Q1 2025 MP Materials Corp Earnings Call
Last quarter 2025 earnings call.
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Speaker Change: With that I would like to turn the call over to Martin Sheehan.
Good.
Martin Sheehan: Head of Investor Relations Mr.
Speaker Change: Mr. Sheehan you may begin.
Speaker Change: Thank you operator, and good afternoon, everyone and welcome to the MP materials first quarter 2025 earnings Conference call with me today from MP materials are Jim <unk>, founder Chairman and Chief Executive Officer, Michael Rosenthal, founder and Chief operating Officer, and Brian Corbett Chief Financial Officer. As a reminder, today's discussion will contain forward looking.
Speaker Change: Statements relating to future events and expectations that are subject to various assumptions.
Speaker Change: Avionics 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. 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 today's earnings release and the.
Speaker Change: Appendix to todays slide presentation any reference in our discussion today to EBITDA means adjusted EBITDA and tons means metric tons. Finally, the earnings release and slide presentation are available on our website with that I'll turn the call over to Jim Jim. Thank you Martin and good evening everyone.
Jim: This past month has been one of the most consequential in our company's history.
Speaker Change: Fast moving challenging.
Speaker Change: <unk> clarifying and ultimately energizing.
Speaker Change: For years, we have warned that the global rare Earth supply chain was built on a single point of failure.
Speaker Change: With China's sweeping tariffs and export restrictions that geopolitical fault line has now become a commercial reality.
Speaker Change: Regardless of how trade negotiations evolve from here.
Speaker Change: The system as it existed is broken and the rare Earth Humpty dumpty sort of speak is not getting put back together.
Speaker Change: What is now abundantly clear is that the United States must urgently accelerate its full scale domestic rare earth magnetic supply chain.
Speaker Change: This is not just about supply security it.
Speaker Change: It is about the future of National defense with systems like drones robotics and other forms of physical AI and is about securing trillions of dollars in downstream enterprise value.
Speaker Change: The events of the past month or a powerful validation of the strategy, we have pursued since founding MP.
Speaker Change: I know some of you will focus on our decision to halt shipments of <unk> concentrate to China we.
We will speak to the near term implications and take your questions. Shortly.
Speaker Change: But let me be clear.
Speaker Change: We have prepared for this moment since day one.
Speaker Change: We are now at an inflection point not just for MP, but for the country.
Speaker Change: Vulnerabilities in global supply chains are no longer theoretical they are central to United States economic and National security.
Speaker Change: What we are witnessing is the beginning of a generational industrial realignment.
Speaker Change: Our vertically integrated model.
Speaker Change: <unk> with conviction and discipline over years has positioned MP as America's National champion Embraer with magnetics.
Speaker Change: Moving as the natural partner of choice for the country's most consequential manufacturers across automotive defense technology consumer products and beyond.
Speaker Change: We are confident that our business should grow to many multiples of its current scale and recent events are accelerating that trajectory.
Speaker Change: Scaling of course will require significant additional capital, but here is what has changed.
Speaker Change: We are now in active discussions with major commercial and government stakeholders, who recognize the urgency of this moment and are eager to accelerate our mission.
Speaker Change: Let me be direct.
Speaker Change: MP took on omission that many believed was impossible.
Speaker Change: We assembled billions of dollars in assets rebuilt a shattered supply chain from the ground up and methodically invested over $8 billion to bring rare earth refining metal, making and magnetics back to the United States <unk>.
Unknown Executive: to the Mp Materials first quarter 2025 earnings call.
Unknown Executive: We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session.
Speaker Change: Against the odds, we did what others would not or could not do.
Speaker Change: And as a result America is in a fundamentally stronger position at such a critical time because of the dedication and vision of the MP team.
Unknown Executive: Also, as a reminder, this conference is being recorded.
Unknown Executive: If you have any objections, please disconnect at this time.
