Q4 2020 Mp Materials Corp Earnings Call

March 18, 2021

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Good afternoon, My name is shantou and I'll be your conference operator today at this time I would like to welcome everyone to the MP materials fourth quarter and full year 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Chantelle: Good afternoon. My name is Chantelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the MP Materials Q4 and full year 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. At this time, I'd like to turn the call over to Martin Sheehan, Head of Investor Relations. Martin, please go ahead.

Operator: Good afternoon. My name is Chantelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the MP Materials Q4 and full year 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, star, followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. At this time, I'd like to turn the call over to Martin Sheehan, Head of Investor Relations. Martin, please go ahead.

If you'd like to ask a question during this time.

<unk> followed by the number one on your telephone keypad, if he would like to withdraw your question press the pound key thank you.

At this time I'd like to turn the call over to Martin Chin head of Investor Relations. Martin. Please go ahead.

Thank you operator, and good day, everyone welcome to MP materials fourth quarter 2020 earnings call with me today are James Lapinski, Chairman and Chief Executive Officer of MP materials, Michael Rosenthal, Chief Operating Officer, Ryan Corbett, Chief Financial Officer, and Sheila Bangalore Chief strategy.

Martin Sheehan: Thank you, operator, good day, everyone. Welcome to MP Materials Q4 2020 Earnings Call. With me today are James Litinsky, Chairman and Chief Executive Officer of MP Materials, Michael Rosenthal, Chief Operating Officer, Ryan Corbett, Chief Financial Officer, and Sheila Bangalore, Chief Strategy Officer and General Counsel. Before we get to James and Ryan's opening remarks, I'd like to remind you that during today's call, we will make certain forward-looking statements that do not constitute historical facts under the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are predictions, projections, and other statements about future events that are based on current expectations and assumptions, and as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from forward-looking statements in this communication.

Officer and General Counsel.

Before we get the change in Ryan's opening remarks, I would like to remind you that during today's call. We will make certain forward looking statements that do not constitute historical facts under the safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995 forward looking statements are predictions projections and other statements about future events that are based.

On current expectations and assumptions and as a result are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from forward looking statements in the communications for more information about factors that may cause actual results to materially differ from forward looking statements. Please refer to the cautionary language in the earnings release.

Martin Sheehan: For more information about factors that may cause actual results to materially differ from forward-looking statements, please refer to the cautionary language in the earnings release and in our filings with the SEC, including the Risk Factors section in our recent SEC filings. During the call, management will also discuss certain non-GAAP financial measures, which we believe to be useful in evaluating MP Materials' operating performance. These measures should not be considered in isolation or as a substitute for MP Materials' financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our current report on Form 8-K filed today and can be found on our website, investors.mpmaterials.com. With that, I'll turn the call over to Jim. Jim?

And in our filings with the SEC, including the risk factors section in our recent SEC filings.

During the call management will also discuss certain non-GAAP financial measures, which we believe to be useful in evaluating MP materials operating performance. These measures should not be considered in isolation or as a substitute for MP materials financial results prepared in accordance with GAAP.

A reconciliation of these measures to the most directly comparable GAAP measures is available in our current report on form 8-K filed today and can be found on our website investors dot MP materials dot com with that I'll turn the call over to Jim Jim.

Thanks, Martin and thanks, everyone for joining us today, welcome to our fourth quarter and full year 2020 call.

James Litinsky: Thanks, Martin, thanks everyone for joining us today. Welcome to our Q4 and full year 2020 Call. I'm going to cover a few things today. First, I'll recap our strong Q4 results, capping a milestone year for MP. Second, I'll update you on our Stage II optimization plan in Mountain Pass. I'll turn it over to Ryan for some color on our performance. Lastly, I'll share some perspective on the current market environment and how we're positioned for it. Starting with the financial highlights. In Q4, we generated strong production volumes as well as records for both shipments and revenues. These results show that we are clearly enjoying the benefit of strong pricing, which has continued to rise post-year end, but we are also demonstrating operating leverage on a unit production basis.

On the cover a few things today for.

First I'll recap, our strong fourth quarter results capping of milestone year for MP.

Second I'll update you on our stage two optimization plan on mountain pass.

Then I'll turn it over to Ryan for some color on our performance and lastly, I'll share some perspective on the current market environment and how we're positioned for it.

Starting with the financial highlights.

In the fourth quarter, we generated strong production volumes as well as records for both shipments and revenues. These results show that we are clearly enjoying the benefit of strong pricing, which has continued to rise post year end, but we are also demonstrating operating leverage on a unit production basis.

You can see the combined effect of these trends on the significant margin expansion, we've reported for the fourth quarter.

James Litinsky: You can see the combined effect of these trends in the significant margin expansion we've reported for Q4. We believe the growth and cost improvement illustrate that we continue to operate our facility at best-in-class levels, with both uptime and yields remaining at or near the record levels we've established since restarting Mountain Pass. All told, Q4 capped an awesome year from a performance standpoint, and we are continuing to execute at a high level. 2020 was also a milestone year in charting MP's future. As you know, we completed a go-public transaction in November, which gave us a fortress balance sheet as we execute on Stage II and beyond. We also took important steps to scale the company as we prepare to become a leading global producer of separate rare earths, both on-site and in our management team.

We believe the growth and cost improvement illustrate that we continue to operate our facility of best in class levels with both uptime on yields remaining at or near the record levels. We've established since restarting mountain pass on.

All told fourth quarter of Captain Awesome year from a performance standpoint, and we are continuing to execute at a high level.

2020 was also a milestone year in chartering MP as future.

As you know we completed a public transaction in November which gave US a fortress balance sheet as we execute on phase two and beyond.

We also took important steps the scale the company as we prepare to become a leading global producer of sorry the virus.

But the onsite and the management team. We currently have over 300 employees across our engineering and site personnel as well as important public company functions across finance legal communications and other key areas and finally, we closed out the year by putting the final pieces in place to execute on our <unk>.

James Litinsky: We currently have over 300 employees across our engineering and site personnel, as well as important public company functions across finance, legal, communications, and other key areas. Finally, we closed out the year by putting the final pieces in place to execute on our Stage II optimization plan. We have now implemented important design improvements that we believe will significantly de-risk Stage II. Essentially, we invested further in the front engineering stage of our Stage II project to improve our processes and circuit design. Through these efforts, we believe our technical team identified ways to improve product yield, expected first pass on-spec production rates, and reagent usage efficiency, including recycling.

<unk> optimization plan.

We have now implemented important design improvements that we believe will significantly derisk stage two.

Essentially we invested further in the front engineering stage of our stage two project to improve our processes in circuit design through these efforts, we believe our technical team identified ways to improve product yield expected first pass on spec production rates and reagent usage efficiency, including recycling.

Importantly, I am very pleased to tell you that due to these achievements. We believe we no longer need to restart the chlor alkali facility to achieve the 2023 expected operating model, we outlined last year on an apples to apples basis. This is because we believe we found ways to permanently reduce the reagent usage per ton of Oreo.

James Litinsky: Importantly, I'm very pleased to tell you that due to these achievements, we believe we no longer need to restart the chlor-alkali facility to achieve the 2023 expected operating model we outlined last year on an apples-to-apples basis. This is because we believe we found ways to permanently reduce the reagent usage per ton of REO. We think this is a significant de-risking of our Stage II, though we still remain maniacally focused on the key work streams of commissioning the roasting circuit, product finishing assets, salt crystallizer, and other site upgrades. I will walk through more details on this in a moment. First, I'd like to cover our production metrics. The team is doing an outstanding job executing, illustrated by strong Q4 and 2020 year-over-year growth in production.

We think this is a significant derisking of our stage two though we still remain maniacally focused on the key work streams of commissioning the roasting circuit product, finishing assets salt crystallized and other site upgrades.

I will walk through more details on this in a moment.

But first I'd like to cover our production metrics. The team is doing an outstanding job of executing illustrated by strong fourth quarter in 2020 year over year of growth in production importantly.

Importantly, while we've increased shipment volumes by 20% in the quarter and 40% for the full year concentrate pricing in the fourth quarter increased 70% demonstrating that the demand for <unk> remains very strong.

James Litinsky: Importantly, while we've increased shipment volumes by 20% in the quarter and 40% for the full year, concentrate pricing in Q4 increased 70%, demonstrating that the demand for NdPr remains very strong. You can also see here the production cost improvement I highlighted a moment ago. For the full year, we've reduced production costs on a per metric ton basis by nearly 28%. As we move through our Stage II and contemplate future initiatives, including evaluating heavy rare earths, moving downstream into magnets, and other potential initiatives, we believe the progress and rapid learning we're achieving today will lead to significant additional opportunities to increase profitability and cash flows. As we've said to many of you, 2021 is about execution on Stage II.

And you can also see here of the production cost improvement I highlighted a moment ago for the full year, we've reduced production costs on a per metric ton basis by nearly 28%.

As we move through our stage, two and contemplate future initiatives, including evaluating heavy rare earth moving downstream into the magnets and other potential initiatives. We believe the progress and rapid learning, we're achieving today will lead to significant additional opportunities to increase profitability and cash flows.

As we've said to many of your 2021 is about execution on stage two.

For those who aren't as familiar with our strategy stage. Two is our plan to move from today's profitable concentrate production to separating rare earth oxides, thereby restoring downstream production of these critical elements of the United States of America. Upon the expected completion of this project in 2022, we will be scaling toward full annual.

James Litinsky: For those who aren't as familiar with our strategy, Stage II is our plan to move from today's profitable concentrate production to separating rare earth oxides, thereby restoring downstream production of these critical elements to the United States of America. Upon expected completion of this project in 2022, we will be scaling toward full annual run rate production of more than 6,000 metric tons of NdPr. As we stated during the going public process last year, we expect 2023 will be the first full year of production at these levels. Keep in mind, though, that the 2023 target of $250 million in normalized EBITDA that we outlined last year assumed a spot NdPr price of $70 per kilo. NdPr spot today is actually roughly $88. With that background, I'm pleased to report that Stage II remains on track.

