MP Materials Corp. / DE

Comparison of the Three Months Ended March 31, 2025 and 2024

Consolidated Results

Revenue

Rare earth concentrate revenue consists of sales of traditional and roasted rare earth concentrate. For the majority of our sales of rare earth concentrate, the sales price is based on preliminary market price (net of taxes, tariffs, and certain other agreed charges) per MT, with an adjustment for the ultimate market price of the product realized upon final sale, including the impact of changes in the exchange rate between the Chinese Yuan and the U.S. dollar.

NdPr oxide and metal revenue consists of sales of NdPr oxide and metal produced at Mountain Pass under individual sales agreements, as well as sales under our distribution agreement with Sumitomo Corporation of Americas. As we ramp up production of separated rare earth products, we expect our NdPr oxide and metal revenue to become a larger portion of our total revenue. Accordingly, to the extent we sell a greater volume of NdPr oxide and NdPr metal, rare earth concentrate revenue will decline in future periods.

Magnetic precursor products consists of sales of magnetic precursor products, including NdPr metal, produced at the Independence Facility and sold in the U.S. Sales of these products commenced in the first quarter of 2025 pursuant to a long-term supply agreement with GM.

Other revenue consists of sales of rare earth products other than rare earth concentrate and NdPr oxide and metal, including lanthanum carbonate and cerium chloride.

Total revenue increased for the three months ended March 31, 2025, as compared to the prior year period, primarily as a result of ramping production of separated products throughout 2024, resulting in higher NdPr oxide and metal revenue. Additionally, during the three months ended March 31, 2025, we began recognizing revenue from the sales of magnetic precursor products, with no comparable revenue in the prior year period. These were partially offset by the decrease in rare earth concentrate revenues, impacted by the ramp-up in midstream operations, as a significantly higher portion of REO produced was refined and sold as NdPr oxide and metal in the current year period. As a result of the item discussed in the“Recent Developments” section above, we expect our rare earth concentrate revenues to be materially lower through at least the second quarter of 2025 as we prioritize further processing the concentrate into separated rare earth products or stockpiling for future use. See the“Segment Results” section below for further discussion of year-over-year changes in revenue.

Cost of sales (excluding depreciation, depletion and amortization)

Cost of sales (excluding depreciation, depletion and amortization) (“COS”) consists of mining, processing, separations, and metal making-related labor costs (including wages and salaries, benefits, bonuses, and stock-based compensation); mining, processing, separations, and metal making-related supplies and reagents; parts and labor for the maintenance of our mining fleet and processing and separating facilities; other facilities-related costs (such as property taxes and utilities); packaging materials; and shipping and freight costs.

The increase in COS for the three months ended March 31, 2025, was driven by higher sales of NdPr oxide and metal in the current year period. The year-over-year increase is further impacted by the production costs associated with the magnetic precursor products sold in the current year period, specifically NdPr metal at the Independence Facility, with no comparable costs in the prior year period. Additionally, production costs associated with separated rare earth products remain elevated as we continue to ramp and optimize production. Notwithstanding, per-unit production costs of separated products are necessarily higher than those of rare earth concentrate due to the additional processing required. Such costs pertain primarily to chemical reagents, employee labor, maintenance expenses, and consumables. Lastly, COS for the three months ended March 31, 2025, benefited from (i) a lower reserve on certain of our work in process and finished goods inventories, which decreased by $2.8 million when compared to the prior year period, and (ii) the Section 45X Advanced Manufacturing Production Credit (the “45X Credit”), which was $2.8 million higher in the current year period.

As we produce and sell more separated products at Mountain Pass, we expect that COS may continue to increase throughout 2025 even as certain per-unit production efficiencies and economies of scale are expected to be achieved, primarily due to the higher production costs associated with separated rare earth products versus rare earth concentrate, as discussed above. Accordingly, in future periods, any further increase in sales of NdPr oxide and metal will likely result in higher year-over-year COS. Additionally, as we ramp production of magnetic precursor products at Independence, COS will also increase. Lastly, we may incur additional reserves on inventories prior to achieving normalized production levels on our midstream operations.

Selling, general and administrative

Selling, general and administrative (“SG&A”) expenses consist primarily of personnel costs (including salaries, benefits, bonuses, and stock-based compensation) of our administrative functions such as executives, accounting and finance, legal, and information technology; professional services (including legal, regulatory, audit and others); certain engineering expenses; insurance, license and permit costs; corporate office lease cost; office supplies; and certain environmental, health and safety expenses.