Martin Sheehan: With that, I would like to turn the call over to Martin Sheehan, Head of Investor Relations. Mr. Sheehan, you may begin. Thank you, operator. And good afternoon, everyone. Welcome to the Mp Materials first quarter 2025 earnings conference.
Speaker Change: From here the equation evolves.
Speaker Change: We have laid the foundation, but scaling this mission requires moving in lock step with public and private partners, who understand that MP cannot and should not carry the burden of countering mercantilism alone.
Martin Sheehan: With me today from Mp Materials are Jim Litinsky, Founder, Chairman and Chief Executive Officer, Michael Rosenthal, Founder and Chief Operating Officer, and Ryan Corbett, Chief Financial Officer.
Speaker Change: Our shareholders have back vision and they must be rewarded accordingly, we will deploy capital only where the economics are compelling the partnerships are strong and the returns are substantial.
Martin Sheehan: 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.
And today the opportunity in front of US has both the scale and momentum to reshape this industry and to deliver transformative value for our shareholders and for the country.
Martin Sheehan: Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation, earnings release, and NRSEC filings.
Speaker Change: Through it all our principles remain unchanged, we will continue to execute with discipline protect our balance sheet and align with partners who share our long term vision.
Martin Sheehan: In addition, we have included some non-GAAP financial measures in this presentation.
Martin Sheehan: Reconciliations to the most directly comparable GAAP financial measures can be found in today's earnings release and the appendix to today's slide presentation.
Speaker Change: In the intermediate term that means executing flawlessly for general motors, our foundational customer.
Martin Sheehan: Any reference in our discussion today to EBITDA means adjusted EBITDA, and tons means metric tons.
Speaker Change: I believe this will be remembered as the moment MP materials began its transformation.
Martin Sheehan: Finally, the earnings release and slide presentation are available on our website.
Speaker Change: From a rare earth producer to a national champion and a foundational pillar of American industrial resilience.
James Litinsky: With that, I'll turn the call over to Jim. Jim? Thank you, Martin, and good evening, everyone.
Speaker Change: Let's now turn to slide four and go over some of the quarter's highlights.
James Litinsky: This past month has been one of the most consequential in our company's history. fast moving, challenging, deeply clarifying, and ultimately energizing. For years, we have warned that the global rare earth supply chain was built on a single point of failure. With China's sweeping tariffs and export restrictions, that geopolitical fault line has now become a commercial reality. Regardless of how trade negotiations evolve from here, the system as it existed is broken, and the rare earth Humpty Dumpty, so to speak, is not getting put back together.
Speaker Change: Our materials Division.
Speaker Change: Made up of our upstream and midstream operations continued its strong execution with painstaking effort in the first quarter demonstrated in part by a record and DPR oxide production of 563 metric tons or 36% sequential increase from the fourth quarter in.
Speaker Change: In addition, the upstream produced its second highest quarterly production of Oreo and our eight year history as our upstream 60, K optimization projects continue to bear fruit with very strong recoveries in the quarter.
We also continue to see strong sell through of our midstream production with most of our 464 metric tons of <unk> and metal sales continuing into Japan, Korea and to other non Chinese customers.
James Litinsky: What is now abundantly clear is that the United States must urgently accelerate its full scale domestic rare earth magnetic supply chain. This is not just about supply security, it is about the future of national defense with systems like drones, robotics and other forms of physical AI, and is about securing trillions of dollars in downstream enterprise value.
Speaker Change: Moving to the Magnetics Division, we began initial on spec of metal production for GM in the quarter.
This is a significant milestone for the company and the country. As we believe this is the first and EPR metal production ever done at scale in the United States.
James Litinsky: The events of the past month are a powerful validation of the strategy we have pursued since founding MP.
James Litinsky: I know some of you will focus on our decision to halt shipments of rare earth concentrate to China.
Speaker Change: This also resulted in us recording $5 $2 million in revenue and positive adjusted EBITDA for the segment in the quarter.
James Litinsky: We will speak to the near term implications and take your questions shortly. But let me be clear, we have prepared for this moment since day one.
