Are you curious about the materials that power our high-tech world? Look no further than MP Materials - leading producer of rare earth elements outside of China. Join me as we delve into $MP's operations & discover the sustainable ways in which they are driving innovation.
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1| Intro:
MP Materials is the largest rare earths miner and processor in the western hemisphere & its primary asset is the Mountain Pass mine located in California, USA, which is one of the world's most significant sources of REEs. $MP is headquartered in Las Vegas, Nevada.
MP Materials is the largest rare earths miner and processor in the western hemisphere & its primary asset is the Mountain Pass mine located in California, USA, which is one of the world's most significant sources of REEs. $MP is headquartered in Las Vegas, Nevada.
2| MP Materials is a mining company that specializes in the production of rare earth elements (REEs) which are a group of 17 chemically similar elements that are critical for a wide range of high-tech applications like electric vehicles, wind turbines & smartphones.
3| Company History:
$MP was founded in 2017. However, its history can be traced back to the 1950s, when the Mountain Pass mine was first discovered in California's Mojave Desert. The Mountain Pass mine quickly became the world's largest producer of rare earths.
$MP was founded in 2017. However, its history can be traced back to the 1950s, when the Mountain Pass mine was first discovered in California's Mojave Desert. The Mountain Pass mine quickly became the world's largest producer of rare earths.
4| However, in the 1990s and 2000s, competition from low-cost producers in China & environmental concerns led to a decline in rare earth production in the US. The MP mine was eventually shut down in 2002. In 2010, an equity firm, Molycorp acquired the mine & tried expanding it.
5| They failed & Molycorp filed for bankruptcy in 2015. In 2017 JHL Capital Group acquired it & formed MP Materials, focusing on developing sustainable mining practices & leveraging the mine's rich, high-quality rare earth deposits to meet growing demand for rare earth materials.
6| Mission:
$MP's mission is "to restore the full rare earth supply chain to the United States of America."
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$MP's mission is "to restore the full rare earth supply chain to the United States of America."
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7| Insider ownership:
$MP did have significant insider ownership in 2022 with CEO, James Litinsky holding nearly ~30% of all shares and all insiders combined holding near ~42% of the company.
$MP did have significant insider ownership in 2022 with CEO, James Litinsky holding nearly ~30% of all shares and all insiders combined holding near ~42% of the company.
8| What are rare earths?
Rare earths are a group of 17 chemically similar elements that are vital for the production of a wide range of advanced technologies, including electric vehicles, wind turbines, smartphones, and military equipment. REE's aren't exactly rare per se.
Rare earths are a group of 17 chemically similar elements that are vital for the production of a wide range of advanced technologies, including electric vehicles, wind turbines, smartphones, and military equipment. REE's aren't exactly rare per se.
9| They are relatively abundant in the earth's crust but are difficult & expensive to mine & refine due to their chemical properties. REE's are critical due to their unique magnetic, optical & catalytic properties making them essential for a wide range of advanced technologies.
10| Here is an example of a few REEs and how diverse they are in terms of the products & industries they can be used in:
πΈLanthanum (La):
πΈLanthanum (La):
11|
πΈCerium (Ce):
πΈCerium (Ce):
12|
πΈNeodymium (Nd) & Praseodymium (Pr):
πΈNeodymium (Nd) & Praseodymium (Pr):
13|
πΈSamarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy):
πΈSamarium (Sm), Europium (Eu), Gadolinium (Gd), Terbium (Tb), Dysprosium (Dy):
14| How does MP Materials work?
$MP has a three stage process:
βͺοΈ Stage I - Mining
βͺοΈ Stage II - Refining
βͺοΈ Stage III - Production
Stage I is complete. Stage II was underway in 2022. Stage III is expected to start soon.
$MP has a three stage process:
βͺοΈ Stage I - Mining
βͺοΈ Stage II - Refining
βͺοΈ Stage III - Production
Stage I is complete. Stage II was underway in 2022. Stage III is expected to start soon.
15| Stage I - Mining:
The goal of this stage was to relaunch the operations at the mine and produce a rare earth concentrate product. This was done successfully and now represents 15% of the total global rare earth supply. This concentrate is currently being sold to China.
The goal of this stage was to relaunch the operations at the mine and produce a rare earth concentrate product. This was done successfully and now represents 15% of the total global rare earth supply. This concentrate is currently being sold to China.
16| Stage II - Refining:
This stage is when rare materials are separated into individual oxides which allows for lower costs in turning intermediate products into separate rare earth materials. $MP is building the world's largest refining facility in TX to achieve this.
This stage is when rare materials are separated into individual oxides which allows for lower costs in turning intermediate products into separate rare earth materials. $MP is building the world's largest refining facility in TX to achieve this.
17| Stage III - Production:
This is not just for making of separated REE products but also for the low cost production of NdPr magnets in the US. This stage is set to commence in 2025. When this starts, they will control the entire supply chain process in their backyard.
