Important Sections From Molycorp Annual Report $MCP

Going concern comments:

"Due to continuing softness in the prices for our products, as well as inconsistent or depressed demand for certain of our products and the delayed ramp-up of operations at our Mountain Pass facility, we have incurred, and continue to incur, operating losses. In addition, we have significant capital requirements, including interest payments to service our debt. These circumstances, among others, indicate the existence of a material uncertainty that casts substantial doubt as to our ability to meet our business plan and our obligations as they come due and, accordingly, the appropriateness of the use of the accounting principles applicable to a going concern. As a result, the unqualified report of our independent auditors includes an explanatory paragraph highlighting the substantial doubt about our ability to continue as a going concern.

We have engaged financial and other advisors to assist us in restructuring our debt; however, there can be no assurance that these efforts will succeed. If we are unable to execute our business plan and restructure our debt, we may not be able to continue as a going concern."

More risks:

"Most of these activities require significant lead times and must be advanced concurrently. In addition, we have experienced delays associated with our modernization, expansion and optimization efforts at our Mountain Pass facility. As a result, our production in 2014, 2013 and 2012 was substantially lower than expected, which led to lower than expected production volumes, revenues and cash flows, and delayed our realization of the benefits of our vertical integration strategy while our other operations continued to purchase raw materials from third parties rather than accepting delivery of products from our Mountain Pass facility. At the end of the third quarter of 2014, we placed into service an expanded leach system at our Mountain Pass facility. We have experienced construction and installation issues with the expanded leach system that have limited our ability to achieve its anticipated benefits. These anticipated benefits have been constrained further due to limited on-site production and market availability of HCl. We expect that, once it is fully operational and sufficient supplies of HCl are available, the expanded leach system will help us increase rare earth production and lower operating costs.

On-site production of HCl has been hampered by quality issues with the brine feedstock that our Chlor-Alkali plant transforms into HCl and other chemical reagents necessary for the production of rare earths. However, during the fourth quarter of 2014, engineers at our Mountain Pass facility have identified a process change that, in combination with certain new equipment, should reduce the impurity level of the brine feedstock, and restore the operational efficiency of our Chlor-Alkali plant. However, it will take several months of optimization before we can fully resume on-site production of HCl at commercial production levels. Therefore, we have not yet realized our expected lower production costs, and any difficulties or delays in the optimization of the new leach system, the Chlor-Alkali plant, and other plants that are expected to improve our operational efficiency at the Mountain Pass facility would delay such cost reductions and negatively impacting cash flows. Any unanticipated costs or other further delays associated with our optimization efforts at our Mountain Pass facility could have a material adverse effect on our financial condition or results of operations and could require us to seek additional capital, which may not be available on commercially acceptable terms or at all."

Advisor engagement:

"In December 2014, our Board of Directors approved the engagement of an independent investment bank and advisory firm to advise us in pursuing various financing alternatives to secure a more sustainable capital structure. While we are evaluating a number of alternatives, we may seek to convert a significant portion of our outstanding debt to equity, including the exchange of debt for shares of our common stock. In addition, we may seek to reduce our cash interest cost and/or extend debt maturity dates by negotiating the exchange of outstanding debt for new debt with modified terms. Although we have been successful in raising funds to date, there can be no assurance that adequate or sufficient funding will be available in the future, or available under terms acceptable to us."