Q4 2021 Mp Materials Corp Earnings Call
Hello, everyone and welcome to the MP materials fourth quarter 2021 financial results conference call and webcast will begin shortly if you would like to register a question ready for the Q&A. Please press star followed by one on your telephone keypad. Thank you for your patience.
[music].
Hello, everyone and thank you for your patience and welcome to the MP materials fourth quarter 2021 financial results Conference call and webcast. My name is David and I'll be coordinating today's call you will have the opportunity to ask questions at the end of the presentation. If you would like towards the store a question. Please press star one.
Led by one on your telephone keypad I will now hand over to your host Martin Sheen, the head of Investor Relations from MP materials. So Martin. Please go ahead. Thank you operator, and good day, everyone. Welcome to MP materials fourth quarter 2021 earnings call with me today are Jim <unk>, Chairman and Chief Executive Officer of MP <unk>.
Michael Rosenthal, Chief operating Officer, and Brian Corbett, Chief Financial Officer, before we get to Jim's Michaels and Ryan's opening remarks as a reminder, today's discussion will contain forward looking statements relating to future events and expectations that are subject to various assumptions and caveats.
Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation earnings release and in our SEC filings and.
In addition, we have included some non-GAAP financial measures in this presentation reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today's presentation and earnings release.
Any reference to our discussion today to EBITDA means adjusted EBITDA Finally, the earnings release and slide presentation are available on our website with that I will turn the call over to Jim Jim.
Thanks, Martin and thank you to everyone joining us this afternoon.
Assume many of you saw or heard about the Whitehouse event on Tuesday, announcing our new partnership with the department of defense.
That was a really special day for all of us at MP materials. So on behalf of the entire team I wanted to again, thank the president the department of Defense and the state of California for all of their confidence and support in US as we continue to execute on our mission to restore the full rare the supply chain to the United States.
It was a very busy quarter and year and we have a lot of exciting things to discuss today.
First I will recap the highlights of a remarkable year.
I will then provide some more detail on our December announcement regarding our initial stage III magnetics facility and our agreement with General Motors.
Next Michael and I will cover our plans regarding our heavy rare earths expansion and give an update on stage II process flow.
And then Ryan will summarize our financial performance provide color on the new SK <unk> Hundred Reserve report and discuss our upcoming investment and operating expectations.
I would be remiss, if I did not address the short reports so I will do that before wrapping it up with some closing thoughts after that we'll open it up for Q&A.
So let's start with slide four.
Here is a summary of some of our major accomplishments in 2021 and year to date.
<unk> has an execution focused owner, operator culture, and I think our outstanding results demonstrate that.
We produced over 42000 metric tons of rare Earth oxides in concentrate.
This represents the highest production in the 70 year history of Mountain pass and the highest primary production in U S history.
This was driven by continued improvement and efficiencies in the plants operations, including feed rates mineral recoveries and plant uptime.
Record production and a focus on efficiencies and costs combined with strong market pricing led to a doubling of our annual revenues and an over five times increase in our adjusted EBITDA for 2021 compared to 2020.
Significant growth in adjusted EBITDA resulted in a $154 million of normalized stage, one free cash flow. This cash flow generation meant that we were able to make significant growth investments throughout the year, while maintaining around $490 million and net cash the delta between our gross and net cash holdings is essential.
The $690 million Green convertible bond, we issued last March.
As we.
Gail financially and operationally in pursuit of our mission being a green bond issuer sends an important signal to key industry and government stakeholders about <unk> commitment to the supply chain and the environment.
Our fortress balance sheet positions us with firepower to continue to invest in the substantial growth opportunities in front of us while also being better ready to both absorb any potential volatility and be opportunistic as we work to create long term shareholder value.
Next we have wonderful news on our key resource Mountain pass.
We recently completed the new SEC regulation SK <unk> hundred Reserve report.
Ryan will cover it more in a bit but it extended our mine life by 11 years and our contained Oreo reserves by 28% versus the last study from mid 2020.
We have consistently said that mountain pass as a unique world class ore body and.
And we are happy that even more detailed outside diligence on it versus last time has added significantly to its estimated life and value.
We will talk more about progress on stage stages, two and three in a moment, but I want to congratulate Michael and his team for something of the utmost importance and outstanding safety record.
We went the whole year without a lost time injury and are now actually approaching 700 consecutive days without such an injury.
Our employee count has grown by over 50% since the end of 2020 to nearly 400 strong today.
<unk> is growing and people assets and complexity and it is no small feat to do so safely.
I want to highlight how proud I am of everyone at <unk> for this.
We continue to make progress on stage two and have had some notable recent achievements.
We recommissioned, our combined heat and power plant and our reverse osmosis water treatment plant.
Both of these are needed for stage two commissioning.
In fact in January we went into island mode. This means that we are now generating 100% of our heat power and steam on site instead of getting it from the grid.
This is beneficial for cost and operational reliability and resiliency as we further invest in mountain pass.
The last part of our earnings deck has pictures from a round mountain pass so please check that out.
While stage two progresses separating some rare Earths at mountain pass a remarkable achievement and innovative itself was never our NGO we.
We have made clear that restoring the full rare earth magnetic supply chain was what we were after and we have also made clear that this would not happen overnight.
B painstaking and take time.
In 2020 around the time, we went public we were awarded a preliminary contract by the Dod to begin design work and study the feasibility of separating heavies at mountain pass.
Earth, specifically turbine and dysprosium are typically utilized in small amounts along with significantly more and EPR number of magnet. These.
These small amounts of heavier typically improve the performance of magnets at high temperatures.
Therefore successfully delivering on Mp's mission met our original stage II process flow would get us almost all the way there, but not fully.
A tremendous amount of work has gone on behind the scenes.
Our team has designed pilot.
Piloted and refined our technological approach.
Hope was that we could expand and enhance our stage II process flow to accelerate towards our overall goal and also grow the economic potential of our site.
The $35 million award from Vod is clearly a huge vote of confidence in MP.
We are humbled and grateful and I will talk more about what this all means in a moment.
But that is not it.
We are pursuing our mission on parallel fronts.
We believe critical industry and government stakeholders are counting on us. So we will move as quickly as we can so long as we preserve our execution focus owner operator culture.
Over the course of 2021, we built up our world class MP Magnetics team and we continue to grow that team.
The pace has been pretty amazing, but also methodical and pragmatic.
In December we announced we are building our first magnetics manufacturing facility in Fort worth Texas.
And so we signed a binding long term agreement with general Motors is the foundational automotive customer of the facility.
I am very pleased to report that we broke ground on the new facility last week.
We have a long way to go.
What an incredible milestone.