Speaker Change: In addition, we provide a general motors with our first automotive grade magnets for them to begin validated.
James Litinsky: We are now at an inflection point, not just for MP, but for the country. The vulnerabilities in global supply chains are no longer theoretical. They are central to United States economic and national security.
Speaker Change: This is another important step for MP as we continue to make ever higher quality magnets on our new product introduction line.
Speaker Change: There is still a lot of work to do on the commercial production equipment, which is being installed but we remain on track to deliver commercial production of magnets for GM by year end.
James Litinsky: What we are witnessing is the beginning of a generational industrial realignment. Our vertically integrated model, developed with conviction and discipline over years, has positioned MP as America's national champion in rare earth magnetics, serving as the natural partner of choice for the country's most consequential manufacturers across automotive, defense technology, consumer products, and beyond. We are confident that our business should grow to many multiples of its current scale, and recent events are accelerating that trajectory. Scaling, of course, will require significant additional capital, but here is what has changed. We are now in active discussions with major commercial and government stakeholders who recognize the urgency of this moment and are eager to accelerate our mission.
Speaker Change: These recent achievements also unlocked another $50 million customer prepayments, which was received on April one.
Ryan: With that let me turn the call over to Ryan to go through the results of the quarter Brian.
Speaker Change: Brian.
Ryan: Thanks, Jim moving to slide six our consolidated revenue shown on the left side of the page increased 25% year over year, driven primarily by the 246% increase in <unk> sales volumes as well as the initial sales of magnet precursor materials in the quarter.
Speaker Change: Consolidated adjusted EBITDA declined $1 $5 million year over year to negative $2 $7 million.
Speaker Change: The driver of our EBITDA results continues to be the transition to producing separated products such as <unk>, which also has the effect of reducing concentrate sales.
James Litinsky: Let me be direct. MP took on a mission that many believed was impossible. We assembled billions of dollars in assets. We built a shattered supply chain from the ground up and methodically invested over a billion dollars to bring rare earth refining, metal making, and magnetics back to the United States. Against the odds, we did what others would not or could not do. And as a result, America is in a fundamentally stronger position at such a critical time because of the dedication and vision of the MP team.
Speaker Change: Our per unit production costs for separated products are declining, but still temporarily elevated as we continue to optimize our processes and ramp production levels towards our targeted throughput I'll have more on this in a moment.
Speaker Change: Adjusted diluted EPS fell from negative <unk> <unk>, a year ago to negative 12. This year, primarily due to higher interest expense from the issuance of our 2030 convert lower interest income as well as higher depreciation from new assets brought into service over the last year.
Speaker Change: Recall also that first quarter of 2024, GAAP EPS was impacted by a $46 3 million noncash gain associated with the early extinguishment of the majority of our 2026 convertible notes.
James Litinsky: From here, the equation evolves. We have laid the foundation, but scaling this mission requires moving in lockstep with public and private partners who understand that MP cannot and should not carry the burden of countering mercantilism alone. Our shareholders have backed old vision, and they must be rewarded accordingly. We will deploy capital only where the economics are compelling. The partnerships are strong and the returns are substantial. And today, the opportunity in front of us has both the scale and momentum to reshape this industry and to deliver transformative value for our shareholders and for the country.
Speaker Change: Turning to slide seven and the materials segment Kpis.
Speaker Change: On the left side, our upstream Kpis and on the right side are the kpis for the midstream.
Speaker Change: On the far left you can see another very strong quarter of Oreo production at 12213 metric tons up nearly 10% compared to last year's first quarter.
Speaker Change: This is virtually all driven by stronger recoveries from our upstream 60 game projects, which Michael will provide some additional detail on shortly.
Speaker Change: As Jim mentioned this was our second best quarter of production ever and our best first quarter on record.
James Litinsky: Through it all our principles remain unchanged. We will continue to execute with discipline, protect our balance sheet and align with partners who share our long term vision.
