liquidity. You should not place undue reliance on these forward-looking statements because such statements speak only as to the date when made. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future, except as otherwise required by applicable law.

The following discussion and analysis should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included herein. The historical financial data discussed below prior to the completion of the initial public offering, or IPO, of Molycorp, Inc. reflects the historical results of operations and financial position of Molycorp, LLC and, for any time period prior to the formation of Molycorp, LLC on September 9, 2009, those of Molycorp Minerals, LLC, or Molycorp Minerals. The historical financial data does not, unless otherwise noted, give effect to the completion of the IPO and corporate reorganization.

This Quarterly Report on Form 10-Q also contains statistical data and estimates we obtained from industry publications and reports generated by third parties. Although we believe that the publications and reports are reliable, we have not independently verified their data.

Overview

Presentation

Molycorp, Inc. was formed on March 4, 2010 for the purpose of continuing the business of Molycorp, LLC in corporate form. On April 15, 2010, the members of Molycorp, LLC contributed either (a) all of their member interests in Molycorp, LLC or (b) all of their equity interest in entities that held member interests in Molycorp, LLC (and no other assets or liabilities) to Molycorp, Inc. in exchange for Molycorp, Inc. Class A common stock. Accordingly, Molycorp, LLC and its wholly-owned subsidiary, Molycorp Minerals, LLC (“Molycorp Minerals”) became subsidiaries of Molycorp, Inc. (the “Corporate Reorganization”). On June 15, 2010, Molycorp LLC was merged with and into Molycorp Minerals.

In the quarter of 2011, we completed a public offering of 5.50% Series A Mandatory Convertible Preferred Stock, or Convertible Preferred Stock, $0.001 par value per share. In connection with this offering, we issued 2,070,000 shares of Convertible Preferred Stock for $100.00 per share. Total net proceeds of the offering were $199.6 million after underwriting discounts and commissions and offering expenses payable by Molycorp, Inc. Each share of the Convertible Preferred Stock will automatically convert on March 1, 2014 into between 1.6667 and 2.0000 shares of Molycorp’s common stock, subject to anti-dilution adjustments. At any time prior to March 1, 2014, holders may elect to convert each share of the Convertible Preferred Stock into shares of common stock at the minimum conversion rate of 1.6667 shares of common stock per share of Convertible Preferred Stock, subject to anti-dilution adjustments. The Convertible Preferred Stock is not redeemable.

On April 1, 2011, we completed the acquisition of a 90.023% controlling stake in AS Silmet, one of only two rare earth processing facilities in Europe. We acquired 80% of the outstanding shares of AS Silmet (now Molycorp Silmet) from AS Silmet Grupp in exchange for 1,593,419 shares of Molycorp common stock, contractually valued at $80 million based on the average closing price of the Company’s common stock as reported by The New York Stock Exchange for the 20 consecutive trading days immediately preceding April 1, 2011, the acquisition date. AG Silmet Grupp retained a 9.977% ownership interest in Molycorp Silmet. Molycorp acquired the other 10.023% from Treibacher Industrie AG for $9.0 million in cash. The total purchase price for the acquisition of the 90.023% controlling stake was $81.7 million for accounting purposes. The Molycorp Silmet acquisition provides us with a European base of operations and significantly increases our current rare earth annual production capacity by approximately 3,000 mt REO equivalent. Molycorp Silmet sources rare earth feed stocks for production of its products primarily from our Mountain Pass, California rare earth mine and processing facility. The main focus of this newly acquired business is on the production of rare earth oxides and metals, including didymium metal, a critical component in the manufacture of neodymium-iron-boron permanent rare earth magnets. Molycorp Silmet’s manufacturing operation is located in Sillamäe, Estonia Molycorp Silmet currently sells products to customers in Europe, North and South America, Asia, Russia, and other former Soviet Union countries.

On April 15, 2011, we completed the acquisition from Santoku Corporation, or Santoku, of all the issued and outstanding shares of capital stock of Santoku America, Inc., which is now known as Molycorp Metals and Alloys, or MMA, an Arizona-based corporation, in an all-cash transaction for $17.5 million. The acquisition provides us with access to certain intellectual properties relative to the development, processing and manufacturing of neodymium and samarium magnet alloy products. As part of the stock purchase agreement, Santoku will provide consulting services to us for the purpose of maintaining and enhancing the quality of our products. On the same date, we entered into five-year marketing and distribution agreements with Santoku for the sale and distribution of neodymium and samarium magnet alloy products produced by each party. Additionally, we entered into a rare earth products purchase and supply agreement through which MMA will supply Santoku with certain rare earth alloys for a two-year period at prices equal to the feedstock cost plus the applicable product premium as such terms are defined in the agreement.