Let's discuss some more specifics about it on slide five.
Our new Fort worth facility will convert rare Earth oxides, we produced at mountain pass into metal and ultimately neodymium iron boron or Mds EV alloy and magnets.
Along with the groundbreaking we are already sourcing long lead equipment.
Objective is to have this facility ready to begin delivering alloy in late 2023 and magnets in 2025.
We are currently planning to produce about 1000 metric tons of MDF VEB magnet per year with some additional alloy capacity, which could feed roughly 500000 EV motors.
This would consume just mid to high single digit percentages of our current expected mountain pass and EPR output. So we have significantly more runway to expand the magnetics business over time.
As we position the company to enter the Magnetics business. We are also expanding into magnetics recycling and.
And we believe MP is uniquely positioned for leadership in this burgeoning opportunity let me explain.
There is a fair amount of waste generated in the magnetics manufacturing process with.
Such valuable material input into the process, maintaining a competitive cost structure is greatly aided by having the ability to do something with that waste.
Our team has been conducting extensive piloting at mountain pass for the last 18 months and some of these pilot projects include large commercial partners, our extraction assets and the high level of co location and our operation means we can run a highly integrated closed loop magnetic manufacturing process where materials are.
Mind refined Metallize alloyed, and then made into finished magnets.
And.
Materials created along the way can be fed back into the process.
MP is now positioned to become the only truly integrated magnetic company in the world outside of China that can do this.
Yes.
As the World Electrifies and many electric vehicles wind turbines and other like assets get to the end of their life.
<unk> expects to participate in recycling those end of life permanent magnets.
Full integration means we believe we will be able to insert those third party feeds into various points in our asset base, Michael will explain more on this in a moment.
Lastly, as I mentioned earlier, we have a binding long term agreement with general Motors is the foundational automotive customer for MP magnetics, and our Fort worth facility, we expect a gradual production ramp to begin in late 2023, beginning with the supply of alloy to GM with a gradual expansion into finished magnet production in the 2020.
Five timeframe with recent efforts around our heavy expansion and breaking ground in Fort worth we believe MPA is pulled forward our mission by at least a couple of years at least certainly compared to where we expect it to be at this point back when we went public.
We believe this is incredibly significant for American industry.
GM and other future MP customers will have access to rare Earth magnets produced in the U S entirely of sustainable U S sourced materials.
That is simply not possible today, given the state of the supply chain and filling this void is significant to both our businesses and the American economy overall.
Let's move on to slide six.
As the long list of achievements on the last two slides suggests.
We entered 2022 and a much stronger position than a year ago. The.
The electrification of the global economy.
Even as the capital markets appear more challenging recently is accelerating.
Our business developments clearly suggests that critical industry and government stakeholders, one MP to become a western champion in our industry and they wanted to happen as quickly as possible by the way.
Stage two heavy rare Earth addition is being designed to accept third party fee. So that should expand what we thought of as our previous light and heavy rare earth output potential.
And it also means we can help other western projects develop as we become a potential customer for their intermediate materials.
We realize the scale of this opportunity and we are pushing forward on parallel paths, we know that we must execute with precision and we must get it right.
Against this backdrop, we continue to see many supply chain labor logistical and materials challenges throughout the global economy I.
I would say that in Q4 of 2021, we did not make as much progress on stage two construction as we had hoped.
Issues around omicron created labor issues all around the economy that we are well documented this past quarter and we along with our contractors and suppliers certainly saw our share of that.
Executing an expansion and scope changes in an inflationary environment. This testing all of US nothing is happening as fast as we would like but we remain relentless engineering.
Engineering and procurement are wrapping up and construction is accelerating.
We are still targeting to mechanically complete the light rare earth portion I E separation, finishing and related infrastructure of our stage. Two later this year.
But with the expanded construction and scope around heavies and recycling.
Next year won't be a full normalized here.
We still expect to achieve full run rate production volumes in 2023.
Ryan is going to discuss our current expectations around capex, which was previewed a bit in our announcement on Tuesday, and what this all means financially and operationally in a bit but let me be crystal clear in saying that all of this is extremely exciting we are generating significant operating cash flow today, we are pulling forward the opportunity.
We believe we are investing at high returns on capital, we believe everyone well almost everyone is rooting for our success.
And we believe we are creating significant enterprise value.
I'll be back after Ryan, but before that let me turn it over to Michael for more process details around stages, two and three Michael.
Thanks, Jim.
To start by saying that I couldnt agree more with how exciting the heavy rare opportunity is for us.
I'd also like to acknowledge our engineering analytical maintenance and project team with a significant work that went into this analysis and design.
I'd also like to thank the department of defense.
In support of our project and helping spearhead the government's effort into securing this critical supply chain in the United States.
When we initially conceived the stage two flow sheet, which is included on slide seven we had anticipated heavier at separation being a longer term possibility.
However, as our strategy for stage three magnetic became more clearly defined and as our magnet recycling capability in support of this project and long term environmental sustainability has progressed.
Necessity and attractiveness of HRD separation equipment installed the seg plus separation has become more apparent.
See as simplified depiction of where the heavier circuit will fit into the flow on the bottom of the slide.
As Jim mentioned, certain HIV, namely Terbium Dysprosium add key functionality to high end magnetics.
Our stage three operation and third party customers are interested in a stable domestic stores to these elements and the same way they're eager for <unk>.
Magnet recycling is a critical component of metal and Magnum manufacturing the U S must have both capabilities.
For middle and magnet facility process waste containers, and the PR, along with turbine and dysprosium in many cases.
The process waste a lot of cost is sunk into that material before it fell out of the process.
Therefore, the waste must be turned back into a valuable commodity.
To do so the elements in some cases must be reset related.
Therefore heavyweight separation becomes even more intricately linked to magna production and by stage III plan.
You can see in the top right, how recycled magnet materials could be fed back into a separation process in the past.
Over the past 18 months, partially supported by our initial Dod Grant we have been working towards the technical and operational plan for Herc separation.
We have also evaluated how to incorporate heavier into the stage two flow sheet and our site infrastructure.
This has contributed to ongoing R&D and capital expenditures throughout 2021.
As our confidence increase and supply chain concerns intensified last summer, we decided to pre purchased certain equipment that we believed would help improve the efficiency of our future heavier at the separation plan.
The heavier circuit largely runs in parallel to the existing stage two plan.
However, there are also important tie ins to come inside infrastructure storage and systems that minimize our environmental footprint improve efficiency and reduce costs.
Importantly, as we consider third party feedstocks to bolster our heavier at supply.
There was an expectation that these feedstock may come with additional light rare earth elements as well.
And DPR lanthanum in theory.