This is not just for making of separated REE products but also for the low cost production of NdPr magnets in the US. This stage is set to commence in 2025. When this starts, they will control the entire supply chain process in their backyard.
18| The Positives: $MP has a few competitive advantages:
1β£ High-quality resources:
The Mountain Pass mine is one of the richest & highest-quality rare earth deposits in the world. This gives $MP a competitive advantage in terms of the quality & consistency of its products.
1β£ High-quality resources:
The Mountain Pass mine is one of the richest & highest-quality rare earth deposits in the world. This gives $MP a competitive advantage in terms of the quality & consistency of its products.
19|
2β£ Vertically integrated operations:
$MP is one of the few rare earths mining companies that will be vertically integrated very soon, meaning it will control the entire supply chain from mining to processing to the production of finished rare earth products.
2β£ Vertically integrated operations:
$MP is one of the few rare earths mining companies that will be vertically integrated very soon, meaning it will control the entire supply chain from mining to processing to the production of finished rare earth products.
20| This provides the company with greater control over production and allows it to offer a more reliable supply chain to customers.
21|
3β£ Sustainable & responsible mining practices:
MP Materials is committed to sustainable and responsible mining practices, which are becoming increasingly important to consumers and investors.
3β£ Sustainable & responsible mining practices:
MP Materials is committed to sustainable and responsible mining practices, which are becoming increasingly important to consumers and investors.
22| The company's focus on reducing its environmental impact and supporting local communities gives it a competitive advantage over companies that prioritize profit over sustainability.
23|
4β£ Location:
One of its main advantages is its control over the Mountain Pass mine, which is the ONLY rare earth mine in the Western Hemisphere. This gives $MP a unique position in the market & makes it a key supplier of rare earths to industries in the US and abroad.
4β£ Location:
One of its main advantages is its control over the Mountain Pass mine, which is the ONLY rare earth mine in the Western Hemisphere. This gives $MP a unique position in the market & makes it a key supplier of rare earths to industries in the US and abroad.
24| The Challenges:
1β£ Volatility of rare earth prices:
Rare earth prices are highly volatile & subject to fluctuations in supply & demand. This can make it challenging for $MP to predict future revenue, especially given the long lead time required for rare earth production.
1β£ Volatility of rare earth prices:
Rare earth prices are highly volatile & subject to fluctuations in supply & demand. This can make it challenging for $MP to predict future revenue, especially given the long lead time required for rare earth production.
25|
2β£ Dependence on the Chinese rare earths market:
China is the world's largest producer of rare earths & $MP relies heavily on the Chinese market for the sale of its products. This dependence on a single market creates a significant risk especially given the trade tensions.
2β£ Dependence on the Chinese rare earths market:
China is the world's largest producer of rare earths & $MP relies heavily on the Chinese market for the sale of its products. This dependence on a single market creates a significant risk especially given the trade tensions.
26|
3β£ Competition:
As mentioned earlier, MP Materials faces competition from other rare earths mining companies, including some based in China. This competition can put pressure on pricing & market share & make it challenging for MP Materials to maintain its competitive edge.
3β£ Competition:
As mentioned earlier, MP Materials faces competition from other rare earths mining companies, including some based in China. This competition can put pressure on pricing & market share & make it challenging for MP Materials to maintain its competitive edge.
27|
4β£ Customer Concentration:
In the ST, this is a HUGE risk. Since they can't refine yet, they ship their concentrate to a refinery in China & one customer accounts for 90% of their sales. But this will change once stage II is completed and stage III starts.
From their 10-K:
4β£ Customer Concentration:
In the ST, this is a HUGE risk. Since they can't refine yet, they ship their concentrate to a refinery in China & one customer accounts for 90% of their sales. But this will change once stage II is completed and stage III starts.
From their 10-K:
28| Future opportunities:
Right now China dominates the rare earth market with ~60% of world's supply or REEs. With just this one mine, the US provides ~15.5% of world's supply. $MP is hoping to increase this % once their refinery is complete & production of magnets begins.
Right now China dominates the rare earth market with ~60% of world's supply or REEs. With just this one mine, the US provides ~15.5% of world's supply. $MP is hoping to increase this % once their refinery is complete & production of magnets begins.
29| Increase of EV adoption & clean energy:
Even though $TSLA said they plan to move away from REE magnets in their EVs, those magnets are still widely used by the rest of the EV market and will continue to be deployed in the EV motors for the near future.
Even though $TSLA said they plan to move away from REE magnets in their EVs, those magnets are still widely used by the rest of the EV market and will continue to be deployed in the EV motors for the near future.
30| Collaborations:
βͺοΈ Deal with General Motors $GM:
mpmaterials.com
βͺοΈ Deal with the DoD & US Military:
mpmaterials.com
βͺοΈ Deal with Sumitomo Corp:
mpmaterials.com
βͺοΈ Deal with General Motors $GM:
mpmaterials.com
βͺοΈ Deal with the DoD & US Military:
mpmaterials.com
βͺοΈ Deal with Sumitomo Corp:
mpmaterials.com
31| Financials - Balance Sheet:
Cash: $MP has a healthy balance sheet with $1.18B in Cash, CE & ST investments & $678M in total debt at the end of 2022.
