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Molycorp Approves Phase 2 Expansion of REOs at Mountain Pass

Molycorp, Inc., producer of rare earth oxides (REOs), announced that Phase 2 of its expansion plan has been approved. The plan is expected to double the production capacity of its Mountain Pass facility in California.

Together with this plan, Molycorp has filed with the U.S. Securities and Exchange Commission (SEC) in connection with a proposed mandatory convertible preferred stock offering by the Company as well as an offering of common stock by certain stockholders.

This move is in light of strong industry fundamentals and a strong pricing environment vis-a-vis reduced Chinese supply. The approval is expected to give Molycorp the ability to produce up to approximately 40,000 metric tons of REOs annually through its Mountain Pass facility by the end of 2013. The expansion represents a doubling of the original Phase 1 production capacity equivalent per year. The Phase 1 plan was estimated at a capital cost of approximately US$250 million. Molycorp believes that it will realize substantial savings by committing to this expansion now while construction activities are underway for its Phase 1 initial modernization and expansion plan.

Molycorp will also set its REO products into the market at rates commensurate with customer and demand growth. It expects to use the net proceeds from the proposed mandatory convertible preferred stock offering to fund its Phase 1 and Phase 2 plans.

The proposed secondary offering will help facilitate the liquidity objectives of the selling stockholders. This will be done through an orderly underwritten offering and will provide additional public float with respect to Molycorp’s common stock. The principal selling stockholders are affiliates of Resource Capital Funds, Pegasus Capital Advisors, L.P., and The Traxys Group, which are the three main investors that led the purchase of the Mountain Pass Rare Earth Facility in 2008. These selling stockholders will remain substantial investors in Molycorp immediately after the offering.

“Without the foresight and long-term, strategic commitment of Resource Capital Funds, Pegasus Capital Advisors, and The Traxys Group, Molycorp would not be in the position we are today. Their willingness to take on significant, early stage risk has positioned Molycorp, and all of our stakeholders, to continue to benefit from the very positive fundamentals of the rare earth sector.”

Mark Smith, Molycorp Chief Executive Officer and Board of Directors Member

J.P. Morgan Securities and Morgan Stanley & Co. will act as joint book-running managers for the proposed offerings.

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