Speaker Change: As we push more of that production through the midstream to make separated products, we have less oreo to sell driving the decline in concentrate sales volumes by nearly a third compared to last year.
James Litinsky: In the intermediate term, that means executing flawlessly for General Motors, our foundational customers. I believe this will be remembered as the moment M.P. Materials began its transformation from a rare earth producer to a national champion and a foundational pillar of American industrial resilience.
Speaker Change: Realized pricing did recover somewhat from last year and was up slightly from Q4 in line with our expectations.
Speaker Change: Moving to the right side of the slide and EPR production volumes grew 36% sequentially better than our expectations and were up 330% compared to last year.
James Litinsky: Let's now turn to slide four and go over some of the quarter's highlights. Our materials division, made up of our upstream and midstream operations, continued its strong execution with painstaking effort in the first quarter, demonstrated in part by record NDPR oxide production of 563 metric tons, a 36% sequential increase from the fourth quarter.
Speaker Change: Sales volumes, followed the usual roughly one quarter lag in production at 464 metric tons. As a reminder, with production volumes still at modest levels and with a longer sales cycle for MVP, our metal the timing of shipments can significantly share sales volumes any given quarterly period and on the far right of the slide you can see.
James Litinsky: In addition, the upstream produced its second highest quarterly production of REO in our eight year history, as our upstream 60K optimization projects continue to bear fruit with very strong recoveries in the quarter. We also continue to see strong sell through of our midstream production with most of our 464 metric tons of NDPR oxide and metal sales continuing into Japan, Korea, and to other non Chinese customers.
Speaker Change: See our realized pricing was in line with our outlook roughly flat sequentially at $52, a kilogram, which was down 16% from last year when overall market pricing was stronger.
Speaker Change: Moving to slide eight materials segment revenues increased 14% driven by the 246% increase in an EPR oxide sales as.
Speaker Change: As well as the 12% increase in Oreo realized pricing, partially offset by the 33% decline in Oreo sales volumes and the 16% decline in MVP our realized pricing.
James Litinsky: Moving to the Magnetics Division, we began initial on spec metal production for GM in the quarter.
Speaker Change: Note that because our Oreo realized pricing is on a much shorter lag versus the market compared to N. DPR realized pricing. We had this somewhat unusual situation of a year over year increase in Oreo realized pricing, while experiencing a year over year decline in DPR pricing.
James Litinsky: This is a significant milestone for the company and the country, as we believe this is the first NDPR metal production ever done at scale in the United States. This also resulted in us recording $5.2 million in revenue and positive adjusted EBITDA for the segment in the quarter. In addition, we provided General Motors with our first automotive grade magnets for them to begin validating. This is another important step for MP as we continue to make ever higher quality magnets on our new product introduction line. There is still a lot of work to do on the commercial production equipment, which is being installed, but we remain on track to deliver commercial production of magnets for GM by year end.
Speaker Change: The longer lagging and DPR realized pricing is due in part to a longer sales cycle driven by our metallization efforts in southeast Asia as well as different contractual arrangements for <unk> outside of that.
Speaker Change: Year over year segment adjusted EBITDA for the materials segment declined from $7 3 million to $3 8 million mainly.
Speaker Change: Mainly due to the lower sales of Oreo and the higher sales at <unk>.
Speaker Change: As I mentioned earlier, our production cost for separated products or temporarily elevated as we continued to ramp production levels towards our targeted throughput.
Speaker Change: Sequentially the materials segment, adjusted EBITDA improved due to a $3 $2 million lower inventory reserve in the current quarter compared to the fourth quarter as well as continued improvement inefficiencies and NDP, our production, including improved fixed cost absorption.
James Litinsky: These recent achievements also unlocked another $50 million customer prepayment, which was received on April 1st.
Ryan Corbett: With that, let me turn the call over to Ryan to go through the results of the quarter. Ryan? Thanks, Jim. Moving to slide 6, our consolidated revenue shown on the left side of the page increased 25% year over year, driven primarily by the 246% increase in NDPR sales volumes, as well as the initial sales of magnet precursor materials in the quarter.