Our Business

We are the only rare earth oxide or REO producer in the Western hemisphere and own one of the world’s largest, most fully developed rare earth projects outside of China at our Mountain Pass, California facility. We also own a controlling interest in one of the largest rare earth and rare metal producers in Europe and the only producer of rare earth alloys in the United States. Upon the full execution of our “mine-to-magnets” strategy and completion of our modernization and expansion efforts at our Mountain Pass facility, we expect to be one of the world’s most integrated producers of rare earth products, including oxides, metals, alloys and magnets. Rare earths are critical inputs in many existing and emerging applications including: clean energy technologies, such as hybrid and electric vehicles and wind power turbines; multiple high-tech uses, including fiber optics, lasers and hard disk drives; numerous defense applications, such as guidance and control systems and global positioning systems; and advanced water treatment technology for use in industrial, military and outdoor recreation applications. Global demand for rare earth elements, or REEs, is projected to steadily increase both due to continuing growth in existing applications and increased innovation and development of new end uses.

Our goals are to:

	•		develop innovative rare earth technologies and products vital to green energy, high-tech, defense and industrial applications;
	•		be commercially sustainable, globally competitive, profitable and environmentally superior;
	•		act as a responsible steward of our rare earth resources; and
	•		use our technology to improve the daily lives of people throughout the world.

We have made significant investments, and expect to continue to invest, in developing technologically advanced and proprietary applications for individual REEs. Under our “mine-to-magnets” strategy, we plan to integrate the rare earths supply chain: mining; oxide processing; production of metals and alloys; and production of rare earth-based magnets. We are in the process of modernizing and expanding our production capabilities at our Mountain Pass, California facility, and our recent acquisitions of MMA and the controlling interest in Molycorp Silmet provide us with additional capacity for the production of rare earth oxides as well as the ability to produce rare earth metals and alloys.

Our vision is to be the rare earth products and technology company recognized for its “ETHICS” — Excellence, Trust, Honesty, Integrity, Creativity and Safety. Since July 2005, the Mountain Pass facility has not had a lost-time accident and has received the coveted “Sentinels of Safety” award from the Mine Safety and Health Administration, or MSHA, for three of the last six years. Additionally, the MMA facility has not had a lost-time accident for the past 14 years and the Molycorp Silmet facility has had one lost-time accident during the second quarter of 2011 and no lost-time accidents for over 12 months prior to the acquisition by Molycorp.

Our Mine Process and Development Plans

We recommenced mining operations in December 2010 and are preparing to recommence milling operations, which we expect to occur in the first quarter of 2012. Recommencement of mining and milling operations is coincident with our initial modernization and expansion plan, which will give us the capacity to efficiently produce at a rate of approximately 19,050 mt of REO per year by the end of 2012. Additionally, upon the completion of our capacity expansion plan at Mountain Pass, we expect to have the ability to produce up to approximately 40,000 mt of REO per year by the end of 2013. Prior to the expected completion of our initial modernization and expansion efforts at Mountain Pass, we expect to produce approximately 3,000 mt to 5,000 mt per year in the aggregate of cerium products, lanthanum concentrate, didymium oxide and heavy rare earth concentrates from stockpiled feedstock.

We currently produce rare earth metals outside of the United States through a third-party tolling arrangement. As a result of our acquisitions of MMA and of a controlling interest in Molycorp Silmet, we added facilities and equipment for metal conversion and alloy production within the Molycorp organization. We intend to transport cerium, lanthanum, neodymium, praseodymium, dysprosium, terbium and samarium oxide products from our Mountain Pass facility to Molycorp Silmet and MMA to produce rare earth metals and alloys.

The following table provides ranges for expected production of rare earth products at our three production facilities for the remainder of 2011.

																		Molycorp Metals and
		Molycorp Minerals								Molycorp Silmet								Alloys
		(Mountain Pass, CA)								(Estonia)								(Tolleson, AZ)								Total
		(range of mt of REO)								(range of mt of REO)								(range of mt of REO)								(range of mt of REO)
		Low				High				Low				High				Low				High				Low				High
		Range				Range				Range				Range				Range				Range				Range				Range
1Q2011 (actuals)			499				499				229	*			229	*			68	*			68	*			796				796
2Q2011 (actuals)			815				815				381				381				53				53				1,249				1,249
3Q2011			977				1,321				400				500				51				69				1,428				1,890
4Q2011			1,017				1,377				400				500				51				69				1,468				1,946
			3,308				4,012				1,410				1,610				223				259				4,941				5,881
																		(540 tons of total alloy)				(630 tons of total alloy)