We have long factored this in but this has resulted in some additional scope to stage two primarily related to the sizing and optimization of existing.
Rather than new asset to.
To accommodate the potential for higher light rare volumes that may come with heavy separation.
As such these investments will help to seamlessly integrate <unk>.
Separation and magnet recycling into the broader stage to plan and will be factored into our capex budget, which Brian will touch on in a moment.
We expect to implement changes to existing assets to support new and increased flows.
We must expect some disruption as we incorporate additional assets into the stage two scope.
Our long term interest in supporting a diverse where supply chain is core to our mission.
With the announcement of the first step of our stage II plan.
And the Dod's support for heavier at the project.
We now have additional stakeholders sooner than we might have anticipated.
Ensuring the quality and sustainability of the mountain pass feed into the supply chain as a preeminent importance.
We will therefore be a specialty prudent with our stage two ramp and we'll prioritize ensuring our long term success over meeting any short term deadlines.
Moving to slide eight the purpose of this slide is simply to show the unique advantage. We have is a vertically integrated company.
We can take the waste from magnet manufacturing or end of life magnet and determine the optimal place in the end to end flow to recycled materials.
Whether it would be into the mills are back to mountain pass to produce fresh oxide.
This level of integration will enable us to maximize value and minimize costs and is highly unique in the global magnet industry.
We have also been working with large commercial partners on piloting these processes at scaled volumes at mountain pass and that vendor's location.
Hopefully this slide and the previous one gives you a better feel on the process flows and visual understanding of some of the complexities that we will continue particularly as we incorporate heavy separation and magnet recycling into a mountain past processes.
With that I will turn it over to Ryan.
Brian .
Thanks, Michael as Jim already hit on the highlights I will quickly go over our annual results starting on slide 10 and.
In 2021, we saw modest improvements on all of the key inputs and our production growth algorithm uptime feed rates and recoveries all improved compared to 2020, resulting in a 10% increase in total rare earth production.
You can see on the bottom left compared to 2019 production is up over 50%.
Obviously from here incremental improvements get more challenging, but Michael and his team continue to focus on making thoughtful improvements to continually drive higher volumes, which we expect will primarily come through improved mineral recoveries on.
On the top left you'll see that we continue to shift virtually everything we produce despite a very challenging shipping and logistics environment.
Moving to the right you can see the strong growth in pricing driven primarily by strong demand for our concentrate products due to the contained and EPR I'll discuss that a bit more later.
Finishing up on the bottom right you can see that production costs were up modestly versus last year, but when excluding about $140 per metric ton of stage two pre commissioning costs that hit the P&L production costs were actually down slightly year over year, despite the inflationary environment.
Moving to slide 11, Jim mentioned, the strong revenue and adjusted EBITDA growth in the year, which you can see in the top two graphs on the bottom two you can see the leverage we get from solid production and shipping, but strong pricing demonstrated by 2021, adjusted EBITDA margin nearly doubling to 66% on the bottom right you can see that much of our adjusted EBITDA.
<unk> flows through to adjusted net income.
Believe these results show the power of our mountain pass that's on the cost curve.
Look forward to building on the success in 2022.
Moving to slide 12, and our fourth quarter results again, a similar story on a year over year basis with production volumes up about 10% driven by improved fee rates and mineral recovery slightly offset by lower uptime in the quarter sequentially.
Sequentially Youll see our production volumes declined about 14%, which was driven by our biannual maintenance shutdown occurring in Q4. This year as we discussed on our last call while.
While the shutdown was very successful we're starting was a bit choppy here than we had hoped for was slightly delayed our ramp back up to full efficiency.
And similar to the annual results shipments for the most part tracked our production volumes with some lumpiness in the actual timing of shipments, causing most of the variability between our year over year comparisons.
And Youll recall, despite all of the shipping challenges, we had an exceptional quarter of shipping in the third quarter as we not only were able to ship our record quarterly production then but also a catch up on modest inventories that had built up from earlier quarters in 2021.
Shipping and logistics, then became even more challenging early in Q4 before finally, starting to ease at the very tail end of the quarter, which left us with another very backend loaded shipping schedule, which is reflected in our higher than average receivables, which similar to last quarter, we have since fully collected.
On the right side, you see the continued growth in realized pricing driven by the tighter supply demand and concentrate driven by NDP, our pricing as reflected in the 31% sequential increase in our realized price.
And on the bottom right production costs were down year over year, even with some additional pre commissioning costs for stage two as we remain resolutely focused on costs with a bit of an easier year over year compare given our reagent testing in Q4 of 2020 that we previously discussed sequentially.
Sequentially costs were up about 5% all due to higher costs associated the stage two pre commissioning as efficiencies ex stage two costs offset cost inflation.
These stage two related costs totaled about $200 per metric ton. So excluding these costs would have been down approximately 17% year over year.
As for our quarterly financials on Slide 13, you can see our revenues were flat sequentially as lower shipments were offset by improved pricing with year over year revenues more than doubling.
Moving to the top right. The same story can be told for adjusted EBITDA with the strong leverage from pricing and our efficient operations, resulting in improved margins, both sequentially and year over year.
And just like our annual chart our growth in adjusted EBITDA nicely converted to adjusted net income.
And lastly on our financials on slide 14, the strong EBITDA from stage one in large part flows through to our normalized stage one free cash flow after adjusting for the $55 million a paydown of the Shanghai Offtake agreement and about $113 million of growth Capex growth Capex consisted partly at <unk>.
Page two optimization spend in addition to the cost of re commissioning, our combined heat and power and water treatment plants as well as other investments primarily about the past.
I would also like to point out that as of the end of the fourth quarter. There was just over $16 million remaining on our offtake agreement with Shanghai and.
And the remaining $16 million should be paid off by the end of the first quarter of 2020 to.
That will mark the end of our off take agreement with Shanghai, and therefore, the recruitment mechanism, which will provide a nice step up in GAAP operating cash flow for 2022.
Can see on the chart, we're moving this recruitment feature and all else equal our GAAP operating cash flow would be $55 million higher.
But the off take agreement nearly complete we have recently received offers from several potential distributors off takers and refiner groups. Our goal is to maximize our profitability and minimize the various risks associated with exporting nearly 80000 metric tonnes of concentrate into China.
As market demand has grown we have also begun laying the groundwork for strategic supply relationships with large multinational customers who are interested in tracing their supply chain back to our ore body.
While we are producing and selling wherewith concentrate into China, we expect to continue distributing via Shanghai to our various end customer refiners, which allows us to leverage in place logistics for a material until we ramp the direct sales of oxides to customers located primarily outside of China.