Run rate production of more than 6000 metric tons of <unk>.

As we stated during the going public process last year, we expect 2023 will be the first full year of production at these levels keep in mind, though that the 2023 target of 250 million of normalized EBITDA that we outlined last year assumed of spot and EPR price of $70 per kilo and EPR spot today is actually roughly 88.

Yeah.

So with that background I am pleased to report the stage two remains on track.

Long lead equipment is arriving on site are fixed price engineering and procurement contract is signed and construction is underway.

James Litinsky: Long lead equipment is arriving on site. Our fixed price engineering and procurement contract is signed, and construction is underway. That said, with our unwavering owner-operator mentality, we do not rest. In recent months, our team made important design improvements that we believe significantly de-risk the project, enhance our potential long-term operating model, and reduce our environmental footprint. For those of you who followed us, we originally announced estimated Stage II project costs back in July. They consisted of a total of $200 million in 2 primary parts. The first $170 million related to mainly reinstituting the roasting step and adding a salt crystallizer, which is intended to restore the separations process flow to how it worked successfully for decades at Mountain Pass. As the chart here indicates, this capital outlay has not changed since we first announced those plans.

That said with our unwavering owner operator mentality, we do not rest in recent months.

Our team made important design improvements that we believe significantly derisked the project enhance our potential long term operating model and reduce our environmental footprint.

So for those of you who followed US we originally announced estimated stage II project costs back in July.

The consisted of a total of $200 million in two primary parts of the.

The first $170 million related to mainly reinstituting, the roasting step in adding of salt crystallize or which is intended to restore the separations process flow to how it worked successfully for decades of mountain pass.

As the chart here indicates this capital outlay has not changed since we first announced those plans.

We also had a stage of <unk>, which was focused on the restart of our Chlor alkali facility for managing reagents used in the refining process.

James Litinsky: We also had a Stage 2B, which was focused on the restart of the chlor-alkali facility for managing reagents used in the refining process. This project was to consume the remaining $30 million of the Stage II capital costs. The successful completion of Stage II construction and chlor-alkali were the execution drivers needed for us to achieve the normalized 2023 EBITDA target that we shared with you. We've been busy. We believe that what is now underway on an apples to apples basis versus July, should have lower structural costs per REO metric ton produced, as well as improve upon our already strong environmental profile. We no longer need to restart chlor-alkali in the near term to achieve those previously disclosed targets. Let me be specific.

This project was to consume the remaining $30 million on the stage II capital costs.

The successful completion of stage, two construction and Chlor alkali, where the execution drivers needed for us to achieve the normalized 2023 EBITDA target that we shared with you.

But we've been busy.

We believe that what is now underway on an apples to apples basis versus July should have lower structural cost per Oreo metric ton produced as well as improve upon our already strong environmental profile and we no longer need to restart chlor alkali in the near term to achieve those previously disclosed targets.

So let me be specific.

The redesign will significantly reduce the amount of reagents used per ton of Oreo processed on our refining process in some cases by over 10%, reducing our original expectations for operating costs in stage two.

James Litinsky: The redesign will significantly reduce the amount of reagents used per ton of REO processed in our refining process, in some cases, by over 10%, reducing our original expectations for operating costs in Stage II. Restarting the chlor-alkali facility in the future remains an option for us, but one might now analyze it as a separate and new incremental potential high return investment opportunity that could further enhance shareholder value. Restarting this facility in the future means we could potentially have more excess reagents to sell into the open market, driving an improved ROI. Therefore, we now have a contracted Stage II underway with a net capital cost consistent with prior estimates, despite what we believe are significant design improvements for all of the reasons I've outlined.

Restarting the Chlor alkali facility in the future remains an option for us, but one might now analyze it as a separate and new incremental potential high return on investment opportunity that can further enhance shareholder value we.

We starting this facility in the future means we could potentially have more excess free agents to sell into the open market driving an improved ROI.

Therefore, we now have a contracted stage two underway with a net capital cost consistent with prior estimates. Despite what we believe are significant design improvements for all of the reasons I've outlined.

Moreover, I believe this is a pretty remarkable achievement for our team when you consider the rapid cost inflation that we're seeing throughout the economy. This is particularly acute for infrastructure materials like steel lumber and concrete and for.

James Litinsky: Moreover, I believe this is a pretty remarkable achievement for our team when you consider the rapid cost inflation that we are seeing throughout the economy. This is particularly acute for infrastructure materials like steel, lumber, and concrete. In fact, since our July 2020 estimate, steel prices are up 150%, lumber prices are up 130%, and concrete is up 30%. As we execute, we hope to experience the upside leverage that could come from rising commodity prices against an in-place, multi-billion dollar and difficult to replace asset base. I would also add that this is particularly powerful to consider in light of what we believe is the beginning stages of a demand-driven commodity cycle. Whatever the markets thought new supply would cost, I think it is fair to say it has recently gone up a lot.

Fact.

Since our July 2020 estimate.

Steel prices are up 150% lumber prices are up 130% and concrete is up 30%.

As we execute we hope to experience the upside leverage that could come from rising commodity prices against the in place multibillion dollar and difficult to replace asset base. I would also add that this is particularly powerful to consider in light of what we believe is the beginning stages of of demand driven commodity cycle whatever the market thought.

New supply would cost I think it is fair to say it has recently gone up a lot now I will turn it over to Ryan to talk through financial highlights.

James Litinsky: Now, I will turn it over to Ryan to talk through financial highlights.

Thanks, Jim and Hello, everyone.

Ryan Corbett: Thanks, Jim, and hello, everyone. Jim already covered a few of the financial headlines, and we have all of the details in our press release. I'll give an overview of how we think about our financial results and share some thoughts on how we're looking at 2021. We delivered impressive growth in Q4 and for the full fiscal year. Jim spoke about the strong demand and pricing environment, which drove the doubling of our revenues in the quarter and the 83% growth for the full year. The lifting of import duties in China has also contributed to higher realized prices. The headline for us is that demand is strong, and although we can't predict pricing or shipping schedules quarter-to-quarter, we expect to continue to sell through all of our production.

<unk> already covered a few of the financial headlines and we have all of the details in our press release. So I will give an overview of how we think about our financial results and share some thoughts on how we're looking at 2021.

We delivered impressive growth in Q4 and for the full fiscal year, Jim spoke about the strong demand and pricing environment, which drove the doubling of our revenues in the quarter and the 83% growth for the full year.

The lifting of import duties on China has also contributed to higher realized prices, but the headline for us of the demand is strong on although we can't predict pricing of shipping schedules quarter to quarter, we expect to continue to sell through all of our production.

In addition to the price and sales side of the equation. Our adjusted EBITDA benefited from the continued excellent work Michael and his team are doing to improve our processes reduce risk and ultimately increase the productivity of stage one.

Ryan Corbett: In addition to the price and sales side of the equation, our adjusted EBITDA benefited from the continued excellent work Michael and his team are doing to improve our processes, reduce risk, and ultimately increase the productivity of Stage I. Unit costs were down year-over-year, mainly due to these process improvements, which drove a higher average concentrate grade and higher mineral recoveries compared to last year. Put another way, our improvements are generating higher percentages of rare earth oxides and concentrate, and we continue to achieve higher productivity per ton of ore fed. As we continue to effectively manage our per unit production costs, you can see the leverage that exists in this model when demand and pricing are strong. This combination caused our margins to triple in Q4 compared to last year's Q4, and was the driver of our roughly 300% increase in EBITDA.

Unit costs were down year over year, mainly due to these process improvements, which drove a higher average concentrate grade and higher mineral recoveries compared to last year.

Put another way our improvements are generating higher percentages of rare earth oxides, and concentrate and we continue to achieve higher productivity per ton of ore fed.

As we continue to effectively manage our per unit production costs, you can see the leverage that exists in this model when demand and pricing are strong.

The combination caused our margins to triple in Q4 compared to last year's fourth quarter and was the driver of our roughly 300% increase in EBITDA.

Ryan Corbett: This combination caused our margins to triple in Q4 compared to last year's Q4, and was the driver of our roughly 300% increase in EBITDA.

Keep in mind that this EBITDA growth includes about six weeks of the impact of public company costs. Following our analyst day, and while we will be seeing the full quarter impact of these cost moving forward, we feel good about production costs and our market outlook.

Ryan Corbett: Keep in mind that this EBITDA growth includes about 6 weeks of the impact of public company costs following our listing. While we'll be seeing the full quarter impact of these costs moving forward, we feel good about production costs and our margin outlook. Lastly, on production costs, although down year-over-year, the sequential increase is partly due to typical seasonality with our planned year-end plant turnaround, but results were also impacted by a project to diversify our reagent supply chain and ensure a sustainable US-based source of these critical materials. We embarked on a full-scale reagent pilot from mid-October into late January of Q1, and it took a lot of hard work from the team. Ultimately, we were successful in this full-scale test, and it was an important achievement for the company.

Lastly on production costs, although down year over year. The sequential increase is partly due to typical seasonality with our planned year end of plant turnaround, but results were also impacted by a project to diversify our reagent supply chain inventory of sustainable U S. Based source of these critical materials.

We embarked on a full scale reagent pilot for mid October in the late January of the first quarter and it took a lot of hard work from the team, but ultimately we were successful in the small scale test and it was an important achievement for the company.

Ryan Corbett: Given the supply chain issues we have all seen in industries like semiconductors, proving out a suitable alternative for our reagents was critical. As you would expect, with a limited volume commitment for a trial, pricing for these reagents was slightly higher per unit of contained REO, but the tremendous success of the pilot, as evidenced in our record production, gives us confidence that we now have supply redundancy that would come at a similar or better per unit cost of our current reagent scheme. Although costs were up slightly from Q3 on a per unit basis, the reduction in risk to our Stage I process was well worth the investment.