2021 Cash: $519.7M | Debt: $70.8M
2022 Cash: $1.18B | Debt: $691.8M
2023 Cash: $136M | Debt: $678.4M
Cash: $MP has a healthy balance sheet with $1.18B in Cash, CE & ST investments & $678M in total debt at the end of 2022.
2021 Cash: $519.7M | Debt: $70.8M
2022 Cash: $1.18B | Debt: $691.8M
2023 Cash: $136M | Debt: $678.4M
32| ST investments:
Their cash decreased cause they invested in money market funds & securities in 2022. Not sure I entirely agree with this but they are saying even a 100 bps increase in increase rates wont have a material impact on their securities investments.
Their cash decreased cause they invested in money market funds & securities in 2022. Not sure I entirely agree with this but they are saying even a 100 bps increase in increase rates wont have a material impact on their securities investments.
33| Financials - Income Statement:
Revenue for Q4 2022 π» 6% YoY from $99M to $91M but revenue for FY 2022 πΌ 59% from $332M to $527.5M.
2019 Revenue: $73M
2020 Revenue: $134M
2021 Revenue: $332.0M
2022 Revenue: $527.51M
Revenue: CAGR of 63.73% over 4 years.
Revenue for Q4 2022 π» 6% YoY from $99M to $91M but revenue for FY 2022 πΌ 59% from $332M to $527.5M.
2019 Revenue: $73M
2020 Revenue: $134M
2021 Revenue: $332.0M
2022 Revenue: $527.51M
Revenue: CAGR of 63.73% over 4 years.
34| The revenue is π» Q4 22 YoY due to the drop in realized price of the rare earths oxides in the 2nd half of 2022 and unfavorable changes in foreign exchange rates (since most of their revenue is from China). These will be an issue for 2023 as well but should normalize in 2024.
35| Financials - Gross Margin%:
Gross margin is going in the right direction for this mining company, ending with 79% for 2022.
2020 GM: 23.8%
2021 GM: 69.7%
2022 GM: 79.0%
Gross margin is going in the right direction for this mining company, ending with 79% for 2022.
2020 GM: 23.8%
2021 GM: 69.7%
2022 GM: 79.0%
36| Financials - FCF:
For the most recent quarter ended Dec 2022, FCF was ($83M) but $MP is FCF positive for FY 2022 with $16.9M
2020 FCF: (19M)
2021 FCF: ($22M)
2022 FCF: $16.9M
For the most recent quarter ended Dec 2022, FCF was ($83M) but $MP is FCF positive for FY 2022 with $16.9M
2020 FCF: (19M)
2021 FCF: ($22M)
2022 FCF: $16.9M
37| Earnings:
$MP has beaten their earnings estimates every SINGLE quarter since they went public in 2020. That is seriously impressive for a company that started out as a SPAC.
$MP has beaten their earnings estimates every SINGLE quarter since they went public in 2020. That is seriously impressive for a company that started out as a SPAC.
38| Valuation: looks very reasonable at current prices.
Below valuation is courtesy of @Quartr_App:
βͺοΈ FY 2023: 8x sales & 21.6x earnings
βͺοΈ FY 2024: 5x sales, 30x FCF & 12x earnings
βͺοΈ FY 2025: 4x sales, 12x FCF & 9x earnings
Below valuation is courtesy of @Quartr_App:
βͺοΈ FY 2023: 8x sales & 21.6x earnings
βͺοΈ FY 2024: 5x sales, 30x FCF & 12x earnings
βͺοΈ FY 2025: 4x sales, 12x FCF & 9x earnings
39| Analyst Estimates:
As of today, 4.23.23, the price of $MP stock is $22.74 and the market cap is ~$4B. Below are the estimates from Wall St. analysts:
As of today, 4.23.23, the price of $MP stock is $22.74 and the market cap is ~$4B. Below are the estimates from Wall St. analysts:
40| Based on the chart above:
π₯Worst Case: is a $30 PT which presents a 31.92% upside from today's price.
π₯Base Case: is a $40.73 PT which presents a 79.11% upside from today's price.
π₯Best Case: is a $56 PT which presents a 146.26% upside from today's price.
π₯Worst Case: is a $30 PT which presents a 31.92% upside from today's price.
π₯Base Case: is a $40.73 PT which presents a 79.11% upside from today's price.
π₯Best Case: is a $56 PT which presents a 146.26% upside from today's price.
41| And with that, we conclude our journey through the rare earths wonderland of MP Materials. From the depths of the mine to the heights of innovation, this a company that truly rocks & has great potential provided management continues to execute.
Thanks for following along!
Thanks for following along!
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