Moving to slide 15, as Jim pointed out one of the most exciting highlights in the quarter was the completion of our updated reserve report in line with New SK <unk> hundred regulations. This resulted in a suggested mine life of 35 years, assuming consistent feed rate to the mill, which is an increase of roughly 11.
Years from our last estimate done in July of 2020.
This was a very comprehensive program, which.
Which included completing an updated geotechnical drilling program, our revised and updated geological block model and update our product prices, including the improved economics of stage two as well as our latest operating costs.
I'd also note that we believe the results are based off of Conservative estimates for most of the key variables, including long term pricing and volumes and an example of the conservatism. We see is the economic cutoff grade used in the report of 249% for our reserves is higher than many producing mines today, we expect to investigate.
<unk> technologies that over time should allow us to efficiently process. These lower grade ores and better incorporate the lower grade material in our ore body into our mine planning and reserves.
The resulting analysis showed a 43% increase in proven and probable reserves to a little over 27 million metric tons.
Roughly 380000 metric ton or 28% increase in the rare earths contained in that or.
In addition, the report highlights a further 457000 metric tonnes of indicated and inferred resources not currently in the reserve that we will look to incorporate over time.
To say, we are really pleased with this update is it solidifies our belief and what a vast resource we have and not in the past to continue feeding our downstream vision, the economics of which of course are not yet captured here.
Moving on to the next slide and before I turn it back over to Jim to wrap up I wanted to give you some color on our near term investment levels at the White House on Tuesday, we committed to investing approximately $700 million each of the various supply chain through 2024.
Let me start by saying that the evolution of our business reinforces the need for discipline and planning around how we are allocating capital to these various projects that support our mission.
Many of these projects are now both overlapping and integrated but all are collectively focused on one objective how best to drive optimal returns as we leverage our asset base at mountain paths and execute on our move downstream.
The $700 million of investment includes one the completion of stage two of which a significant portion was still left to be spent as of the end of 2021.
Now also includes the additional scope of heavy various separations.
Two our initial Fort worth magnetics facility and associated investments in recycling at Fort worth and about in past, we note that with the groundbreaking and long lead purchasing commencing we expect to incur a significant portion of this investment in 2022.
And three various efficiency projects, we will continue to embark on about in the past.
In total we expect to spend approximately $500 million in Capex in 2022, and the remaining approximately $200 million net of the contribution by the department of defense in the 2023 and 2024 time frame.
I would imagine there will be continued additional vertical and horizontal investment opportunities in the coming year is to consider and we will update you with any material changes to our investment plan.
So what will that investment get you our shareholders. When we are fully operating our separations capability, including heavies and our initial bagnette facility is that run rate.
As a benchmark and I say this with all of our caveats around forward looking statements will.
Are we to assume current spot pricing for the full year of 2022, we would expect to be currently at a run rate of $450 million to $500 million of annualized.
<unk> adjusted EBITDA from sales of concentrate I E. Our current business it.
It is important to note, though that year to date spot NDP, our pricing has been lower than current spot and our realized pricing also tends to move with N DPR prices with a small lag. So this run rate is not meant to be calendar year 2022 guidance.
After our investments in stage, two including Heavies and the achievement of a full run rate in our initial magnetics facility. Our model indicates expected total adjusted EBITDA for MP, but nearly double to approximately $900 million to $1 billion at current spot prices.
We are not sharing these figures as formal guidance as we don't intend to update it with every tick of rare earth pricing or movements in other operating conditions, but we wanted to give you all detailed insight into how we are modeling plant spend and the potential returns.
I want to reiterate that we are in a challenging and volatile macro environment with inflation supply chain and other challenges so like any model, including one where the inputs involve commodity pricing. These numbers could ultimately fluctuate quite a bit.
That said I think this demonstrates that we believe are incremental investment opportunities that is both big and scale and very financially attractive.
Of course, we must execute as Jim always stresses such a recap when aggregating the approximately $113 million of growth Capex already spent in 2021, plus the anticipated $700 million, we intend to deploy we expect an incremental run rate EBITDA opportunity of nearly $500 million.
The current pricing environment, resulting from our downstream expansion.
And keep in mind that this assumes a downstream magnetics business and only consumed single digit percentages of our upstream output.
We will be methodical, but we expect exciting further reinvestment opportunities overtime.
Lastly, I would highlight again that given the significant free cash flow generated from our current business. We believe we can continue to invest in these growth projects that significantly expand enterprise value, while still maintaining a net cash balance and conservative fortress balance sheet.
With that I'll turn it back over to Jim Jim.
Thanks Ryan.
Still on slide 16.
And I Love this picture.
Many of you have heard me say how proud we are that we were the American flag on our sleep.
The mission, we have taken on is important disruptive.
And very challenging.
We are also capitalists and we believe what we are doing is going to be very rewarding.
Yet for two quarters in a row, we and.
And our shareholders have been the victim of drive by stock rates short seller statement.
Sell side analysts and investors not taken in by misleading soundbites figure things out, but according to Bloomberg reporting at least one of these parties appears to be involved in a United States Department of Justice probe around potential trading abuses and other crimes.
We take addressing this issue very seriously on behalf of our shareholders.
Many of whom are rightly very angry at those involved in producing these false and misleading short seller statements.
First.
I want to make clear.
So we respect honest.
Rigorous and thoughtfully researched short selling.
It is a critical market function.
Some of you already know this but I ran a sizable hedge fund for nearly 15 years before returning my outside liquid capital. So I can focus full time on creating long term shareholder value and MMP.
The reason I bring that up is that I think it is fair to say that I have the appropriate background to be able to delineate fundamental short selling.
From outright market manipulation and securities fraud.
So let me address the fundamental claims raised about MP and then I will give you. Some overall perspective in case this happens to us again.
In a nutshell the report claim that we engaged in a scheme with Shanghai, our distributor to inflate prices that the mountain pass ore body is uneconomic. According to a data German study utilizing inputs from our predecessor eight years ago.
And that a single loss shipping container was evidence of round tripped inventory.
The disseminate or of these false and misleading statements never called us and its entire thesis would've been debunked by a simple phone call or frankly by reading our SEC filings.
First regarding the pricing of our products.
<unk> is a distributor.
They are paid a commission to achieve the best possible price from a number of refineries in China, who are eager to purchase mp's product and who ultimately set the price that we received.
Trying to overlay our product sales versus import data versus the ultimate sell through by a distributor all with completely different timing parameters in it and in a rapidly rising price environment is purposely deceptive and misleading in my view.
Next I think the viability and economics of our ore body speaks for itself right and I covered it today in the SK <unk> hundred which reflects extensive outside due diligence will also be filed along with our Form 10-K next week.