Given the supply chain issues, we have all seen in industries like semiconductors proving out a suitable alternative for our reagents was critical as you would expect with a limited volume commitment for a trial pricing for these reagents was slightly higher per unit of contained on Rio with the tremendous success of the pilot as evidenced in our record production.

Gives us confidence that we now have supply redundancy that would come at a similar or better per unit cost of our current reagent scheme.

So although costs were up slightly from Q3 on a per unit basis, the reduction in risk to our stage one process was well worth the investment.

On the next slide I thought it would be useful to dig into our reported cash flow and provide some context. So that you can see how our stage one process is generating free cash flow for the business and.

Ryan Corbett: On the next slide, I thought it would be useful to dig into our reported cash flow and provide some context so that you can see how our Stage I process is generating free cash flow for the business. In the appendix section of the slides, you'll see a detailed walk of how we get from adjusted EBITDA to our reported operating cash flow and then our reported free cash flow. Looking at slide 9, specifically, on the left side of the chart, you see our free cash flow for the year was negative $19 million. If we adjust for our offtake paydown, the CapEx spent on our Stage II optimization and related projects, as well as deal expenses and one-time items, our Stage I process generated approximately $34 million of normalized free cash flow in 2020.

In the appendix section of the slide you'll see a detailed walk of how we get from adjusted EBITDA to our reported operating cash flow and then on a reported free cash flow, but looking at slide nine specifically on the left side of the chart you see our free cash flow for the year was negative $19 million, but if we adjust for our offtake of pay down the capex spend on on.

The stage, two optimization and related projects as well as deal expenses and onetime items. Our stage one process generated approximately $34 million of normalized free cash flow in 2020, that's a very strong 25% free cash flow margin for the year.

Ryan Corbett: That's a very strong 25% free cash flow margin for the year. Keep in mind that the offtake balance is essentially debt, but per US GAAP, the impact of the paydown of that agreement, because our offtake partner retains a portion of the cash from sales to pay down the obligation, that runs through our operating cash flow instead of financing in the cash flow statement, as might be expected, which is why we believe it's relevant to add back to our free cash flow for a comparable metric. Moving to slide 10, a quick balance sheet update. As we discussed last quarter, our business combination resulted in gross proceeds of $545 million to fund our growth.

Keep in mind that the off take balance is essentially debt.

Per U S. GAAP the impact of the Paydown of debt agreement because of our offtake partner retained a portion of the cash from sales to pay down the obligation that runs through our operating cash flow instead of financing in the cash flow statement as might be expected, which is why we believe it's relevant to add back to our free cash flow for a compare.

<unk> metric.

Moving to slide 10, a quick balance sheet update as we discussed last quarter. Our business combination resulted in gross proceeds of $545 million to fund our growth the reported a net cash balance at year end of nearly $520 million positioning us very well as we ramp up work on stage two.

Ryan Corbett: We reported a net cash balance at year-end of nearly $520 million, positioning us very well as we ramp up work on Stage II. In addition, the balance on our offtake agreement was reduced to $71 million in the quarter. Regarding our share count, the earn-out investing shares from our business combination all vested in the quarter, resulting in approximately 171 million shares outstanding at the end of Q4. Also, approximately 11.5 million warrants remain outstanding and will become exercisable on 4 May, on the one-year anniversary of the Fortress Value IPO. We've illustrated our fully diluted share count with the warrant impact captured via the treasury stock method on the table on slide 10.

In addition, the balance on our off take agreement was reduced to $71 million on the quarter.

Regarding our share count the earn out investing shares from our business combination all vested in the quarter, resulting in approximately 171 million shares outstanding at the end of Q4.

Also approximately 11 5 million warrants remain outstanding and will become exercisable on may four on the one year anniversary of the fortress value IPO, We've illustrated our fully diluted share count with the warrant impact captured via the Treasury stock method on the table on slide 10.

In summary, we feel very good about where we stand financially as we embark on stage two which as Jim noted, we will now be a $210 million net headline cost with the design improvements built in.

Ryan Corbett: In summary, we feel very good about where we stand financially as we embark on Stage II, which, as Jim noted, will now be a $210 million net headline cost with the design improvements built in. We are more than adequately funded for Stage II, while also generating strong implied free cash flow from Stage I. All that said, with our markets developing rapidly, we will be opportunistic with respect to how we manage our financial capacity and flexibility, particularly as we see opportunities to pursue our mission of fully restoring the supply chain to the United States. Shifting to the next slide on our fiscal year 2021 operating framework, we currently anticipate modest production and shipping volume growth for the full year, and should pricing hold, we are set up for a very good 2021.

So we are more than adequately funded for stage two while also generating strong implied free cash flow from stage one.

All of that said with our market's developing rapidly we will be opportunistic with respect to how we manage our financial capacity and flexibility, particularly as we see opportunities to pursue our mission of fully restoring the supply chain to the United States.

Shifting to the next slide on our fiscal year of 2001 operating framework. We currently anticipate modest production and shipping volume growth for the full year entered the pricing hold are set up for a very good 2021.

We continue to produce at near record levels, and our Q1 is shaping up to be a solid quarter with improved sequential revenue and EBITDA.

Ryan Corbett: We continue to produce at near record levels. Our Q1 is shaping up to be a solid quarter with improved sequential revenues and EBITDA. Moving to the cost side, as we continually optimize our Stage I process, we expect to continue our trend of per unit cost improvement. We expect to reinvest those gains in headcount growth as we prepare for Stage II and grow our corporate functions. Some of you might also be wondering about shipping, given reports of congestion at the Los Angeles and Long Beach ports. I'd remind you there that we are an outbound shipper. We do not believe we will see any material cost impact from what you're reading about, though general lumpiness and shipment timing is always possible given the overall congestion at the port.

Moving to the cost side as we continually optimize our stage one process. We expect to continue our trend of per unit cost improvement, but expect to reinvest those gains and head count growth as we prepare for stage two and grow our corporate functions.

Some of you might also be wondering about shipping given reports of congestion at the Los Angeles and long Beach ports.

To remind you there that we arent outbound shipper. So we do not believe we will see any material cost impact from what Youre reading about the general Lumpiness on shifting timing there is always possible given the overall congestion of the port.

As for the stage II capital spend the ramp in capital cost is essentially the beginning now with the majority of that $210 million spend occurring in late 2021.

Ryan Corbett: As for the Stage II capital spend, the ramp in capital costs is essentially beginning now, with the majority of that $210 million spend occurring in late 2021. Now I'd like to turn it back to Jim to wrap up.

Now I'd like to turn it back to Jim to wrap up.

Thanks, Brian.

James Litinsky: Thanks, Ryan. I would like to take a moment to remind everyone of the extraordinary opportunity unfolding for MP. When we founded the company in 2017, we saw tremendous potential in Mountain Pass, given the incredibly unique nature of the asset and its importance to electrification and supply chain reliability. We were fortunate, though, to have a few tough years to help us build confidence in our mission and to put in place an owner-operator culture focused on execution. We are now in the early innings of a multi-trillion dollar industrial transformation of the global economy, and MP will be a part of shaping this future. Just since our listing on the NYSE in November, it feels like the theme of electrification and decarbonization has accelerated even faster than most people expected.

I would like to take a moment to remind everyone of the extraordinary opportunity unfolding for MP.

When we founded the company in 2017, we.

We saw tremendous potential in mountain pass given the incredibly unique nature of the asset and its importance to electrification and supply chain reliability.

We were fortunate, though tab of few tough years to help us build confidence in our mission and to put in place on owner operator culture focused on execution.

We are now in the early innings of a multi trillion dollar industrial transformation of the global economy, and MP will be a part of shaping the future.

Just since our listing on the NYSE in November it feels like the theme of electrification and decarbonization has accelerated even faster than most people expected.

We see global Oems, including Ford and GM, along with their Chinese Japanese and German counterparts announcing plans to accelerate the transition away from combustion items.

James Litinsky: We see global OEMs, including Ford and GM, along with their Chinese, Japanese, and German counterparts, announcing plans to accelerate the transition away from combustion engines. Maybe it can be best summed up by a quote the other day from Herbert Diess, the CEO of Volkswagen, who said, Our transformation will be fast. It will be unprecedented. E-mobility has become core business for us. Here at home, more and more states have adopted California's aggressive clean vehicle standards, with several more expected to follow. Of course, I could just remind you about what's happening in the capital markets. From cars and trucks to planes and air taxis, or from multiple battery technology plays, massive amounts of capital are going into SPACs and IPOs to fund electrification.

And maybe it can be best summed up by a quote the other day from <unk>, the CEO of Volkswagen who said.

Our transformation will be fast it will be unprecedented.

E mobility has become core business for us.

Here at home more and more state of adopted California's aggressive clean vehicles standards with several more expected to follow.

But of course.

I could just to remind you about what's happening in the capital markets from cars and trucks for planes and air taxis or for multiple battery technology plays.

Massive amounts of capital are going into Spacs and Ipos to fund electrification.

The enterprise value of companies focused around auto electrification now exceeds one trillion.

James Litinsky: The enterprise value of companies focused around auto electrification now exceeds $1 trillion, and that doesn't even include the other trillion plus from the legacy OEMs. We see a pathway of literally $hundreds of billions invested globally over the next 5 or so years, and then likely into the $trillions beyond that. Like any great boom, whether it was the railroads, the ice automobile, or the internet, useful industrial excitement and unending possibility eventually seasons into maturity, competition, consolidation, and failure for some. Every great American gold rush era needs its picks and shovels or blue jeans plays, and this one is no different. We believe MP serves that kind of role. Speaking of blue jeans, there are a few areas of overwhelming bipartisan consensus in America right now, but supporting resilient domestic supply chains is certainly one of them.

And that doesn't even include the other trillion plus from the legacy Oems.

We see a pathway of literally hundreds of billions invested globally over the next five or so years, and then likely into the trillions of beyond that.

Like any great boom, whether it was the railroads the ice automobile for the Internet.

