mp-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended March 31, 2022


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

For the transition period from __________ to __________

Commission File Number: 001-39277

MP MATERIALS CORP.

(Exact name of registrant as specified in its charter)


Delaware						84-4465489
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

6720 Via Austi Parkway, Suite 450

Las Vegas, Nevada 89119

(702) 844-6111

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value of $0.0001 per share	MP	New York Stock Exchange

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 ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

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

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of April 29, 2022, the number of shares of the registrant’s common stock outstanding was 177,526,827.

MP MATERIALS CORP. AND SUBSIDIARIES

TABLE OF CONTENTS


			Page

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements			1
Condensed Consolidated Balance Sheets (unaudited)			1
Condensed Consolidated Statements of Operations (unaudited)			2
Condensed Consolidated Statements of Changes in Stockholders’ Equity (unaudited)			3
Condensed Consolidated Statements of Cash Flows (unaudited)			4
Notes to Condensed Consolidated Financial Statements (unaudited)			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			28
Item 4. Controls and Procedures			28

PART II—OTHER INFORMATION
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28


Item 4. Mine Safety Disclosures			28

Item 6. Exhibits			29
Signatures			30

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References herein to the “Company,” “MP Materials,” “we,” “our,” and “us,” refer to MP Materials Corp. and its subsidiaries.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this Quarterly Report on Form 10-Q for the three months ended March 31, 2022 (this “Form 10-Q”), that are not historical facts are forward-looking statements under Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements may be identified by the use of the words such as “estimate,” “plan,” “shall,” “may,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target,” or similar expressions that predict or indicate future events or trends or that are not statements of historical matters. These forward-looking statements include, but are not limited to, statements regarding estimates and forecasts of other financial and performance metrics and projections of market opportunity. These statements are based on various assumptions, whether or not identified in this Form 10-Q or our Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”), and on the current expectations of our management and are not predictions of actual performance. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as, and must not be relied on by any investor as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond our control.

These forward-looking statements are subject to a number of risks and uncertainties, including:

•fluctuations and uncertainties related to demand for and pricing of rare earth products;

•uncertainties regarding the growth of existing and emerging uses for rare earth products and ability to compete with substitutions for rare earth minerals;

•the intense competition within the rare earth mining and processing industry;

•uncertainties relating to our commercial arrangements with Shenghe Resources (Singapore) International Trading Pte. Ltd., an affiliate of Shenghe Resources Holding Co., Ltd., a global rare earth company listed on the Shanghai Stock Exchange;

•potential changes in China’s political environment and policies;

•unanticipated costs or delays associated with our Stage II optimization project;

•unanticipated costs or delays associated with our Stage III project;

•risks associated with our intellectual property rights, including uncertainties related to the Company’s ability to obtain the intellectual property rights or licenses of intellectual property rights to produce NdFeB alloy and magnets;

•uncertainties related to the Company’s ability to produce and supply NdFeB alloy and magnets;

•the ability to convert current commercial discussions with customers for the sale of rare earth oxide products, NdFeB alloy and magnets into contracts;

•uncertainties relating to the COVID-19 pandemic;

•potential power shortages at Mountain Pass;

•increasing costs or limited access to raw materials that may adversely affect our profitability;

•fluctuations in transportation costs or disruptions in transportation services;

•inability to meet individual customer specifications;

•diminished access to water;

•uncertainty in our estimates of rare earth oxide reserves;

•risks associated with work stoppages;

•a shortage of skilled technicians and engineers;

•loss of key personnel;

•risks associated with the inherent dangers involved in mining activity and metal and alloy manufacturing;

•risks associated with events outside of our control, such as natural disasters, climate change, wars or health epidemics or pandemics;

•risks related to technology systems and security breaches;

•ability to maintain satisfactory labor relations;

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•ability to comply with various government regulations that are applicable to our business;

•ability to maintain our governmental licenses, registrations, permits, and approvals necessary for us to operate our business;

•risks relating to extensive and costly environmental regulatory requirements;

•risks associated with the terms of our convertible notes; and

•the other factors described elsewhere in this Form 10-Q, included under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II, Item 1A, “Risk Factors” or as described in our Form 10-K, or as described in the other documents and reports we file with the Securities and Exchange Commission (“SEC”).

If any of these risks materialize or our assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements.