The increase in SG&A expenses for the three months ended March 31, 2025, as compared to the prior year period, was driven primarily by higher legal costs. Additionally, higher personnel costs (excluding stock-based compensation expense, which decreased modestly) contributed to $1.0 million of the increase in the current year period, due to higher costs related to executive and administrative personnel, as well as increased employee headcount to support our downstream expansion. SG&A expenses for the three months ended March 31, 2025, benefited from the 45X Credit in the amount of $0.4 million.

Depreciation, depletion and amortization

Depreciation, depletion and amortization (“DD&A”) primarily consists of depreciation of property, plant and equipment and depletion of mineral rights.

The year-over-year increase in DD&A for the three months ended March 31, 2025, primarily reflects an increase in depreciation of $3.2 million. Depreciation increased as a result of the timing of placing certain machinery and equipment assets into service, which occurred progressively throughout 2024, with the majority placed into service during the fourth quarter of 2024 as we began production of magnetic precursor products at Independence.

Start-up costs

Start-up costs relate to costs associated with restarting an existing facility or commissioning a new facility, circuit or process of our production, manufacturing, or separations facilities prior to the achievement of commercial production, that do not qualify for capitalization. Such costs, which are expensed as incurred, include certain salaries and wages, outside services, parts, training, and utilities, among other items, used or consumed directly in these start-up activities.

The year-over-year decrease in start-up costs for three months ended March 31, 2025, was attributable primarily to our midstream operations, where virtually all start-up activities have been completed as production of separated products commenced in late 2023. Start-up costs attributable to our downstream initiatives remained flat year over year, in line with the commencement of our production of magnetic precursor products at Independence in late 2024.

Advanced projects and development

Advanced projects and development consists principally of costs incurred in connection with research and development of new processes or to significantly enhance our existing processes; and certain government contracts, as well as costs incurred to support growth initiatives or pursue other opportunities.

Advanced projects and development for the three months ended March 31, 2025, decreased year over year, primarily due to lower costs incurred for legal, consulting, and advisory services to support growth initiatives, such as potential acquisitions, mergers, or other investments, which decreased by $2.8 million when compared to the prior year period.

Other operating costs and expenses (income), net

Other operating costs and expenses (income), net consists primarily of accretion of asset retirement and environmental obligations and gains or losses on disposals of long-lived assets, including demolition costs.

The year-over-year change is attributed primarily to the net impact of gains recognized on sales of certain long-lived assets during the three months ended March 31, 2025.

Interest expense, net

Interest expense, net principally consists of the expense associated with the 0.25% and 3.00% per annum interest rates and amortization of the debt issuance costs on our 2026 Notes and 2030 Notes (as defined below), respectively, offset by capitalized interest.

Interest expense, net for the three months ended March 31, 2025, increased year over year due to the issuance of the 2030 Notes, slightly offset by repurchases of the 2026 Notes in the first and fourth quarters of 2024.

Gain on early extinguishment of debt

Gain on early extinguishment of debt during the three months ended March 31, 2024, was the result of the repurchase of a portion of our 2026 Notes at prices lower than the associated carrying amounts. See the“Liquidity and Capital Resources” section below for additional information.

Other income, net

Other income, net consists of interest and investment income, changes in fair value of derivative instruments, and non-operating gains or losses.

Other income, net for the three months ended March 31, 2025, increased year over year as a result of changes in the fair value of the derivative instrument related to the redemption feature included in the portion of the 2030 Notes issued in December 2024, which was a $7.0 million gain for the three months ended March 31, 2025, netted against lower interest and investment income earned on our short-term investments, whose balance decreased over the applicable periods. Interest and investment income is principally generated from accretion of the discount on such investments.

Income tax benefit (expense)

Income tax expense or benefit 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 for the three months ended March 31, 2025, differed from the statutory tax rate of 21% primarily due to the 45X Credit, percentage depletion, and state income tax benefit, offset by a deduction limitation on officers’ compensation and a valuation allowance on California Competes Tax Credits (“CCTC”). The effective tax rate for the three months ended March 31, 2024, differed from the statutory tax rate of 21% primarily due to state income tax expense and a deduction limitation on officers’ compensation, offset by the 45X Credit and CCTC. For additional information on the 45X Credit, see Note 15, “Government Grants,” in the notes to the unaudited Condensed Consolidated Financial Statements.