Useful industrial excitement on ending possibility eventually seasons into maturity competition consolidation and failure for some.

But every great American gold rush era needs, its picks and shovels or blue jeans plays.

And this one is no different.

We believe MP serves that kind of role.

Speaking of Bluejeans there are a few areas of overwhelming bipartisan consensus in America right now.

But supporting resilient domestic supply chain is certainly one of them.

Our mission is to restore the full their supply chain for the United States and to do so sustainably and we believe Washington, DC is getting focused on stimulating much more success for companies like ours.

James Litinsky: Our mission is to restore the full rare supply chain to the United States and to do so sustainably. We believe Washington, DC, is getting focused on stimulating much more success for companies like ours. We won't hold our breath. Right now, we are focused on the relentless execution that I've outlined. We are moving forward, improving our Stage I operations and implementing our Stage II optimization. In fact, a key third-party industry research firm recently published that MP is expected to be the world's lowest cost rare earth producer when we complete Stage II. We tweeted their chart last month. Please check that out. While we do all this, we are working in parallel on our longer-term approach for Stage III. Ultimately, the main use case for rare earths is for magnets. The size of that opportunity is enormous.

But we won't hold our breath.

Right now we are focused on the relentless execution that I've outlined we are moving forward improving our stage, one operations and implementing our stage two optimization.

In fact.

Our key third party industry research firm recently published that MP is expected to be the worlds lowest cost rare earths producer when we complete stage two.

We treated their chart last month, so please check that out.

While we do all of this we are working in parallel on our longer term approach for stage three of.

Ultimately the main use case for viruses for magnets and the size of that opportunity is enormous.

So we are profitable with the strong balance sheet. We are the most environmentally responsible company on the rare the industry evidenced by our modern facility and location in California.

James Litinsky: We are profitable with a strong balance sheet. We are the most environmentally responsible company in the rare earth industry, evidenced by our modern facility and location in California. We believe we are on track to being the world's lowest cost producer, we are the only scaled Western supplier of a precious commodity that is critical to electrification, decarbonization, and national security. Thank you all again for joining today. Let's now have the operator begin the Q&A session.

We believe we are on track to being the world's lowest cost producer and we are the only scaled western supplier of a precious commodity that is critical to electrification the carbonization and national security.

Thank you all again for joining today, let's now have the operator begin the Q&A session.

At this time I would like to remind everyone in order to ask a question, let's start with the number one on your telephone keypad well pause for just a moment to compile the Q&A roster.

Chantelle: At this time, I would like to remind everyone, in order to ask a question, press star then 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Carlos de Alba with Morgan Stanley. Your line is open.

Operator: At this time, I would like to remind everyone, in order to ask a question, press star then one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Our first question comes from Carlos de Alba with Morgan Stanley. Your line is open.

Our first question comes from Carlos de Alba with Morgan Stanley. Your line is open.

Thank you good afternoon, everyone. So a couple of questions on.

Carlos de Alba: Thank you. Good afternoon, everyone. A couple of questions, if I may. The first one is, you expect basically modest volume growth this year with a stable unit cost. Do you foresee any seasonality, especially seasonality throughout the quarters? Maybe as you ramp up the more production in the second half or Q4, the unit cost will be lower then than they will be in the first, in the first half? That would be the first question. The second one is if you could comment, please, on the rebates that you are getting from the change in the tariff rebate. If you can comment, when do you see that finalizing?

If I may the first one is so your spec basically modest volume growth. This year, we'd of stable unit cost do you foresee any seasonality, especially seasonality throughout the quarters, maybe as you ramp up the more production in the second half of the fourth quarter. The unit cost will be lower day, and then they would be in the first in the first half that will be the first.

Question on in the second one if you could comment please on the rebates that you are getting from the change in the.

Sorry of rebate.

If you can comment when did you see that you'll.

The final icing.

Carlos de Alba: Then in terms of the stock, stockpile sales, also, how, how do you see that throughout 2021? Thank you very much.

And then in terms of the stock stockpile sales also how do you see that.

Carlos de Alba: Then in terms of the stock, stockpile sales, also how do you see that throughout 2021? Thank you very much.

Our 2000 on 'twenty one thank you very much.

Sure.

James Litinsky: Sure. hey, Carlos. Hey, Ryan, why don't you take both those?

Hey, Carlos Hi, Brian why don't you take both of those.

Sure.

Ryan Corbett: Sure. Hey, hey, Carlos. I'd start on your, your first one in terms of seasonality. I, I, I wouldn't expect there to be significant seasonality from a production basis. I think your view is, is probably correct in terms of the modest volume growth really taking place in the back half of the year. From a shipment standpoint, as I mentioned, that, that can be lumpy quarter-to-quarter, you know, it, it's tough to give any great color there. I think over the course of the year, we, we certainly intend to, you know, be selling through 100% of our production. You know, the, the, the individual shipments over the course of each quarter can, can move around a bit.

Carlos So I'd start on your first one in terms of seasonality.

I wouldn't expect there to be significant seasonality from a production basis I think your view is probably correct in terms of the modest volume growth really taking place in the back half of the year.

From a shipment standpoint.

As I mentioned that that can be lumpy quarter to quarter and so it's tough to give any great color. There I think over the course of the year, we certainly intend to be selling through a 100% of our production but.

The individual shipments over the course of each quarter can move around a bit.

Ryan Corbett: On the tariff question, the tariff rebate in 2020 was really a one-time item. You know, this reflected a rebate from the tariffs that were in place, the Chinese import duties on our product, up until March 2020 and related to sales in Q1 and in prior years. There may be some small amount of remaining rebate left, but not material and not anything that we could predict with certainty coming into 2021. The last piece on stockpile sales, you'll see, I mean, those are incredibly small, you know, $200,000 a year, and relate to legacy stockpiles, as you mentioned.

On the tariff question.

The tariff rebate in 2020 was really a onetime item.

This reflected of rebate from the tariffs that were in place the the Chinese import duties on our products.

Up until March of 2020 and related to sales.

In the first quarter and in prior years.

There may be some small amount of remaining rebate last but not material and not anything that we can predict with certainty coming into 2021.

The last piece on stockpile sales, you'll see I mean, those are incredibly small a couple of hundred thousand dollars a year and relate to legacy stockpiles as you mentioned.

Ryan Corbett: I think we'll probably continue to, to, you know, sell out that inventory over time, but not a material driver for us.

I think we will probably continue to sell out that inventory over time, but not a material driver for us.

Perfect. Thank you very much Jim and Brian just on maybe if I could add one more.

Carlos de Alba: Perfect. Thank you very much, Jim and Brian. Just so maybe if I could add one more.

On the royalty expense two of SNR.

Ryan Corbett: Of course.

Carlos de Alba: Royalty expense to SNR. If I understood correctly from what I read in the release, the amount of around 450, 440 thousand tons we saw in Q4, was the last sort of payment before the transaction was completed and the combination was done, the business combination was concluded, and therefore we should not be seeing this any further, or any more in the results, right, from Q1 on?

So if I understood correctly from what I read in the release the.

The amount of fiber on 400 on 50 440.

<unk> thousand tons that we saw in the fourth quarter.

That was the last sort of payment before the transaction was completed at the combination of was done on the business combination of West concluded and therefore, we should not be seen these any any for there on any more.

In the results right from the first quarter on it.

Yes.

Ryan Corbett: Yeah, Carlos, that's right. There was no payment from the company to SNR in closing the combination. That just reflects bringing the SNR mineral royalty interest onto the balance sheet of the combined company. Going forward, since both SNR and MP Mine Operations are operating business, are wholly owned subsidiaries of MP Materials Corp., you will not see any royalty expense or intercompany going forward.

Right.

There was no.

From the company to SNR in closing the combination not just reflects bringing the SNR of mineral royalty interest the onto the balance sheet of the combined company.

But going forward since both SNR and MP mine operations, our operating business of wholly on subsidiaries of MP materials Corp, you will not see any royalty expense or inter company going forward.

All right excellent. Thank you very much guys.

Carlos de Alba: All right. Excellent. Thank you very much, guys.

Thank you. Thanks next question.

James Litinsky: Thank you.

Ryan Corbett: Thanks.

James Litinsky: Next question.

Your next question comes from the line of David <unk> with Cowen Your line is open.

Chantelle: Your next question comes from the line of David Deckelbaum, with Cowen, your line is open.

Operator: Your next question comes from the line of David Deckelbaum, with Cowen, your line is open.

Good afternoon, Jim and Ryan Thanks for your time today of course.

David Deckelbaum: Good afternoon, Jim and Ryan. Thanks for the time today.

James Litinsky: Of course.

Yes.

Good afternoon.

Ryan Corbett: Afternoon.

David Deckelbaum: I, I was hoping that you could, you, you highlighted the fact that a third-party research firm, points to MP and Mountain Pass as the lowest cost producer of NdPr in the world. Could you share, you know, what you expect your targeted production cost to be on a per kilo basis once you're at run rate in 2023?

I was hoping that you could you highlighted the fact of the third party research firms.

David Deckelbaum: I was hoping that you could, you highlighted the fact that a third-party research firm, points to MP and Mountain Pass as the lowest cost producer of NdPr in the world. Could you share, you know, what you expect your targeted production cost to be on a per kilo basis once you're at run rate in 2023?

Points to MP.

On mountain pass as the lowest cost producer of MVP R. In the world.

Could you share what you expect your targeted production cost of be on the per kilo basis once you're at run rate in 2023.

Well I'll make a quick comment on that question, which is remember that obviously today, we sell of stage one product. So we don't currently producing the APR. The research was saying that when we're complete with stage two.

James Litinsky: Well, I'll make a quick comment on that question, which is, remember that obviously today we sell a Stage I product, so we don't currently produce NdPr. The research was saying that when we're complete with Stage II, we'll, we'll be, you know. That's when we're actually selling NdPr. Ryan, do you wanna comment on the model and anything you wanna say on that front?

We'll be at.

That's one we're actually selling on the PR, but Ryan do you want to comment on on the model in anything you want on say on that front.