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this Form 10-Q are more fully described within Part II, Item 1A, “Risk Factors” in this Form 10-Q and “Part I, Item 1A. Risk Factors” in our Form 10-K. Such risks are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, statements of belief and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us, as applicable, as of the date of this Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

iii

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


	March 31, 2022		December 31, 2021
(in thousands, except share and per share data)
Assets
Current assets
Cash and cash equivalents	$	1,233,300	$	1,179,297
Accounts receivable (including related party), net of allowance for credit losses of $0 and $0, respectively	37,108		51,009
Inventories	39,619		38,692
Prepaid expenses and other current assets	6,447		7,809
Total current assets	1,316,474		1,276,807
Non-current assets
Property, plant and equipment, net	668,488		610,612

Other non-current assets	2,249		2,247
Total non-current assets	670,737		612,859
Total assets	$	1,987,211	$	1,889,666
Liabilities and stockholders’ equity
Current liabilities
Accounts payable and accrued liabilities	$	41,654	$	35,734
Income taxes payable	5,246		3,463
Current installments of long-term debt—related party	—		16,082

Other current liabilities	4,675		4,264
Total current liabilities	51,575		59,543
Non-current liabilities
Asset retirement obligations	17,888		17,615
Environmental obligations	16,594		16,598
Long-term debt, net of current portion	675,804		674,927

Deferred income taxes	127,979		104,500
Other non-current liabilities	7,003		7,751
Total non-current liabilities	845,268		821,391
Total liabilities	896,843		880,934
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock ($0.0001 par value, 50,000,000 shares authorized, none issued and outstanding in either period)	—		—
Common stock ($0.0001 par value, 450,000,000 shares authorized, 177,526,007 and 177,816,554 shares issued and outstanding, as of March 31, 2022, and December 31, 2021, respectively)	18		18
Additional paid-in capital	932,384		936,299
Retained earnings	157,966		72,415
Total stockholders’ equity	1,090,368		1,008,732
Total liabilities and stockholders’ equity	$	1,987,211	$	1,889,666

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


	For the three months ended March 31,
(in thousands, except share and per share data)	2022		2021
Revenue:
Product sales (including related party)	$	161,755	$	59,739


Other sales (including related party)	4,503		232
Total revenue	166,258		59,971

Operating costs and expenses:
Cost of sales (including related party)(excluding depreciation, depletion and amortization)	23,173		17,936
Selling, general and administrative	20,565		13,458
Advanced projects, development and other	1,818		125
Depreciation, depletion and amortization	5,260		6,150
Accretion of asset retirement and environmental obligations	418		593

Total operating costs and expenses	51,234		38,262
Operating income	115,024		21,709
Other income, net	194		55
Interest expense, net	(1,905)		(1,154)
Income before income taxes	113,313		20,610
Income tax expense	(27,762)		(4,491)
Net income	$	85,551	$	16,119

Earnings per share:
Basic	$	0.49	$	0.10
Diluted	$	0.45	$	0.09

Weighted-average shares outstanding:
Basic	176,355,566		168,922,566
Diluted	193,490,330		179,319,489

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)



	Preferred Stock			Common Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)		Total Stockholders’ Equity
(in thousands, except share data)	Shares			Shares	Amount
Balance as of January 1, 2022	—	$	—	177,816,554	$	18	$	936,299	$	72,415	$	1,008,732
Stock-based compensation	—	—		46,882	—		10,179		—		10,179
Shares used to settle payroll tax withholding	—	—		(337,429)	—		(14,094)		—		(14,094)
Net income	—	—		—	—		—		85,551		85,551

Balance as of March 31, 2022	—	$	—	177,526,007	$	18	$	932,384	$	157,966	$	1,090,368

Balance as of January 1, 2021	—	$	—	170,719,979	$	17	$	916,482	$	(62,622)	$	853,877

Stock-based compensation	—	—		36,320	—		5,673		—		5,673

Shares used to settle payroll tax withholding	—	—		(10,435)	—		(334)		—		(334)
Net income	—	—		—	—		—		16,119		16,119
Other	—	—		—	—		(178)		—		(178)
Balance as of March 31, 2021	—	$	—	170,745,864	$	17	$	921,643	$	(46,503)	$	875,157

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the three months ended March 31,
(in thousands)	2022		2021
Operating activities:
Net income	$	85,551	$	16,119
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	5,260		6,150
Accretion of asset retirement and environmental obligations	418		593