Speaker Change: Also impacting the comparison was a larger benefit in the fourth quarter from the section 45 ex tax credit, which in part resulted from a favorable final rule, making by the IRS in October of 2024.
Speaker Change: And lastly, moving to the right side of the slide you see that the initial metal production for General Motors resulted in revenue of $5 2 million in the quarter and adjusted EBITDA of about half a million dollars.
Ryan Corbett: consolidated adjusted EBITDA declined $1.5 million year over year to negative 2.7 million. The driver of our EBITDA results continues to be the transition to producing separated products such as NDPR oxide, which also has the effect of reducing concentrate sales. Our per unit production costs for separated products are declining, but still temporarily elevated as we continue to optimize our processes and ramp production levels towards our targeted throughput. I'll have more on this in a moment.
Speaker Change: We couldnt be more pleased with the dedication effort and performance of the team at independents, which Michael will discuss in more detail shortly.
Speaker Change: Looking at the outlook for our metal production at Independence, you will note that we now carry approximately $75 million of deferred revenues under our current liabilities, which by definition is our present expectation for revenues, we will generate over the coming four quarters.
Ryan Corbett: Adjusted diluted EPS fell from negative $0.04 a year ago to negative $0.12 this year, primarily due to higher interest expense from the issuance of our 2030 convert. Lower interest income, as well as higher depreciation from new assets brought into service over the last Recall also that first quarter 2024 gap EPS was impacted by a $46.3 million non cash gain associated with the early extinguishment of the majority of our 2026 convertible notes.
Speaker Change: So we expect a materially improved revenues in Q2, eventually leveling out at roughly $20 million a quarter over the next 12 months.
Speaker Change: And with that growth should come modestly improved EBITDA margins for the segment.
Speaker Change: Before turning to the balance sheet I wanted to give an update on our current expectations regarding our cost of production for and EPR oxide.
Speaker Change: It has been several years since we outlined our high level expectations and with our focus shifting to accelerating all parts of our mid and downstream business. We thought it would be a timely update.
Ryan Corbett: Turning to slide 7 and the Material Segment KPI. On the left side are our upstream KPIs, and on the right side are the KPIs for the midstream. On the far left, you can see another very strong quarter of REO production at 12,213 metric tons, up nearly 10% compared to last year's first quarter. This is virtually all driven by stronger recoveries from our upstream 60K projects, which Michael will provide some additional detail on shortly.
Speaker Change: Turning to slide nine we've broken our NDP, our cost of production into the fixed portion of costs in dark blue as well as the variable portion in light blue.
Speaker Change: I would note that these are all of the costs associated with making MVP, including upstream mining and Beneficiate costs.
Speaker Change: The bar on the left is where we are currently slightly north of an average of $60 per kilogram in the first quarter.
Ryan Corbett: As Jim mentioned, this was our second best quarter of production ever and our best first quarter on record. As we push more of that production through the midstream to make separated products, we have less REO to sell, driving the decline in concentrate sales volumes by nearly a third compared to last year. realized pricing did recover somewhat from last year and was up slightly from Q4 in line with our expectation. Moving to the right side of the slide, NDPR production volumes grew 36% sequentially, better than our expectations, and were up 330% compared to last year. Sales volumes followed the usual roughly one quarter lag in production at 464 metric As a reminder, with production volumes still at modest levels, and with a longer sales cycle for NDPR metal, the timing of shipments can significantly shift our sales volumes in a given quarterly period.
Speaker Change: This is at below 40% of our target production volumes on average for the quarter.
Speaker Change: As you can see on the right side.
Speaker Change: We believe that at normalized production, our target costs would be in the low $40 per kilograms with continued opportunity for improvement importantly.
Speaker Change: Importantly, note that as we've talked about recently the overwhelming driver of the decline is expected to be the fixed cost absorption from increasing production.