Ryan Corbett: Sure, yeah. I'd say the right way to think about it is, you know, we highlighted, we think with the plan that we laid out from the design improvements today, you know, we stand behind our view of the EBITDA guidance we've provided for 2023. If you just do the math on sort of what we had provided during our go public transaction, and just divide that cost structure, the implied cost structure by the total NdPr we expect to produce, that's in the very high 20s per kilogram. You know, I think that's the right, the right way to think about it.

Sure Yes.

I'd say the right way to think about it as we highlighted we think with.

With the plan that we laid out from the design improvements today, we stand behind our view of the the EBITDA guidance, we provided for 2023 and so if you just do the math on sort of what we had provided.

During our go public transaction, and just divide that cost structure or the implied cost structure by.

On the total NDP are we expect to produce that's in the very high twenties per kilogram.

And so I think thats the right the right way to think about it.

I appreciate that and then maybe if you could just clarify a bit of you talked about getting to that run rate of.

David Deckelbaum: Appreciate that. Maybe if you could just clarify a bit, you talked about getting to that run rate of just over 6,000 tons per annum, once Stage II is up and running, and that would be a full run rate achieved in 2023. How, how long do you expect it take to ramp up the capacity from sort of first separation in terms of months or quarters?

Just over 6000 tons per annum.

One stage, two was up and running and that would be the full run rate achieved in 2023.

How long do you expect to take to ramp up the capacity from sort of first separation in terms of months or quarters.

Yes, so we haven't said anything specifically about what that ramp is going to look like.

James Litinsky: Yeah, yeah, we, we haven't said anything specifically about what that ramp is gonna look like. You know, what we've said is that assume that 2022 will be a year that consists of, of that completion, the ramp, et cetera. Then really the best way to view it is normalize 2023. I'd, I'd love to help you, but we just really haven't said anything about how, you know, how that ramp will go, other than obviously, we will try to get it done as quickly as we possibly can.

James Litinsky: Yeah, we haven't said anything specifically about what that ramp is gonna look like. You know, what we've said is that assume that 2022 will be a year that consists of, of that completion, the ramp, et cetera. Then really the best way to view it is normalize 2023. I'd, I'd love to help you, but we just really haven't said anything about how, you know, how that ramp will go, other than obviously, we will try to get it done as quickly as we possibly can.

What we've said is that assume that 2022 will be a year that consists of of that.

Completion of the ramp et cetera.

And then really the best way to view it as a normalized 2023.

So I'd love to help you, but we just really haven't said anything about how.

How that ramp will go other than obviously, we will try to get it done as quickly as we possibly can.

The one other thing I'd add there.

Ryan Corbett: The one other thing I'd add there, David, is, obviously, we'll continue to sell our concentrate product that is not being consumed by the Stage II ramp-up process. Obviously, you know, you see the results this quarter, and our expectation for the year, you know, from a revenue and cash generation standpoint for the Stage I business. That will continue as we ramp Stage II.

David is obviously, we'll continue to sell.

Our concentrate product that is not being consumed by the stage to ramp up process. So obviously you see the results this quarter.

And our expectation for the year for.

Our revenue and cash generation standpoint for the stage one business. So that will continue as we as we ramp stage two.

I appreciate the.

David Deckelbaum: I appreciate that. You know, the last ones for me is just, you know, you, you highlighted, the chlor-alkali sort of capital opportunity. When do you think that you'll have a, a decision around whether you wanna pursue, that, that, that facility or not in terms of a, of a business opportunity?

David Deckelbaum: I appreciate that. You know, the last ones for me is just, you know, you highlighted, the chlor-alkali sort of capital opportunity. When do you think that you'll have a, a decision around whether you wanna pursue, that facility or not in terms of a, of a business opportunity?

The last one for me is just you highlighted the Chlor alkali.

Sort of capital opportunity.

When do you think that Youll have a decision around whether you want to pursue.

The debt facility or not in terms of day of the business opportunity.

Yeah. So we don't have a timetable on that I think the the important thing the realizes the is the substantial progress that we've made with respect of these design improvements where basically we believe that.

James Litinsky: Yeah. We don't have a timetable on that. I think the important thing to realize is that, is the substantial progress that we've made with respect to these design improvements, where basically we, we believe that we can deliver on the 2023 operating model improved obviously relative on, and obviously we're staying on an apples to apples basis relative to before. We think that that's a pretty exciting achievement.

We can deliver on the 2023.

Operating model improved obviously relative on obviously.

Staying on an apples to apples basis relative to before so we think that that's.

But pretty exciting achievement with that we preserve our ability to ramp up chlor alkali, but we haven't we haven't obviously, we're just announcing this today. So we haven't made any.

James Litinsky: With that, we preserve our ability to ramp up chlor-alkali, but we haven't, you know, we haven't obviously, we're just announcing this today, so we haven't made any, we haven't stated any public view as to kind of when and how we would do that, other than to say that the way you should think about that is it will be a, you know, it is, it is now a separate, potentially high return on capital event that we'll analyze like any investment opportunity.

<unk>.

We haven't.

State of any public view as to kind of went on how we would do that other than to say that the way you should think about that is it will be as it is.

It is now a separate potentially high return on capital event that will analyze like any investment opportunity.

Absolutely I appreciate the time guys I'll get the of course you. Thank.

David Deckelbaum: Absolutely. I appreciate the time, guys. I'll get back to you.

James Litinsky: Yeah, of course. Thank you.

Thank you.

Your next question comes from the line of Chris Terry with Deutsche Bank. Your line is open.

Chantelle: Your next question comes from the line of Christopher Terry with Deutsche Bank. Your line is open.

Operator: Your next question comes from the line of Christopher Terry with Deutsche Bank. Your line is open.

Thank you Oh, Jim Ross dress, Michael who has it.

Chris Terry: Thank you. Hi, Jim, Ryan.

Christopher Terry: Thank you. Hi, Jim, Ryan.

James Litinsky: Hey, Chris.

Chris Terry: Michael. Hey, how are they? Hope you're all well. I, I have a few questions. I'll just maybe do them one at a time. First one, just on the reagents. Sounds like an exciting opportunity you, you have there. Just wondering if you could talk a little bit to, you know, how, how you're doing that. Is that, is that, that the process itself is the same as it was, and you just save on the reagents? Or have you slightly modificate- modified the way that you'll do the separation, and that's where the actual savings in the reagents come about?

Christopher Terry: Michael. Hey, how are they? Hope you're all well. I, I have a few questions. I'll just maybe do them one at a time. First one, just on the reagents. Sounds like an exciting opportunity you, you have there. Just wondering if you could talk a little bit to, you know, how, how you're doing that. Is that, is that, that the process itself is the same as it was, and you just save on the reagents? Or have you slightly modificate- modified the way that you'll do the separation, and that's where the actual savings in the reagents come about?

Hope you're all well.

On a few questions. So I'll just maybe do the one of the time for us.

One just on the reagents it sounds like an exciting opportunity you have the.

I was just wondering if you could talk a little bit too.

How are you doing that is that is that the process itself is the same as it was and you're just save on the reagents or have you slightly motive for modified the way that you'll do the separation.

That's where the actual savings from the reagents come about.

Yes, so Chris Thank you for what will give youre getting Michael a chance to chime in here So Michael.

James Litinsky: Yeah. Chris, thank you for... We'll give, you're getting Michael a chance to chime in here. Michael, why don't you take that one?

When do you take that one.

Thank you Chris.

Michael Rosenthal: Thank you, Chris.

Chris Terry: Yeah.

Christopher Terry: Yeah.

Michael Rosenthal: It's a good question. I guess we mentioned in previous presentations that we saw that there are areas for continued improvement in how we operated some of the existing assets that are to be recommissioned, and optimization of the new assets that we plan to acquire. These opportunities rose from our deep understanding of the previous generations of Mountain Pass operations, as well as certain industry best practices, you know, particularly in China. Earlier last year, we decided to extend the front-end engineering schedule in order to spend more time on R&D and pilot work before finalizing our process flow and equipment list. Ultimately, we developed enough confidence in some of these developments to incorporate that into some design changes in our final process and equipment list.

It's a good question.

We mentioned in previous presentations that we saw that there are areas for continued improvement in how we operated some of the existing assets that are to be recommissioned.

Optimization of the new assets that we plan to acquire.

And these opportunities rose from our deep understanding of the previous generations of mountain pass operations as well as certain industry best practices.

Particularly in China.

So the earlier last year, we decided to extend the front end engineering.

In order to spend more time.

On the R&D and pilot work.

Before finalizing our process flow and the equipment list. So ultimately we developed enough confidence in some of these developments to incorporate that into the.

Into the some design changes and our final process and equipment list.

So some of those some examples of that are on the roasting and leaching processes, we worked to optimize the roasting and these changing conditions to improve the NDP on recovery.

Michael Rosenthal: Some of those, some examples of that are, you know, on the roasting and leaching processes, we worked to optimize the roasting and leaching conditions to improve the NdPr recovery, maximize serum removal, and minimize reagent usage. On the leach side itself, we made adjustments to the leach processes to minimize the entrainment of NdPr in the removed leach solids, to minimize the amount of RO water we had to use, and minimize the amount of reagents to use through improved recycling. On the re-extraction side, we made certain improvements to the processes to reduce reagent use and maximize the production of saleable products, including non-NdPr products.

Maximize CRM removal and minimize the reagent usage.

On the Leach said itself, we made adjustments to the leach processes to minimize didn't treatment of and the PR.

The removed Leach solids.

Minimize the amount of water we had to use it.

And minimize the amount of reagents to use through improved recycling.

On the extraction side, we made certain improvements to the processes to reduce reagent use and maximize the production.

Salable products, including none of new pillar of products.

And then on the finishing we improved the reagent handling to reduce the stoichiometric excess reagent usage relative to our previous model on that.