Loss (gain) on sale or disposal of long-lived assets, net	257		(133)
Stock-based compensation expense	9,773		5,673
Accretion of debt discount and amortization of debt issuance costs	1,394		1,064

Revenue recognized in exchange for debt principal reduction	(13,566)		(11,276)
Deferred income taxes	23,479		4,162
Decrease (increase) in operating assets:
Accounts receivable (including related party)	13,901		(10,336)
Inventories	(927)		(2,826)
Prepaid expenses, other current and non-current assets	694		(2,231)
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities	(7,176)		3,050
Income taxes payable	1,783		—
Other current and non-current liabilities	130		(674)
Net cash provided by operating activities	120,971		9,335
Investing activities:
Additions of property, plant and equipment	(54,932)		(19,298)
Proceeds from sale of property, plant and equipment	—		125
Proceeds from government awards used for construction	5,130		—
Net cash used in investing activities	(49,802)		(19,173)
Financing activities:
Proceeds from issuance of long-term debt	—		690,000
Principal payments on debt obligations and finance leases	(3,817)		(276)
Payment of debt issuance costs	—		(17,419)
Tax withholding on stock-based awards	(14,094)		(334)
Other	—		(178)
Net cash provided by (used in) financing activities	(17,911)		671,793
Net change in cash, cash equivalents and restricted cash	53,258		661,955
Cash, cash equivalents and restricted cash beginning balance	1,181,157		532,440
Cash, cash equivalents and restricted cash ending balance	$	1,234,415	$	1,194,395

Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	1,233,300	$	1,181,515
Restricted cash, current	587		3,765
Restricted cash, non-current	528		9,115
Total cash, cash equivalents and restricted cash	$	1,234,415	$	1,194,395

See accompanying notes to the Condensed Consolidated Financial Statements.

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MP MATERIALS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1—DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business: MP Materials is the largest producer of rare earth materials in the Western Hemisphere. We own and operate the Mountain Pass Rare Earth Mine and Processing Facility (“Mountain Pass”), the only rare earth mining and processing site of scale in North America. The Company is headquartered in Las Vegas, Nevada. References herein to the “Company,” “we,” “our,” and “us,” refer to MP Materials Corp. and its subsidiaries.

We currently produce a rare earth concentrate that we sell pursuant to an offtake agreement to Shenghe Resources (Singapore) International Trading Pte. Ltd. (“Shenghe”), a majority-owned subsidiary of Leshan Shenghe Rare Earth Co., Ltd. (“Leshan Shenghe”) whose ultimate parent is Shenghe Resources Holding Co., Ltd., a leading global rare earth company listed on the Shanghai Stock Exchange. We are currently recommissioning, upgrading and enhancing the processing facility at Mountain Pass to provide for the separation of the individual rare earth elements contained in our concentrate (referred to as the “Stage II optimization project” or “Stage II”), that will allow us to sell separated rare earth oxides directly to end users. In addition, we recently began construction on our initial rare earth, metal, alloy and magnet manufacturing facility in Fort Worth, Texas (the “Fort Worth Facility”) as a part of our Stage III downstream expansion strategy (“Stage III”). For more information on our relationship and agreements with Shenghe, see Note 3, “Relationship and Agreements with Shenghe,” and Note 13, “Related-Party Transactions.”

Operating segments are defined as components of an enterprise about which separate financial information is available and evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker views the Company’s operations and manages the business as one reportable segment.

The cash flows and profitability of the Company’s operations are significantly affected by the market price of rare earth products. The prices of rare earth products are affected by numerous factors beyond the Company’s control. The products of the Company are sold globally, with a primary focus in the Asian market due to the refining capabilities of the region. Rare earth products are critical inputs in hundreds of existing and emerging clean-tech applications including electric vehicles and wind turbines as well as drones and defense applications.

Basis of Presentation: The unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the rules and regulations of the U.S. Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Results of operations and cash flows for the interim periods presented herein are not necessarily indicative of the results that would be achieved during a full year of operations or in future periods. These unaudited Condensed Consolidated Financial Statements and notes thereto should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

NOTE 2—SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The unaudited Condensed Consolidated Financial Statements include the accounts of MP Materials Corp. and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Concentration of Risk: As of March 31, 2022, Shenghe, a related party of the Company, accounted for more than 90% of product sales. See Note 3, “Relationship and Agreements with Shenghe,” for additional information.