Speaker Change: And as we announced in mid April soon after coming out of the plant shutdown, we are exceeding 50% of our concentrate throughput being refined in the midstream circuits.
Speaker Change: And of course, we also expect some modest improvements inefficiencies on the variable side. Once we are consistently running at roughly 500 metric tons per quarter.
Ryan Corbett: And on the far right of the slide, you can see our realized pricing was in line with our outlook, roughly flat sequentially at $52 a kilogram, which was down 16% from last year, when overall market pricing was strong.
Speaker Change: One potentially material area for further improvement in our cost structure is via commissioning of the onsite Chlor alkali facility.
Speaker Change: We expect the first of three trains of Chlor alkali to come online next year, which we believe will be able to drive cost savings on chemical reagent inputs, which make up the significant majority of the variable costs, we have notionally highlighted on the slide.
Ryan Corbett: Moving to slide 8, material segment revenues increased 14%, driven by the 246% increase in NDPR oxide sales, as well as the 12% increase in REO realized pricing, partially offset by the 33% decline in REO sales volumes and the 16% decline in NDPR realized price. Note that because our REO realized pricing is on a much shorter lag versus the market compared to NDPR realized pricing, we had the somewhat unusual situation of a year-over-year increase in REO realized pricing while experiencing a year-over-year decline in NDPR. The longer lag in NDPR realized pricing is due in part to a longer sales cycle driven by our metallization efforts in Southeast Asia, as well as differing contractual arrangements for NDPR oxide and metal.
Speaker Change: And based on the track record of the team at Mountain pass I am confident they will continue to find ways to improve efficiency in ways. They haven't even thought of yet.
Lastly, I would point out that taking our initial cost estimates from 2020 and adjusting them for inflation and the significant change in market prices of our two primary variable inputs hydrochloric acid and caustic soda, which has increased nearly 80% net you to almost exactly our current expected.
Speaker Change: The run rate cost structure.
Speaker Change: While we have consistently noted no material deviations from those initial views safer inflation. This hopefully provides further clarity on why we have such confidence in being among the low cost producers of and EPR when we achieve our target throughput.
Ryan Corbett: Year over year segment adjusted EBITDA for the materials segment declined from $7.3 million to $3.8 million, mainly due to the lower sales of REO and the higher sales of NDPR oxide and metal. As I mentioned earlier, our production costs for separated products are temporarily elevated as we continue to ramp production levels towards our targeted throughput. Sequentially, the material segment adjusted EBITDA improved due to a $3.2 million lower inventory reserve in the current quarter compared to the fourth quarter, as well as continued improvement in efficiencies and NDPR production, including improved fixed cost absorption.
Speaker Change: Moving to the balance sheet.
Speaker Change: I wanted to point out a large increase in receivables in the quarter, which was driven by us achieving the final prepayment milestone and our Magnetics division during Q1, while the $50 million of cash was received post quarter on April one.
Speaker Change: Regardless Q1 is always our major working capital consumer as we pay out annual incentive compensation and renew various annual prepaid.
Ryan Corbett: Also impacting the comparison was a larger benefit in the fourth quarter from the Section 45x tax credit, which in part resulted from a favorable final rulemaking by the IRS in October of 2024. And lastly, moving to the right side of the slide, you see that the initial metal production for General Motors resulted in revenue of $5.2 million in the quarter and adjusted EBITDA of about half a million dollars.
Speaker Change: Such as property and casualty insurance.
Speaker Change: Further we have continued to invest in greater safety stock of key inventory items and also continued to increase the level of available inventory of oxide at tolling partners as demand for metal from our midstream business grows.
Speaker Change: Regarding our debt balance the small remainder of our 2026 notes were moved to current as they were technically convertible within the next year.
Ryan Corbett: We couldn't be more pleased with the dedication, effort and performance of the team at Independence, which Michael will discuss in more detail shortly. Looking at the outlook for our metal production at Independence, you will note that we now carry approximately $75 million of deferred revenues under our current liabilities, which by definition is our present expectation for revenues we will generate over the coming four quarters. So we expect materially improved revenues in Q2, eventually leveling out at roughly $20 million a quarter over the next 12 months.