Making a claim about <unk> based on a data German study with eight year old information from our predecessor that went bankrupt is also purposely misleading in my view.
And lastly, we shipped roughly 4000 containers last year.
Disseminate or have these misleading statements attempting to focus on one container, which got lost and was returned to sender back to long beach before being rerouted to its proper destination ports.
Trying to cause the market to believe falsely without any context that a single lost container was evidence of anything.
Constitutes market manipulation and again purposefully misleading in my view.
To the contrary I would argue the only thing that is evidence of is that our team is pretty darn good at logistics.
So.
It is clear to me that the disseminate or have these false and misleading statements was not actually doing legitimate research.
There was no attempt to gather and check backs with context for an actual investment thesis and it was certainly not about acting in the public interest.
The apparent goal was stock manipulation in the hopes that harsh obligations would create enough doubt to scare our investors for a day or maybe more.
I think the government is going to deal with this kind of behaviour eventually.
And I think what they are going to find is that there are actors behind these false statements profiting from the chaos they create in the investors they hurt.
For those who were hurt by this though I would ask the following question.
Why would someone pay for so called quote research reports.
Where there is basically no substantive research being done and that are already being given out to the world for free.
It would seem to me that a very plausible explanation is that it is for advanced knowledge on timing of manipulation events <unk> influence the stock prices of the companies when they are actually attacked by false and misleading statements.
Let's be clear.
If that is the case and there are purchases and sales of securities.
That is securities fraud.
I think we might ultimately see criminal charges and or liability extend to the parties funding and facilitating those involved in disseminating false information and trading in advance on that information.
Before concluding on this topic I want to address the insider sales.
I know I have made this point very clear since we went public.
But it is worth reiterating.
I am deemed the beneficial owner of two major blocks of shares.
Approximately 42 million shares in the name of <unk> capital group and approximately $16 8 million shares in mining.
The <unk> capital group named shares are almost entirely institutional investors, who were invested with me. When this journey began in late 2014.
Nearly eight years ago.
Those holders our foundation family offices insurance companies and many other institutional investors, who are entitled to have their capital return to them over time.
When <unk> went public.
I went out of my way to make this very clear.
And even segregated my personal position from my investors entity, so that I could return money thoughtfully to my investors over time, while also providing the market with more transparency around my primary personal investment alongside shareholders.
For an unscrupulous party to make accusations without any context is again purposefully misleading in my view.
Thank you to the research analysts and investors, who helped clarify all that.
I believe in the importance of our mission and the incredible opportunity in front of US MP is helping to solve a major problem for industry in the country.
Many great companies have been through these kinds of challenges. So we just consider it a rite of passage for MP, we will be unwavering until it is done and with that I will open it up for Q&A.
Operator.
Thank you very much.
First question is from Tyler Langton from Jpmorgan Tyler Langton. Please go ahead. Your line is open.
Good afternoon, and thanks for taking my question.
I guess, maybe to start with you just sort of.
Stage two.
Could you just could you provide a little bit more detail I know you mentioned sort of honestly Amit.
On sort of labor shortages, but are there any I guess sort of a key sort of processes.
Our equipment that are sort of causing the delays.
No I mean, I think that I think that what we said pretty much speaks for itself.
I think you've heard commentary around companies in the global economy or just the challenges this past quarter.
Anytime you have one things slip up it can have.
Ramifications with something else, but there's nothing specific I would say other than sort of what we said in the comments pilot.
Okay. Now that's helpful. And then just on the Capex front.
$700 million is there I guess can you provide any sort of rough numbers in terms of.
What is going to be directed towards states too.
Fort worth and recycling of inefficiencies.
No I mean, I think so obviously, we talked a lot about it in the script.
But.
We're essentially because we have all of these projects were just we're transitioning to.
And overall Capex number and we're not breaking that out into individual projects. So.
So sorry, I can't help you on that front.
Okay, Alright, that's it thanks so much.
Yes, no problem.
Thank you as a reminder, if anyone would like to register a question. Please press star followed by one on your own testing and Pat.
Our next question is from Matt Summerville from D. A Davidson. Your line is open. Please go ahead.
Excuse me thanks, good evening couple of questions.
First with respect to stage one output.
Potential outages do you anticipate incurring in 'twenty, two what would be a reasonable expectation for year over year growth in stage, one output I guess I'm trying to get a feel for how much.
Moving forward Youre able to push the envelope on mineral recovery.
Hey, Michael why don't you take that one.
Sure. Thank you.
Yes, as we said, we'll continue to work to improve the overall mineral recovery.
And we think there is still significant opportunity, although the exact timing of how and when that materializes.
It's difficult to predict.
Continue to optimize our existing circuit and make adjustments and upgrades to it too.
We're making better and better we do expect probably to have some interruption from.
When construction and tie ins at the year, but I don't think that would be terribly material.
So overall, we think that the.
The uptime will be probably down slightly but offset by.
The continued improvement you saw in the second half of the year that was.
Some.
Improvement year over year, and we think that has not all been reflected fully into the <unk>.
The full run rate.
I'm not sure if that answers your question. Thanks.
Yes, yes. Thank you.
Helpful and then as my follow up question I'm curious.
As the Offtake agreement comes to an end here this quarter.
Where the whole might be four where you ultimately can begin to sell stage one material before it's obviously consumed in stage two and then similarly, I would be curious as to where geographically.
I'd be looking to source stage II feedstock. Thank you.
The third party feedstocks.
Brian Why don't you go ahead and cover that you cover.
Sure Landsberg.
Matt on that front.
What we what I mentioned in the script is that we do intend for the majority of the stage one product that is being sold into the market to continue to distribute that through Shanghai.
Even today, we do have direct customers there'll be sell our stage one product too and we have the ability to do that to the extent, we so choose but obviously given the preponderance of.
Refining capacity being in China, and the ability for us to.
Easily distribute with existing in place logistics.
We do have an agreement on terms with with Shanghai to continue distributing through them once the offtake is complete.
We continue to see.
Pretty strong demand directly from customers.
Really really far up the supply chain, who want to have visibility to exactly where their materials are coming from and so it is a good opportunity for us to continue to develop those direct relationships that we intend to leverage once we are into stage, two and selling separated product. So.
I think majority will continue to make their way to where the refining is in China through Shanghai, but we continue to develop our own direct sales force as well.
Jim do you want to cover the third party.
Feedstock.
Yes, I think what.
Sorry, what was the question again on third party feedstock.
I was just curious where geographically you would plan to potentially source that material and how much material could ultimately go through the stage two process.
I guess at the end of the day.
I'm curious as to what that <unk> 75 number looks like if you are not only processing.