Furthermore, while revenue is generated in the United States, our principal customer conducts its primary operations in China and may transport and sell products in the Chinese market. Therefore, the Company’s revenue is affected by Shenghe’s ultimate realized prices in China. In addition, there is an ongoing economic conflict between China and the United States that has resulted in tariffs and trade barriers that may negatively affect the Company’s business and results of operations.

In December 2019, a novel strain of coronavirus (known as “COVID-19”) began to impact the population of China. In March 2020, the outbreak of COVID-19 was declared a global pandemic after growing both in the United States and globally. The responses by governments, societies, and private sector entities to the COVID-19 pandemic, which include temporary

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closures of businesses, social distancing, travel restrictions, “shelter in place,” and other governmental regulations and various economic stimulus programs, have significantly impacted market volatility and general global economic conditions, including significant business and supply chain disruption as well as broad-based changes in supply and demand.

Since the onset of the COVID-19 pandemic in the first quarter of 2020, we have experienced, at times, significant shipping delays due to congestion and slowdowns at U.S. and international ports caused by shortages in vessels, containers, and truckers, also disrupting the global supply chain. Congestion and slowdowns have affected and may continue to affect the capacity at ports to receive deliveries of products or the loading of shipments onto vessels. Despite these factors, we have not experienced a reduction in production or sales due to the COVID-19 pandemic; however, the COVID-19 pandemic has contributed to certain cost and schedule pressures on the Stage II optimization project. The Company has worked proactively and diligently to adjust working schedules and hours to optimize logistics and shipping, which has thus far prevented a significant negative impact on our product sales and has mitigated certain impacts on Stage II construction and recommissioning progress. However, there can be no assurance that the ongoing COVID-19 pandemic will not have a negative impact on our production, sales, or growth projects in the future.

Furthermore, as the situation continues to evolve, including as a result of new and potential future variants of COVID-19, the possibility of federal or state mandates on vaccinations, or other factors that may affect international shipping and logistics or involve responses to government actions such as strikes or other disruptions, it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic on the Company’s business and results of operations. The extent and duration of any business disruptions, and related financial impact, cannot be estimated at this time.

Use of Estimates: The preparation of the unaudited Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities at the date of the unaudited Condensed Consolidated Financial Statements, and (iii) the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results may differ from those estimates.

Recently Issued Accounting Pronouncements: There were no new accounting pronouncements recently issued or effective during the three months ended March 31, 2022, that had or would be expected to have a material impact on the Company’s unaudited Condensed Consolidated Financial Statements.

Reclassifications: Certain amounts in prior periods have been reclassified to conform to the current year presentation.

NOTE 3—RELATIONSHIP AND AGREEMENTS WITH SHENGHE

Offtake Agreement

In March 2022, the Company entered into an offtake agreement with Shenghe (the “Offtake Agreement”), which became effective upon the termination of the A&R Offtake Agreement (as discussed and defined below). The initial term of the Offtake Agreement is two years, with the option to extend the term at the Company’s discretion for an additional one-year period.

Pursuant to the Offtake Agreement, and subject to certain exclusions, Shenghe shall purchase on a “take or pay” basis the rare earth concentrate produced by the Company as the exclusive distributor in China, with certain exceptions for the Company’s direct sales globally. In addition, at the discretion of the Company, Shenghe may be required to purchase on a “take or pay” basis certain non-concentrate rare earth products, although the Company may sell all non-concentrate rare earth products in its sole discretion to customers or end users in any jurisdiction. Under the Offtake Agreement, Shenghe will be paid a variable commission on net proceeds to the Company.

Similar to the A&R Offtake Agreement, the sales price of rare earth concentrate sold to Shenghe is based on an agreed-upon price per metric ton, subject to certain quality adjustments depending on the measured characteristics of the product, with an adjustment for the ultimate market price of the product realized by Shenghe upon sales to their customers. The sales price and other terms applicable to a quantity of offtake products are set forth in monthly purchase agreements between the Company and Shenghe.