Michael Rosenthal: Then on the finishing, we improved reagent handling to reduce the stoichiometric excess reagent usage relative to our previous model, and improved the recycling of materials to improve the yields. We also made improvements to the finishing process to increase first pass production rates, first pass on spec production rates. This includes sort of enhanced blending capability to blend the various stages of production, as well as increased storage to enable greater resiliency and flexibility of production. All these things contributed to what Jim said about reducing reagent usage, which also reduces the amount of spent brine that is produced, some of which would have to otherwise be neutralized, which then further reduces the amount of reagents consumed.

Improve the recycling of the materials to improve the yields.

Also made improvements of the finishing process to increase first pass production rates.

First bets on spec production rates.

And this includes sort of enhanced blending capability.

The blend of various stages of the production as well as increased storage to enable greater resiliency and.

And flexibility of production.

So all of these things contributed to what Jim said about reducing reagent usage.

Which also reduces the amount of spent Bryan that has produced some of which would have to otherwise be neutralized.

Which then further reduces the amount of reagents consumed.

Michael Rosenthal: Those are the types of things that we engaged in, that we thought, you know, generate very high return and, and make us very confident in those long-term savings.

So those of the types of things that we are engaged in that would tell them generate very high return and make us very confident.

Michael Rosenthal: Those are the types of things that we engaged in, that we thought, you know, generate very high return and, and make us very confident in those long-term savings.

And those long term savings.

Thanks, Thanks, a lot I appreciate the extra color.

Chris Terry: Thanks. Thanks, Michael. Appreciate the extra color. Yeah, a couple, couple of others, just wanted to ask: Do you think maybe by the middle of the year or some point, early in the second half of the year, you'll be in a position to maybe give more specific timing about the startup of Stage II in 2022? Or how, how are you thinking about, you know, when you'll, when you'll provide that update?

Christopher Terry: Thanks, Michael. Appreciate the extra color. Yeah, a couple, couple of others, just wanted to ask: Do you think maybe by the middle of the year or some point, early in the second half of the year, you'll be in a position to maybe give more specific timing about the startup of Stage II in 2022? Or how, how are you thinking about, you know, when you'll, when you'll provide that update?

A couple of a couple of those just wanted to ask do you think maybe both of the middle of the year of some point earlier.

Early in the second half of the year, you'll be in a position to maybe give more specific talking about the startup of stage two in 2022.

Are you thinking about you know when you when you provide that up the.

So.

James Litinsky: You know, great question. We totally understand that people obviously wanna get as updated as they possibly can throughout the way. We're gonna do our best throughout this year to, you know, be transparent, let people know what's going on. Hopefully, we'll try to have some visits later in the year so people can kind of see for themselves. We will look to do that. As far as, you know, a specific timetable, it's hard to, you know, give you something specific other than to say that I understand it's top of mind, and investors wanna know how we're progressing.

Great question, we totally understand the that people obviously want to get.

As updated.

Possibly can throughout the way.

We're going to do our best throughout this year to.

The transparent, let let people know whats going on.

Hopefully we will we will try to have some visits later in the year. So people can kind of speak for themselves.

So we will look to do that but.

As far as.

The specific timetable it's hard.

The <unk>.

To give you something specific other than to say that I understand it's top of mind on the investors want to know how we're progressing and we certainly as the team.

James Litinsky: We certainly, as a team, you know, we are execution focused, so we, we recognize that, that people wanna, judge us and measure us against, you know, against what we say, and obviously, we wanna do that as well. That might not be a satisfying answer, but we'll, we'll do our best to, to tell you as much as we can throughout the year, to, you know, to, to keep you aware.

We are execution focused so we recognize that people want to.

Judge us on measure us against.

Against what we say and obviously, we want to do that as well.

But.

That might not be of satisfying answer, but we'll do our best to tell you as much as we can throughout the year.

Okay.

To keep you aware.

Okay, Okay, and then just.

Chris Terry: Okay, okay. Just moving down a stage to stage, Stage III, just wondering if you can give an update on how you're thinking about that. It's obviously an exciting opportunity if you can, if you can, if you can do that. Do, are you thinking about that still, you'll chip away at it while Stage II is going through, or you get Stage II up and running, and then look at it? Just, just trying to work out the sequence of events and how Stage III might ultimately fit in.

Christopher Terry: Okay. Just moving down a stage to stage, Stage III, just wondering if you can give an update on how you're thinking about that. It's obviously an exciting opportunity if you can, if you can, if you can do that. Do, are you thinking about that still, you'll chip away at it while Stage II is going through, or you get Stage II up and running, and then look at it? Just, just trying to work out the sequence of events and how Stage III might ultimately fit in.

Moving down the stage to stage stage three.

Just wondering if you could give an update on how you're thinking about the silversea.

So the opportunity if you can if you can if you can do the but you're thinking about that still true.

The way on it while stage two is going through or you get stage, two up and running and then look at it just just trying to work out sequence of events in the house side Sri.

The mod ultimately fit in.

So Chris I'm going to give you a really on satisfying answer Unfortunately, which is.

James Litinsky: Chris, I'm gonna give you a really unsatisfying answer, unfortunately, which is, we, we don't have any Stage III updates today. You can expect us to be very opportunistic. I will leave it at that. We've publicly stated, obviously, we have a, a team, working on Stage III, so we have a number of people and we will be opportunistic.

We don't have any stage three updates today.

You can expect us to be very opportunistic.

So I will leave it at that and we've publicly stated obviously, we have a team working on stage three so we have a number of people and we.

We will be opportunistic.

Okay, Okay and the last one for me just relates to the market.

Chris Terry: Okay. Okay. Yeah, the last one for me just relates to the market. Yeah, I guess just keen to hear your views on the recent price moves in NDPR that we've seen since the start of the year. The update from the China production quotas and just, yeah, any color you can provide in general, particularly on the NDPR side. Thanks.

Christopher Terry: Okay. Yeah, the last one for me just relates to the market. Yeah, I guess just keen to hear your views on the recent price moves in NDPR that we've seen since the start of the year. The update from the China production quotas and just, yeah, any color you can provide in general, particularly on the NDPR side. Thanks.

I guess just keen to hear your views on.

On the recent price moves in and the PR.

What we're saying.

Since the start of the year.

From the China production quotas and just.

Any color you can provide in general, particularly on the N D. P also of thanks.

Maybe everyone can chime in here, because obviously when it comes to commodity prices who knows.

James Litinsky: Maybe everyone can chime in here, 'cause obviously when it comes to commodities prices, who knows? What I would say is that our belief is that this is demand driven. I mean, I think everyone can see the headlines around and, and the growth in the EV space. That, that is certainly our interpretation of what we're seeing on the ground, so to speak. There were also, around that same time of the quotes you referenced, there were also some headlines of very senior Chinese rare earth officials talking about how they believe prices to be too low, given the environmental impact of, you know, processing.

What I would say is that.

Our belief is that this is demand driven I think everyone can see the headlines around and the growth in the EV space.

And that is certainly our interpretation of what we're seeing on the ground sort of speak there were also around that same time of the quarters you referenced the rock also some some headlines of very senior Chinese growth officials talking about how they believe prices to be too low.

Given the environmental impact of.

Processing and.

James Litinsky: And, and, you know, I believe the exact words were, "Prices reflected the price of earth, not, not their rarity" or, or something, I'm messing up the paraphrasing. W-we again, as, as I've fairly cl- clearly stated, who knows what the next month or two, or look like in the near term? I, I am fundamentally of the belief that if you look around the world and, and see that we're 3% penetrated just in electric vehicles, and we, we are going to 90+% over the next few decades, and maybe we're gonna get there pretty fast, given the amount of capital that has been forming in the space. You can do the math on the, on the demand.

I believe the exact words were prices reflected the price of earth, not not the royalty or something I'm messing up the paraphrasing, but.

So we again as I've clearly.

Clearly stated who.

Who knows what the next month or two or.

Looked like in the near term I I am fundamentally of the belief that if you look around the world and see the worst 3% penetrated just on electric vehicles, and we were going to.

On the 90 plus percent over the next few decades, and maybe we're going to get there of pretty fast given the amount of capital that has been forming in the space you can do the math on the on the demand and then I think that the the other incremental piece here that we tried to touch upon this during the the.

James Litinsky: I think that the, the other incremental piece here that we, we tried to touch upon this during the, the prepared remarks, is just I, I don't think that there's a full appreciation for the true replacement cost of getting these assets online. These are... To do this right, to be a, an economically viable participant in this space, it's, it's a multibillion-dollar investment, and that's if you have the ore body. As you know, we have a 7+% ore body, relative to kind of some of these other projects you might see out there. You know, in, in some of the junior mining or other spaces, they're typically around 1% or 2%, if that.

James Litinsky: I think that the other incremental piece here that we, we tried to touch upon this during the, the prepared remarks, is just I, I don't think that there's a full appreciation for the true replacement cost of getting these assets online. These are... To do this right, to be a, an economically viable participant in this space, it's, it's a multibillion-dollar investment, and that's if you have the ore body. As you know, we have a 7+% ore body, relative to kind of some of these other projects you might see out there. You know, in, in some of the junior mining or other spaces, they're typically around 1% or 2%, if that.

The prepared remarks is just I.

I don't think there is a full appreciation for the true replacement cost of getting these assets online.

These are to do this right to be a economically viable participant in this space.

It's a multibillion dollar of investment and that if you have the ore body. As you know we have a seven plus percent ore body relative to kind of some of these other projects you might see out there.

In some of the junior mining or other.

Spaces, they're typically around one or 2% if that and so.

James Litinsky: Again, it's, it, it's just a look through across. If you had unlimited capital and you had a permit and, and a plan, and, and a viable ore body. Sort of, none of which really exists today in the Western world, but if you had that, you then have to build a separation facility. This is a, a, a massive investment. Again, I think given what we're seeing in materials costs and, and given the expertise required, I, I do think that, that people are gonna find that the, the ability to, to bring new supply online is gonna end up being more challenging and more expensive than they might otherwise think by just sort of throwing a number out there. But that will be something that we will see prove out over time in the coming years.