Speaker Change: We anticipate paying these notes down with cash on hand.
Speaker Change: Looking at the $759 million in cash cash equivalents and short term investments balance as of March 31, as I. Just noted we have received an incremental $50 million on April one and still expect to receive another approximately $50 million in cash from our 2020 for tax credits.
Speaker Change: Turning to capital expenditures, our spend in the quarter was $35 million split approximately equally between the materials and magnetics divisions.
Ryan Corbett: And with that growth should come modestly improved EBITDA margins for the Before turning to the balance sheet, I wanted to give an update on our current expectations regarding our cost of production for NDPR oxide.
Speaker Change: We continue to target between $150 million and $175 million for the year for the company, including our heavy rare Earths separation project. The Chlor alkali re commissioning noted above.
Ryan Corbett: It has been several years since we outlined our high level expectations. And with our focus shifting to accelerating all parts of our mid and downstream business, we thought it would be a timely update. Turning to slide nine, we've broken our NDPR cost of production into the fixed portion of costs in dark blue, as well as the variable portion in light blue. I would note that these are all the costs associated with making NDPR, including upstream mining and beneficiation. The bar on the left is where we are currently slightly north of an average of $60 per kilogram in the first quarter.
Speaker Change: As well as the completion of independents.
Speaker Change: Specifically with regards to heavy birth separations, given the accelerating long term outlook for magnetics as you know mountain pass, while primarily a lightbearer ore body as one of the worlds largest sources of rare of contexts contains a significant amount of heavy rare Earths in fact.
Speaker Change: Right now we have over 200 tons on an Oreo basis of heavy work with concentrate stockpile of our initial year of separated product production.
Speaker Change: In partnership with the Department of Defense, we have been executing on a project to separate the contained dysprosium and <unk> in this heavy feedstock while designing the plan to also accept third party feedstocks from around the world to further bolster DIY in television production.
Ryan Corbett: This is at below 40% of our target production volumes on average for the quarter. As you can see on the right side, we believe that at normalized production, our target costs would be in the low $40 per kilogram with continued opportunity for improvement. Importantly, note that as we have talked about recently, the overwhelming driver of the decline is expected to be the fixed cost absorption from increasing production. And as we announced in mid-April, soon after coming out of the plant shutdown, we are exceeding 50% of our concentrate throughput being refined in the midstream circuit. And of course, we also expect some modest improvements in efficiencies on the variable side, once we are consistently running at roughly 1500 metric tons per quarter.
Speaker Change: We expect to bring the facility online next year and importantly, we have sufficient heavy birth feedstock now and as the plant comes online to enable the rapid scaling of our magnet business.
Speaker Change: As we look at the expansion of Magnetics beyond our initial independents capacity, which Jim mentioned in his opening we believe MP is best positioned to be the refiner of choice for heavy rich feedstocks, particularly as the railroad market further decoupled from China we.
Speaker Change: We have already invested significant capital in this effort in the vast majority of remaining spend is reflected in our current outlook for this year's capital expenditures net of government grants receivable.
Ryan Corbett: One potentially material area for further improvement in our cost structure is via commissioning of the onsite chloralkali. We expect the first of three trains of chloralkali to come online next year, which we believe will be able to drive cost savings on chemical reagent inputs, which make up the significant majority of the variable costs we have notionally highlighted on the slide. And based on the track record of the team at Mountain Pass, I am confident they will continue to find ways to improve efficiency in ways they haven't even thought of yet. Lastly, I would point out that taking our initial cost estimates from 2020 and adjusting them for inflation and the significant change in market prices of our two primary variable inputs, hydrochloric acid and caustic soda, which have increased nearly 80% net you to almost exactly our current expected run rate cost structure.
Speaker Change: With that let me turn the call over to Michael to go through our operations in a bit more detail Michael.
Speaker Change: Thanks Ryan.