Original Commercial Agreements

In May 2017, the Company entered into a set of commercial arrangements with Shenghe, which included a technical services agreement (the “TSA”) and an offtake agreement (the “Original Offtake Agreement”). The Original Offtake Agreement required Shenghe to advance the Company an initial $50.0 million (the “Initial Prepayment Amount”) to fund the restart of operations at the mine and the TSA required Shenghe to fund any additional operating and capital expenditures

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required to bring Mountain Pass to full operability. Shenghe also agreed to provide additional funding of $30.0 million to the Company pursuant to a separate letter agreement dated June 20, 2017 (the “Letter Agreement”) (the “First Additional Advance”), in connection with our acquisition of Mountain Pass. In addition to the repayment of the First Additional Advance, pursuant to the Letter Agreement, the Initial Prepayment Amount increased by $30.0 million. We refer to the aggregate prepayments made by Shenghe pursuant to the Original Offtake Agreement and the Framework Agreement (defined below), as adjusted for Gross Profit Recoupment (defined below) amounts and any other qualifying repayments to Shenghe, inclusive of the $30.0 million increase to the Initial Prepayment Amount, as the “Prepaid Balance.”

Under the Original Offtake Agreement, we sold to Shenghe, and Shenghe purchased on a firm “take or pay” basis, all of the rare earth products produced at Mountain Pass. Shenghe marketed and sold these products to customers, and retained the gross profits earned on subsequent sales. The gross profits were credited against the Prepaid Balance, and provided the means by which we repaid, and Shenghe recovered, such amounts (the “Gross Profit Recoupment”).

Framework Agreement and Restructured Commercial Agreements

In May 2020, the Company entered into a framework agreement and amendment (the “Framework Agreement”) with Shenghe and Leshan Shenghe that restructured the commercial arrangements and provided for, among other things, a revised funding amount and schedule to settle Shenghe’s prepayment obligations to the Company, as well as an amendment to the Original Offtake Agreement, as discussed below.

Pursuant to the Framework Agreement, the Company entered into an amended and restated offtake agreement with Shenghe on May 19, 2020 (the “A&R Offtake Agreement”), which, upon effectiveness, superseded and replaced the Original Offtake Agreement. Pursuant to the Framework Agreement, Shenghe funded the remaining portion of the Initial Prepayment Amount and agreed to fund an additional $35.5 million advance (the “Second Additional Advance” and together with the Initial Prepayment Amount, inclusive of the $30.0 million increase pursuant to the Letter Agreement, the “Offtake Advances”), which amounts were fully funded in June 2020.

The A&R Offtake Agreement maintained the key take-or-pay, amounts owed on actual and deemed advances from Shenghe, and other terms of the Original Offtake Agreement, with the following changes, among other items: (i) as to the offtake products subject to the A&R Offtake Agreement, provided that if we sold such offtake products to a third party, then, until the Prepaid Balance was reduced to zero, we would pay an agreed percentage of our revenue from such sales to Shenghe, to be credited against the amounts owed on Offtake Advances; (ii) provided that the sales price to be paid by Shenghe for our rare earth products (a portion of which reduces the Prepaid Balance rather than being paid in cash) would be based on market prices (net of taxes, tariffs and certain other agreed charges) less applicable discounts; and (iii) obliged us to pay Shenghe, on an annual basis, an amount equal to our annual net income, less any amounts recouped through the Gross Profit Recoupment mechanism over the course of the year, until the Prepaid Balance was reduced to zero.

The sales price and other terms applicable to a quantity of offtake products were set forth in monthly purchase agreements between the Company and Shenghe. In March 2022, the Company made a $2.9 million payment to Shenghe pursuant to item (iii) discussed above. Upon payment by the Company, the Prepaid Balance was repaid in full, and the A&R Offtake Agreement was terminated.

NOTE 4—INVENTORIES

The Company’s inventories consisted of the following:


	March 31, 2022		December 31, 2021
(in thousands)
Materials and supplies	$	11,246	$	10,711
In-process	26,799		25,574
Finished goods	1,574		2,407
Total inventory	$	39,619	$	38,692

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NOTE 5—PROPERTY, PLANT AND EQUIPMENT

The Company’s property, plant and equipment consisted of the following:


	March 31, 2022		December 31, 2021
(in thousands)
Land and land improvements	$	15,764	$	7,925
Buildings and building improvements	8,835		8,791
Machinery and equipment	62,331		61,822
Assets under construction	186,236		134,327
Mineral rights	438,719		437,376
Property, plant and equipment	711,885		650,241
Less: Accumulated depreciation and depletion	(43,397)		(39,629)
Property, plant and equipment, net	$	668,488	$

SEC Form 10-Q filed by MP Materials Corp.