Even more concentrated than you maybe originally kind of guided to.
In the stack and now you are also willing to take in third party material.
Yes.
Sure so.
I can't tell you, specifically, where because obviously I wouldn't want to give up.
The strategic advantage of the company and kind of negotiating and thinking about where and how we make.
Future investments and whatnot, but I think to the heart of your question. It is as we said today.
When you look at that.
What we've outlined and you can go back to <unk>.
So the slide where we kind of show you the whole the whole process flow.
The.
Our ability now to take third party feed really allows us the ability to take <unk>.
Our carbonate from somewhere else in the world and that can go somewhere into our process in a way that will give us additional lights and heavies.
And so.
We also mentioned.
In the script that we have been sort of positioning and adjusting for that and so I can't I'm not going to give you sort of a specific number but I think it would be correct to assume that.
We will be able to do sort of <unk>.
More than we contemplated two years ago.
Understood. Thank you guys.
Sure.
Thank you. Our next question is from David <unk> from Cowen David Your line is open. Please go ahead.
Hey, David Thanks for the time, Hey, guys. Thanks, Jim Ryan.
Michael I appreciate all the color Tonight.
Sure I was hoping you maybe at a high level. The reserve report is obviously highly encouraging.
Pointed out all of the conservatism that you see in the report and yet at the same time, you have 11 more effective economic years 35 years.
You guys have a lot on your plate right now.
Stage two is taking on more complexity you are expanding in the stage three but if we get back to stage one.
How should we think about expansions and was there is there a correct mine life given how robust demand is growing right now that you'd like to.
Kind of goal seek around your target over the next few years.
Sure. So great question al covered and maybe Brian or Mike will want to chime in with additional thoughts.
I think the way to think about it I'll start with I'll just step back high level I think we may have said this on our prior call, but if you think about just the U S Auto fleet.
As that goes from ice to electric.
We probably need just for our domestic auto fleet three mountain passes.
And Thats, obviously, leaving out sort of the rest of the world and all the other applications and growth that we're going to see around electrification. So theres no question Theres a lot more supply needed.
Certainly it makes sense.
To expand the potential output at mountain pass vis vis.
Pretty much at least anything IC in the western world or frankly anywhere else in the world.
Two to expand what you said is sort of what our stage one output is and I would also say it's also frankly helpful from an environmental standpoint in the sense that.
Before you start.
And our brand new mine with all of the impact that that could have.
With a much lower grade worst economics potentially other environmental challenges.
It makes sense frankly from.
Government stakeholders to want to see.
Our.
Our site expanded.
So I think we obviously have a strong economic measures and I also think government stakeholders have that interest.
Yes, you also noted that some of your question, we have a full plate of projects and so.
As you as you can tell already at MP, we work on lots of parallel paths.
And we're trying to move as quickly as we can whilst also getting things right.
So I guess I would say to your question.
It's definitely something that is top of mind as far as top of mind not mind as far as things we want to think of but realistically that is we have a lot to get done first.
<unk>.
So.
I would also just add if you look at the reserve report.
Fund.
You look at our cutoff grade and Thats above.
Where the ore body.
Actual ore body, great is a lot of other hopeful of projects. So.
Theres certainly a lot of.
It makes a lot of economic sense for more a lot more to be done at non pass, but Brian Michael do you want to cover anything on this question.
I think you hit it Jim the only thing I'd add is obviously there are technologies out there that will continue to stare at to Jim's point.
On.
The lower grade material that would allow us potentially to make some interesting changes to be able to leverage.
Material that Hasnt, even made it into the reserve at this point, but.
I agree with everything that Jim said, certainly with everything on our plate, we have been adding very capable teams and all of these areas and this is one that we'll continue to look at doing the same thing.
I appreciate the responses.
If I could just ask one more on the GM as a foundation customer congrats on that announcement in December .
You outlined Brian I think like the size of the prize in terms of EBITDA with.
Stage, II and stage III up and running at a $1 billion.
How do we think about sort of the pricing and votes for.
And fabricated magnets.
Are these going to be on fixed price contracts, where you can just turn back a margin on the hundreds of millions of dollars you're spending on the plant or will there be some variability in the pricing with GM.
Bob.
What I would say on that is we certainly are not going to get into the specifics of <unk>.
Our agreement with General Motors, but I would say.
It takes sort of Jim's adage that you said many times that we firmly believe is we're not going to Rob Peter to pay Paul So we're not going to enter into an agreement on the magnetic side than in any way prevents us from earning.
A market price on our material.
In the upstream business and so I think the very exciting thing about what we're seeing develop in terms of the demand domestically.
And.
Across globally ex China frankly.
Is a willingness for customers to look at the value that they get from the birth and the wherewith magnetics.
We are going to provide and understand that.
Willing.
Hey.
A fair price and allow us to earn what we believe is a very healthy margin and return on capital.
Pursue this opportunity and so it allows us to continue to benefit from what we all see as very exciting supply demand dynamics from a pricing standpoint on the upstream business, but then be able to continue to move downstream methodically capture what we think are nice high returns on capital and continue to morph the business into something that.
Ads.
And additional technological component to it.
Add some smoothing the volatility to it and so frankly the reason we're so excited about this as the market has really come our way from that perspective, and so we're excited about the opportunity.
And I would just add on that.
Yes, it's hard for us to.
Don't expect us to give out economics of of any specific customer in the future as you can imagine, but I do think it's just worth repeating when you think about the way the world is headed and I think we were we sort of highlighted this over the past year with the semiconductor issue and now.
And sort of the various serious situation that we see on our televisions today with.
Russia, Ukraine, I mean, what would.
What would a company or country pay to have some diversity in their natural gas from from Russia, right what would they pay to have some diversity in their semiconductors, and so youre seeing this theme kind of across the board.
<unk> of people recognizing that as as the world economy evolves here the ability to have a fully integrated offering to a customer has a lot of strategic value and there are there are it is a difficult thing to create.
And so we really think that our our franchise sort of provide that opportunity and obviously the foundational deal is suggestive of that and we expect to have a <unk>.
Number of customers like that in the future and.
And so again I would just <unk>.
Highlights that.
We believe that we will be able to get the economics of our stage to your business and then earn attractive returns on capital in our stage III business that will add additional total dollars, which obviously is just grow the enterprise value and so from every indication that we see as we talk to people day to day.
That that.
That thesis if you will remains intact and is growing by the day.
Thanks, Jim.
Sure.
Thank you. Our next question is from Bank Hello from Baird. Your line is open. Please go ahead.
Hi, everyone. This is George generally gets actually good evening.
Hey, George I had a couple of questions.
First on the Heavies can you help us quantify what the opportunity looks like there is from a revenue perspective.