Again, it's just the look through across if you had unlimited capital and you had.

The permit and a plan.

And of viable ore body sort of none of which really exists today on the western world, but if you had that you then have to build.

The separation facility and so this is the.

The massive investment and again I think given what we're seeing in materials costs and given the expertise required.

I do think that people are going to find that the the ability to bring new supply online is going to end up being more challenging and more expensive than they might otherwise think by just sort of throwing a number out there.

But that will be something that we will see prove out over time in the coming years. It certainly is.

James Litinsky: It certainly is nothing that will be, you know, playing out in the next month or two. Hopefully, that's sort of a long-winded way of giving you our perspective on it. I don't know if Ryan or Michael want to chime in, but that's our house view.

Nothing that will be playing.

Playing on the next month or two.

So hopefully that sort of a long winded way of.

The giving you our perspective on it on.

No if Ryan on Mike will want to chime in but that's that's our house view.

Okay.

Thanks, Jim Yes of course.

Chris Terry: Thanks, Jim. Yep.

Christopher Terry: Thanks, Jim. Yep.

James Litinsky: Yeah, of course.

The circle.

Chris Terry: That's helpful. I think that that's it for me. Thanks, guys. All the best.

Christopher Terry: That's helpful. I think that's it for me. Thanks, guys. All the best.

I think that's it for me thanks, guys all the best Thank you Chris.

James Litinsky: Thank you, Chris. Yep.

We will take one more set of questions from bank of <unk> with Baird. Your line is open.

Chantelle: We will take one more set of questions from Ben Kallo with Baird. Your line is open.

Operator: We will take one more set of questions from Ben Kallo with Baird. Your line is open.

Hey, James Hey, Rod Martin Martin.

Ben Kallo: Hey, James. Hey, Ryan, Mark, and Martin. Thanks for taking my questions. Maybe, when's Stage II gonna be finished? I'm just joking.

Ben J. Kallo: Hey, James. Hey, Ryan, Mark, and Martin. Thanks for taking my questions. Maybe, when's Stage II gonna be finished? I'm just joking.

Thanks for taking my questions.

A baby.

One stage to go because of just joking.

Yeah.

I was going to make some jokes like I haven't seen you on Asia.

James Litinsky: I was gonna make some joke like, "I haven't seen you in ages, Ben.

Let me just talk about the downstream worthy cause.

Ben Kallo: No, but can you talk about, you know, the downstream? I think, because I think that maybe, it would be helpful to figure out, you know, you know, how fragmented the market is, you know, and what that really means, and then how close to the customer that is, and then how you think that that could, you know, help, maybe mitigate, price fluctuations, you know, in rare earths as you move downstream.

Ben J. Kallo: No, but can you talk about, you know, the downstream? I think, because I think that maybe, it would be helpful to figure out, you know, you know, how fragmented the market is, you know, and what that really means, and then how close to the customer that is, and then how you think that that could, you know, help, maybe mitigate, price fluctuations, you know, in rare earths as you move downstream.

I think maybe it.

It would be helpful to figure out how.

How fragmented the market is.

What that really means and how close to the customer that is and then how you think that that could help.

Help.

Maybe mitigate.

Price fluctuations.

That was true.

When you say the downstream of that Youre, referring to separated right so sort of stage two right.

James Litinsky: When you say the downstream, you're referring to separated, right? So, Stage II, right?

For the stage III or.

Ben Kallo: Stage III.

Ben J. Kallo: Stage III.

James Litinsky: Yeah. Oh, Stage III. Well, I, I'm gonna give you the same unsatisfying answer that I gave Chris. Maybe I'll say it with a little more gusto. We, we don't have any Stage III updates at this time, but you can expect us to be extremely opportunistic. I'll leave it at that on Stage III, but it might be helpful-

The state well.

I'm going to give you the same unsatisfying answer that I gave Chris maybe I'll say with a little more gustaf.

But we don't have any stage three updates at this time, but you can expect us to be extremely opportunistic.

So I'll leave it at that on stage, three but it might be helpful.

Ben Kallo: I was asking.

But I can say about.

Ben J. Kallo: I was asking-

James Litinsky: But, but-

James Litinsky: But-

Ben Kallo: about the, the market, like in how fragmented it is or, or, or just in general, and, and, and what that does for pricing?

Ben J. Kallo: ... about the, the market, like in how fragmented it is, or just in general, and what that does for pricing?

The market like of the help fragmented as or or just in general.

And what that does for price Oh, I see yeah, well I think that I think here's what you here's the answer of what you are asking even if youre not specifically asking it which is that we have to remember again.

James Litinsky: Oh, I see. Yeah, well, I think that here, here's, I, I think here's what you-- here's the answer to what you're asking, even if you're not specifically asking it, which is that we have to remember again, and I, that this is a total transformation of the supply chain, right? We've never had an electrification of the OEM market, let alone the global economy, right? So when we think about what the downstream looks like, certainly the downstream today, the magnet industry is controlled in China. The reality is that as we evolve globally into, you know, you heard me quote the CEO of Volkswagen, you, you certainly see what e- what's going on globally with investment. It's unlikely that there's going to continue to be a single point of failure in the supply chain in areas where there are viable alternatives.

That this is a total transformation of the supply chain right. We've never had an electrification of the OEM market, let alone the global economy, right and so when we think about what the downstream looks like.

Certainly the downstream today the magnitude of industry is controlled on China.

But the reality is that as we evolve globally into.

You heard me quote the <unk>.

The Volkswagen you certainly see what what's going on globally with investment it's unlikely that there's going to continue to be a single point of failure in the supply chain in areas, where there are viable alternatives.

James Litinsky: It's unlikely that there's going to continue to be a single point of failure in the supply chain in areas where there are viable alternatives.

James Litinsky: So we believe that we're positioned really well to provide that. The reality is that the magnet business today is mainly concentrated in China. There's a little bit in Japan. But our belief is that we will be part of, you know, that's obviously core to our mission, is that we will be part of the shaping of that, as this whole world evolves. This is just such a huge opportunity when you think about... Just do the math, whatever the, the, and we've obviously put out slides on this, of what you think the, the magnet business is today for EVs. If it's, if it's 3% penetrated and it goes to 30%, that's, that's a 10-bagger, roughly. Maybe, obviously, there'll be some scaling, but it's still, it's a huge opportunity.

And so we believe the we're positioned really well to provide that and so.

The reality is is that the magnet business today is mainly concentrated in China, there's a little bit in Japan.

But our belief is that we will be part of that's obviously core to our mission is that we will be part of the shaping of that.

As of this whole world evolves and again this is just such a huge opportunity when you think about.

Just do the math whatever the.

You've obviously put out slides on this of.

What you think the the magnet businesses today for Evs, if it's if it's 3% penetrated and it goes to 30% that's of 10.

On back of roughly maybe obviously there'll be some scaling but it's still it's a huge opportunity and so we plan on being part of that solution and so the other thing I would say is as far as the magnets you definitely there's a variety of customers as the industry stands today the OS.

James Litinsky: We, we plan on being part of that solution. The other thing I would say is, as, as far as the magnets, you definitely there's a variety of customers. As the industry stands today, the OEMs can be involved, the motor makers can be involved, or the magnet producers. This, this downstream supply chain, there are different parties involved in it, but we certainly know who the players are. You know, we don't need a huge sales force to go out and talk to, to these folks. They, they know who we are, we know who they are. I think that it's, it's just another one of these things, you know, right now, if you think about the legacy OEMs, they're, they're thinking about evolving their business.

Ms can be involved the motor makers can be involved or the magnet producers and so this.

This downstream supply chain there are different parties involved in it but we certainly know who the players are we don't need a huge sales force to go out and talk to for these folks.

They know who we are we know who they are and so I think that it's just another one of these things.

Right now if you think about the legacy Oems. They are they are thinking about evolving their business. They haven't gotten to some of these other issues because they are literally drinking from a fire hose. There are so many issues when when when you were talking about this scale of GDP that is transforming there are just so many issues and it creates chaos right and that's you see capital formation and many companies.

James Litinsky: They haven't gotten to some of these other issues because they're literally drinking from a fire hose. There are so many issues when you're talking about this scale of GDP that is transforming, there are just so many issues, and it creates chaos, right? That's, you see capital formation in many companies. You know, the good news is that there's gonna be some winners, there's gonna be some losers. We don't need to take an extraordinary amount of risk, and we don't need to take over the entire industry. All we need to do is be thoughtful about how we invest and execute, and it's just a pretty extraordinary business opportunity.

The good news is that there is going to be some winners theres going to be some losers.

We don't need to we don't need to take an extraordinary amount of risk and we don't need to take over the entire industry. All we need to do is be thoughtful about how we invest and execute and it's just a pretty extraordinary business opportunity and so again I know, it's not a super <unk>.

James Litinsky: Again, I know it's not a super satisfying answer, but the truth is, it's a supply chain that doesn't exist yet, and we believe we're gonna be part of creating it.

Satisfying answer, but the truth is is that it's it's a supply chain that doesn't exist yet and we believe we're going to be part of creating it.

So again and again.

Ben Kallo: Thank you.

Ben J. Kallo: Thank you.

Ryan Corbett: And Ben, this is

This is Joe this is Ryan I'd, just add real quick on that.

Ben Kallo: Go.

Ben J. Kallo: Go.

Ryan Corbett: This is Ryan. I'd just add real quick on that, you know, a couple of thoughts. Adding to what Jim was saying in terms of, you know, we don't need to take a ton of share. I mean, you know, we get asked a lot about, you know, the magnet intensity per electric vehicle and all those things. Certainly you see in our materials, we think that, you know, the EV piece of the market is growing incredibly fast. Take the entire magnet market, we think capacity between now and 2030 has to double in this industry. I think the other thing that's really playing into our favor in a market that already we think needs to double is, I think what a key differentiator will be is access to raw materials.