Well I would just say high level, we expect to consume all of our heavies into our magnetics business.
So.
It wouldn't be a separate yeah, it wouldn't be a separate.
Item.
Okay.
And then maybe with regard go ahead, Michael Michael Go ahead, Michael I think you want to add into that.
The disposal that microbial.
Hello.
The disposal and soybean from our Seg plus.
The previously reported.
Would be.
Set into the magnetics business.
Those represent the vast majority of the value.
I just want to clarify that point.
Got it.
And then you gave.
Some numbers.
<unk> hundred $50 to 500, and 902 1 billion in EBITDA.
Stage, one and stage two numbers I just wanted to make sure I understood I heard those correctly.
Yes, sure John I'll go ahead, Brian is right.
Yes, so what we had said is if you take current spot.
Our expectation is if you run rate at stage one our current business that was the first number the $4 50 to five <unk>.
If you look at what we expect to be able to earn.
Current market pricing in all the caveats that come with that current cost structure and all those sorts of things that we expect.
The 900 to a $1 billion.
Was with us fully ramped on stage, two and with the initial Fort worth Magnetics facility ramp.
Understood and that's $4 50 to 500 assumes 42000 metric tons production similar to this year.
We haven't gotten into the into the specifics of that.
And we tried to make clear.
It's not it's not meant to be calendar year 2022 guidance, obviously get that taking today's spot.
Not necessarily indicative, but we havent gotten into the specifics other than I certainly share Michael's sentiment on on his discussion earlier on how we would triangulate around our anticipated production for the year.
Okay.
And so given that set of metrics.
The 700 million that you've articulated is is funded through the business for the most part of it can you help us understand a little bit about the financing needs of the business over the next two or three years.
Well I mean I can take that.
You can look at our balance sheet right now right.
A little under $500 million and net cash right, we have $1 2 billion approximately in gross cash.
And if you look at the run rate of the business look at this.
This quarter. If you want obviously prices have moved materially since Q4, which is what we reported today, but pick your number in between and I think if you look at the cash flow that we're generating and do that math.
You can you can see that we believe will be able to fund all of this with our net cash position. So we feel very very comfortable with the balance sheet and we want to maintain a fortress balance sheet because.
And I said this in my remarks earlier.
When you're in a business with volatility you want to make sure that you can absorb volatility, but you also in times of volatility we want to be able to be opportunistic.
And I think that our balance sheet, and our investment program and where we see the state of the business today affords us that that we can do all of those things.
Understood. Thanks, guys.
Yes.
Thank you. Our next question is from Carlos de Alba from Morgan Stanley and Carlos Your line is open. Please go ahead.
Great. Thanks, very much everyone.
First question is do you envision that for the stage three the current month on pause the policy.
And then.
The heavies that.
You have there combined with the recycle.
<unk> dual generate will be enough to support.
Sure.
Lisa refresh client.
My nephew Magnetics plant or do you expect potentially that you need to buy from third parties.
Yes.
Well Carlos I think I think it would be fair to say that you should assume that we would would not.
Go do business that we didn't think we could deliver on.
So.
I think you can.
Your conclusion.
<unk>.
We believe we'll be able to provide the heavies that we need.
But I'm not necessarily from euro deposit.
Yes from our deposit with the initial facility yes.
Obviously as we scale beyond that.
Question, but.
We do.
Believe that we will be able to provide from our from our existing deposit yes.
Alright, alright, great and then the other.
I don't know if it is for you Jim or Michael.
What stage of completion is the stage to prior year.
Right now and how did you see the progress.
Throughout the year.
I mean basically it seems from.
From the commentary.
We should expect only really to start late in Q4, and then have sort of a gradual ramp up in 2023 until you reach full capacity at some point in 2023 right.
Yes, I think that.
But.
As I said in the prepared remarks, Carlos we expect to be.
Mechanically complete in that later this year and sometime in 2023, we will be hitting run rate production.
This this past quarter was.
What's going on in the World. It was a little slower than we would have liked but we're progressing forward and try.
To execute this as quickly as we possibly can.
Alright, and then final question is in terms of.
Cash flow generation.
Once once they offtake agreement he has done.
You guys will be.
As you will.
Basically have a step up in your in your cash from operations that you show in your financials right.
Yes, Brian go ahead, Brian .
Yes, that's exactly right.
If you look at the cash flow waterfall that we provide over the course of the year and the current offtake arrangement, we obviously pay down with each sale.
So.
<unk> forward with the offtake complete if you just take last year's numbers from an operating cash flow perspective, we'd have to step up of about $55 million in operating cash flow purely from transitioning away from.
Prepaid offtake arrangement.
Alright, excellent and if I may squeeze last one since you were talking about.
If customer generation that we're talking about class a industrial generation, how should we think about working capital, particularly receivables.
For the quarter.
I guess is I guess it depends on the sequencing of your of.
The shipments, but how is it going so far as you see this quarter and maybe you can't.
Reviews.
At quarter end the amount of receivables are you holding your balance sheet.
Yes, it's a great question Carlos.
I'll refer you back to my remarks on sort of the.
Pace of shipping in.
Q4, which was sort of a repeat of Q3 and even a bit crazier.
So far what we've seen is encouraging in terms of how the port is operating and our ability to get product out the door.
I'd never in this environment want to make a hard prediction on timing of shipments, but I would say that the improvement that we saw towards the tail end of Q4. So far has continued.
Excellent. Thank you very much guys.
Okay.
Thanks.
Okay.
Thank you. Our next question is from Lawson Winder from Bank of America Olson. Your line is open. Please go ahead.
Hi, guys. Good evening and thank you for the presentation.
Congratulations on.
The free money from.
The government is never a bad thing I just wanted to.
Ask about the $500 million of incremental EBIT that you spoke to on the call.
So it would seem to me that the vast majority of that would likely be from the separation facility.
Combination of the light and heavy rare earth.
Am I thinking about that correctly is the bulk of that being.
From that or.
Is there going to be a significant portion coming from this Meg.
Meg facility.
So Laurence that was another creative way of asking the same question.
But we haven't broken that out, but Ryan if you want to.
Address that you May go ahead, yeah, I mean look obviously, just given the scale of the upstream versus downstream.
Majority of the portion would be coming from.
Two including lights, and Heavies I think we've given.
I'd refer you back to some of our prior commentary to try to triangulate around.
What our expectations are from a production cost perspective.
And so you can you can do that math.
And think about what are the potential volumes that we've talked about in stage two.
We told you that we were.
Referencing that number at today's spot and if you do that math you do get.
Attractive return on capital for the Magnetics business and so I think there are a lot of moving parts that go into that math, but I think we've given you guys hopefully that the.
The pieces to be able to do it.
Just given as we talked about.
Im a little bit earlier.
We don't want to get into the specific economics of any one customer's arrangement, we don't want to get.
Much more detailed than that but hopefully that's helpful.
Yes.
That is helpful color.
Also could I ask about sort of the timeline on all of the moving parts here. So I'm just trying to understand stage two so when stage two starts up towards the end of 2022 is it going to be a start up for both the light and the heavy or should we think about it as being.
Same students starting up for the light and then a possible future shutdown to tie in the head.
Yeah.
Michael do you want to what are you going to pick up.
Yes, Thats a good question.
When we start up the lights.
The products that we've shown in the charges the seg plus concentrate so that is a.
A product that we.
Had originally planned to.
To sell and now we will probably start pilot, but we won't start up with the heavier.
Separation facility until a later date more coinciding with the startup of the.
Magnetics production stage III.
We would hope to start up slightly earlier for heavies.
Certainly not with stage two.
So we'll be running stage two <unk>.
Normalizing that operation.
In preparing for Titans restage for the February of separation.
Okay. That's clear and then and then how should we think about how disruptive the tie ins of of the heavies would be well actually both the heavy and the.
The sort of recycling and per.
Recycled material handling angle.
Matt.
Michael go ahead I think.
We would say.
The primary thing is whether we have to do any facilitating investments too.
Sure.
Smoothed handling.
Any preprocessing of any.
Additional material third party material recycled materials into our circuit.
I wouldn't expect a hugely disruptive.
Impact, but there'll be periodic impact.
And then the throughput potentially it could be modestly impacted for short periods of time, where that normalizes.
But they are they are discrete.
In many cases and so the disruption wouldn't be lengthy.
But for the most part.
Yes, that's super helpful. And then just finally I wanted to ask a question or perhaps two on the updated reserve, obviously and an additional 11 years.
Is it really exciting, especially if the price of MVP R keeps rising, but what I wanted to understand it.
Yes.
With the lower grade material that is coming into the mine plan now does that start.
Into the mine plan in the near term or is this something thats going to be backend loaded.
Yes, I'm happy to take that.
The way we've built out the mine plan is that over time.
The grade will.
Continue to sort of average down if you will.
It's not sort of a stair step in any way and the way that we built out too.
This mine life, obviously is with an assumption is as.
As you see head grade come down you have the obvious impact on recovery throughout the mill I think what what we see is very conservative assumptions in the report about how that.
How that will come to pass and certainly with some of the comments I made earlier about our ability to look at potential upstream technologies.
And new processes to look at some of the lower grade material I think those things would also translate very well into our ability to continue to maintain and grow recoveries even with.
A lower average head grade coming into the mill over time.
Obviously.
Look at the reserve Slide you can see the difference between.
The contained Oreo if you look though at recoverable Oreo versus contained Oreo.
The increases.
Almost the same.
So I think 25% versus 28% that youll see in the report and so there really is not.
Nothing Super meaningful there and particularly with the investments we.
Tend to make.
So we feel very good about.
Multi decade.
<unk> to continue to improve.
Okay. That's extremely helpful and then.
With the estimated distribution of our content that you guys had previously disclosed so with this updated reserve estimate.
Does that change at all.
No it does not change meaningfully the distribution.
Youll see when we file the distribution that we see coming out of the of our of our current product today has been.
<unk> stable.
The way the reserve report.
<unk> was.
It was put together certainly.
Primarily light where with ore body was focused on.
The library with content and so I think we have an ability, particularly now that we've got.
Real plans in place at this point that had developed at.
It accelerated towards the end of 2021, whereas this report is.
Actually an effective date of Q3, and then depleted to the end of the year.
I think an opportunity for us absolutely going forward is to to.
To invest some more time in incorporating better.
The heavy rare portion into into the reserves.
Mike If you have any other thoughts on that or distribution over time.
No you hit on it I think the natural distribution has been very stable over very long periods of time.
Going back decades.
Right.
Very helpful. If I could just fit in one more question on the Seg plus one 7% of the total Trs content.
What percent of that one 7% is DIY and television.
We haven't disclosed that I think we would prefer not to other than referring back to Jim's comments about.
Being sufficient to handle.
Our initial commitments for this stage one for the stage three facility.
Yeah.
Okay. Okay, that's fair.
Yes.
Thank you we have time for one more question and that is from Laurence Alexander from Jefferies. Laurence. Your line is open. Please go ahead.
Choices choices with thanks for putting me in can you just flush out.
You're thinking about recycling I mean, any incremental color you can give us now that you've been.
As you say pursuing multiple tracks at the same time in terms of potential capex over the next few years.
How the margin structure might compare with the stage two stage III can you give some thoughts on how that's going to fit into the mosaic.
Well I would say on the Capex I would just refer you back obviously to the.
The statements Ryan made in the prepared remarks, just because we're not going to break out.
Any of these specific parallel investments, we want to make sure that we.
Guide you to an overall capex figure, but maybe Michael if you want to address.
<unk>.
Sort of.
What's on recycling and kind of how you how you see it integrating with the operation go ahead.
Okay.
Sure.
Yes.
Two parts and they are similar but slightly different but one is the process waste that would come off of magnetics plants.
Which some of which can be recycled within the magnetic operation itself in this industry and some of which would come back to mountain pass to be separated.
And the other would be end of life magnets.
We've done a lot of our work on end of lifecycle in terms of.
Digesting them.
We're moving on.
Iron and boron and other things.
Introducing separated oxide.
You could see it as and probably the most prefer.
<unk> would be to leverage the existing assets and existing infrastructure.
Which largely can handle.
All of these processes.
There could be.
Customers, who may want.
Surely recycled material that doesn't interact which would have.
Current economics, and we'd have to evaluate whether that's attractive in that.
But I think the attractive thing for mountain passes.
<unk> existing processes, which do essentially the exact same thing that magnet recycling requires.
But having material that has.
Fewer.
<unk>.
Impurities.
And larger separation factors between the elements given.
Do they have in the rare earth.
Generally no.
Demand praseodymium dysprosium maybe.
Very very trace amounts of others, but it makes it a simpler separation.
Thank you.
Okay.
Thank you. This is all the questions. We have time for today, so I'll hand back over to Jim for any closing remarks.
Okay. Thank you operator, and I just wanted to thank everyone I know, it's a long call today, but we obviously have.
<unk> had a lot of exciting things to report to you. So thank you for your time today, and we look forward to future updates have good night everyone.
Thank you everyone for joining today's call you may now disconnect your lines and have a lovely day.
Okay.
Yes.