A couple of thoughts.

Adding to what Jim was saying in terms of.

We don't need to take a ton of share.

We get asked a lot about.

The the magnet intensity per electric vehicle when all of those things and certainly you see in our materials, we think that the EV piece of the market is growing incredibly fast, but take the entire magnet market.

We think capacity between now and 2030 has the double in this industry and so.

The other thing that's really playing into our favor in a market that already we think meets the double is I think what a key differentiator will be is access to raw materials.

Ryan Corbett: It, it, since we've been at this and had conversations with customers, it, the thing that has surprised me is the amount of time that we have very, very downstream customers, you know, all the way down to the OEMs of various types of things, not, not just electric vehicles, now coming hand in hand with magnet makers to us, trying to understand, Hey, if I sign this contract for magnets, is there going to be NdPr there to back it up? So I think it's a really critical differentiator being vertically integrated and, you know, something that really no one else can do. So I think that, that's, you know, will be the secret sauce, if you will.

Since we've been at this and had conversations with customers.

The thing that has surprised me is the amount of time debt, we have very very downstream customers all the way down to the Oems for various types of things not just electric vehicles now coming hand in hand, with Magnum makers to us true.

To understand Hey, if I sign this contract from Avnet is there going to be NDP are there to back it up and so I think it's a really critical differentiator being vertically integrated and something that.

Really no one else can do and.

And so I think that that's.

It will be the secret sauce, if you will and to your point on.

Ryan Corbett: To your point on, you know, volatility in, in rare earth prices, I think you've seen, if you sort of model over time what, what margins in the magnet business have done versus rare earth prices, magnet makers have pretty consistently been able to pass through with some lag, you know, for sure. You know, I, I think our fundamental view as well, though, is, you know, we certainly are not gonna subsidize, you know, one piece of our business for the benefit of the other. I think, you know, we, we feel very strongly that they need to stand alone and have their own economic returns, and, and we'll, we'll proceed with that view. But, you know, the reason we feel good and are interested in, in the Stage III opportunity is the staying power of those margins.

Volatility in rare Earth prices I think you've seen if you sort of model over time, what what margins in the magnet business of done versus rare earth prices magnet makers of pretty consistently been able to pass through with some lag for sure but I.

I think our fundamental view as well, though is we certainly are not kind of subsidize one piece of our business for the benefit of the other I think we feel very strongly that they need to stand alone and have their own economic returns and we'll proceed with that view.

But the reason we feel good in the are interested in the states. The opportunity is the staying power of those margins and given our view of the scarcity of rare Earth prices continue to go up our stage two business will continue to benefit and we do not think that will come at the expense of a.

Ryan Corbett: Given our view of the scarcity, if rare earth prices continue to go up, you know, our Stage II business will continue to benefit, and we do not think that will come at the expense of, of a potential Stage III. So I'd say that, that a- at a high level is sort of just how we think about that market.

Potential stage, three and so I'd say that that at a high level of sort of just how we think about that market.

That's very good maybe two questions one for you Brian first just.

Ben Kallo: Thank you. That, that's very good. Maybe two questions, and one for you, Ryan, first. Just the leverage ratio that you're comfortable with going down, you know, and the structure. Then, James, for you, you know, one of the benefits, you know, you have... You have many employees that have been working at the mine for a long time, that are there and making sure that, you know, you guys are very successful, and I think it's a huge benefit. How do you make them feel okay to just be, I mean, I'm kind of crude, but just make them feel okay because, it's, you know, the mine's been in the hands of a few different people over the years?

Ben J. Kallo: Thank you. That, that's very good. Maybe two questions, and one for you, Ryan, first. Just the leverage ratio that you're comfortable with going down, you know, and the structure. Then, James, for you, you know, one of the benefits, you know, you have... You have many employees that have been working at the mine for a long time, that are there and making sure that, you know, you guys are very successful, and I think it's a huge benefit. How do you make them feel okay to just be, I mean, I'm kind of crude, but just make them feel okay because, it's, you know, the mine's been in the hands of a few different people over the years?

The leverage ratio.

Were comfortable with going down.

Uh huh.

Structure then.

James for you on.

The one of the benefits.

The many employees working at the mine for a long time.

Or.

Are there the.

Sure.

You guys are very successful.

It's a huge growth.

How do you.

Make them feel okay.

Crude but the.

Victor for you Okay.

Xu of hands of a few different people over the years.

Ben Kallo: I'll, I'll stop there. Thanks, guys.

I'll stop there thanks guys.

Ben J. Kallo: I'll stop there. Thanks, guys.

Sure I can I can probably take both of those were Brian you can chime in after on on.

James Litinsky: Sure. I can, I can probably take both of those, but Ryan, you can chime in after. On leverage, I feel very strongly that, you know, the capital structure of a company needs to be appropriate for the business that you're in. Certainly, we are very mindful of that. We obviously are mindful of the history, and as you've probably heard me say ad nauseam, we want the, the leverage to be in the price, you know, not on the balance sheet, so to speak. I would say, though, that remember that we are, our Stage I business is generating cash.

On leverage.

I feel very strongly that.

On the capital structure of the company needs to be appropriate for the business.

You are in and.

And certainly.

We are very mindful of that we obviously are mindful of the history and as you probably heard me say Ad-nauseum, we want we want the the leverage to be on the price.

Not on the balance sheet sort of speak and I would say, though that.

Remember that we are our stage one business is generating cash.

James Litinsky: We, we obviously believe that our Stage II business will, will then be a significant uplift, there's no doubt that we have made a lot of progress in the business over the last two years. But the power of an owner-operator culture is that, you know, we are large shareholders ourselves. We care, and, and we wanna make sure that we create long-term value. We're not, we're not looking to, to do anything too short-sighted. Again, the capital structure needs to be appropriate for the business, and, and hopefully that, that helps you on the leverage front. Then on the employee front, it's a great question, and actually, it's, it's an extension of what I just said, which is our owner-operator culture.

We obviously believe that our stage of your business will then be a significant uplift and so there is no doubt that we have made a lot of progress.

In the business over the last few years, but.

The power of an owner operator culture or is that.

We are large shareholders ourselves, we care and and we want to make sure that we create long term value. We're not we're not looking to.

Do anything too shortsighted so.

Again, the capital structure needs to be appropriate for the business and and and so hopefully that helps.

Helps you on the leverage front and then on the employee front. It's a great question and actually it's an extension of what I, just said, which is our owner operator culture.

James Litinsky: One thing, that people might not be aware, but as part of our public transaction in November, we gave every single, sorry, every single non-executive employee of the company a $3,000 bonus, as well as, and that didn't matter your title or whatever, just every employee that's non-executive. As well as, we recently provided the opportunity for every single employee to be an owner. Everyone got granted 100 shares, across, and it doesn't matter, again, doesn't matter your job, whether you're, you know, a mine worker, a maintenance, a receptionist, doesn't matter. Our intention as a company, as a culture, is to be an owner-operator culture.

One thing that people might not be aware, but as part of our.

Public transaction in November we gave every single non employee.

Of the every single sorry every single nonexecutive employee of the company of $3000 on us.

As well as in that didn't matter of your title or whatever just every employee on the executive as well as.

We recently provided the opportunity for every single employee to be an owner.

Everyone got granted 100 shares.

Across the it doesn't matter again doesn't matter your job, whether you're a mine worker of maintenance.

The.

The reception of it doesn't matter and so our intention as a as a company as a culture is to be an owner operator culture.

James Litinsky: And I think that we've, I think we've delivered on our, our promises to, to the base out there of, of making sure that we were gonna share in, in the good fortune when it comes. We've been through a, a, a number of tough years, and I think we've certainly delivered it so far an outstanding result. We, you know, we are gonna continue to work the way we always have to, to create a lot of value here. Our employees, we expect to all participate in that and, hopefully increasingly over time. It's, it's top of mind. It's really important, and I think particularly when you have an industrial enterprise that's so reliant on your, on your human capital, you need to treat them like owners.

And I think that we have.

We've delivered on our promises to the base out there of of making sure that we were going to share.

In the good fortune when it comes and we've been through.

The number of tough years, and I think we've certainly delivered so far an outstanding result.

We are going to continue to work the way, we always have to create a lot of value here.

Our employees, we expect to all participate on that and hopefully increasingly over time.

It's top of mind, it's really important and I think particularly when you have an industrial.

Real enterprise, but so reliant on your on your human capital you need to treat them like owners you need to treat them.

James Litinsky: You need to treat them and make sure that they care. I think that that really pays dividends for shareholders because, because you have everybody of like mind, that the goal is to create value here. There's no, there's no sort of distinction or pointing fingers of us versus them kind of mentality. You know, hopefully we will continue to get that piece of it right. I think that, as far as we can tell, you know, everybody is very happy that we've been so successful, and we think we have a long way and to go and much success ahead, and they'll participate in that upside.

And make sure that they care and I think that that really pays dividends for shareholders.

Because you have everybody of like mind that the goal is to create value here Theres no theres no sort of the distinction of pointing fingers of us versus them kind of mentality and so hopefully we will continue to get that piece of it right and I think that.

As far as we can tell everybody is very happy.

Debt.

We've been so successful and we think we have a long way to go in much success ahead of the mill participate in that upside.

Good stuff. Thank you very much.

Ben Kallo: Good stuff. Thank you very much.

Ben J. Kallo: Good stuff. Thank you very much.

James Litinsky: Mm-hmm. Of course.

Of course.

James Litinsky: Of course. Okay.

Okay.

Operator: Okay.

This concludes today's conference call. Thank you for attending you may now disconnect.

Chantelle: This concludes today's conference call. Thank you for intending. You may now disconnect.

Operator: This concludes today's conference call. Thank you for intending. You may now disconnect.

James Litinsky: Okay. Thank you, everyone.

Thank you everyone.

Yeah.

[music].

Okay.

Yes.

Okay.

Yes.

Okay.

Yes.

Okay.

One of them.

[music].

Okay.

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