Speaker Change: The materials segment had a good quarter.
Speaker Change: Upstream concentrate production was strong with improved recovery solid grade and good uptime.
Speaker Change: As alluded to in our last call in January we were hampered by somewhat poor settling and dewatering of concentrate in tailings that impacted throughput and uptime.
Speaker Change: This was in the range of normal process variability, though.
Speaker Change: The new upstream 60, K assets somewhat compounded the challenge we have since put the issues behind us.
Speaker Change: The quarter, we made further progress in those two previously commissioned upstream 60 K circuits for.
Speaker Change: For the quarter as a whole both generated positive impact.
Ryan Corbett: While we have consistently noted no material deviations from those initial views, save for inflation, this hopefully provides further clarity on why we have such confidence in being among the low cost producers of NDPR when we achieve our target moving to the balance I wanted to point out a large increase in receivables in the quarter, which was driven by us achieving the final prepayment milestone and our magnetics division during Q1, while the $50 million of cash was received post quarter on April 1st. Regardless, Q1 is always our major working capital consumer, as we pay out annual incentive compensation and renew various annual prepaid interest, such as property and casualty.
Speaker Change: About 30% of our feed is now passing through the first of these assets, which is generating 65% final grade and high recovery in one pass.
Speaker Change: The cyclone in screening circuit. The newer of the two is also largely stabilized and is contributing to improved recovery as well.
Speaker Change: Overtime, we expect a significant narrowing of our growing distribution and this will contribute to further improvements in mineral recovery and grade.
Speaker Change: We are working with the vendor of the screens to incorporate screening materials better suited to the fact that our concentrator operates on nearly 100% recycled water.
Speaker Change: Midstream circuits made significant progress in the quarter.
Speaker Change: I am pleased that we were able to sustain stronger uptime, while increasing throughput.
Ryan Corbett: Further, we have continued to invest in greater safety stock of key inventory items, and also continue to increase the level of available inventory of oxide at tolling partners as demand for metal from our midstream business growth. Regarding our debt balance, the small remainder of our 2026 notes were moved to current as they are technically convertible within the next year. We anticipate paying these notes down with cash on hand. Looking at the $759 million in cash, cash equivalents and short-term investments balance as of March 31st. As I just noted, we have received an incremental $50 million on April 1st and still expect to receive another approximately $50 million in cash from our 2024 tax credit.
Speaker Change: We did have a couple of short, though untimely unplanned maintenance interruptions in two primary circuits that impacted our overall midstream production.
Speaker Change: As we progressed through our ramp we expect these types of events to continue so hopefully to moderate in their impact and become less frequent.
Speaker Change: We experienced a similar pattern of issues during the ramp up of our upstream business in 2018 through 2019 on the way to achieving 93% or greater uptime and above nameplate throughput every year since.
Speaker Change: During the quarter, we achieved more stable roasting performance and improved <unk> yield and leach.
Speaker Change: We see incremental improvement in Q2 to date.
Ryan Corbett: Turning to capital expenditures, our spend in the quarter was $30.5 million, split approximately equally between the Materials and Magnetics Division. We continue to target between $150 million and $175 million for the year for the company, including our heavy rare earth separation project, the poor alkali recommissioning noted above, as well as the completion of independent Specifically, with regards to heavy-rare-earth separations, given the accelerating long-term outlook for magnetics, as you know, mountain paths, while primarily a light-rare-earth ore body, as one of the world's largest sources of rare-earth content contains a significant amount of heavy-rare-earths. In fact, right now, we have over 200 tons on an REO basis of heavy-rare-earth concentrate stockpiled from our initial year of separated product production.
Speaker Change: We also implemented adjustments and purification and separation.
Speaker Change: Have begun to help leverage reagent usage per unit of production.
Speaker Change: These gains will become more evident in Q2 and beyond.
Speaker Change: Mechanical issues and product, finishing have been a pain point.
Speaker Change: I will provide more detail in a moment, but we are expecting this to mitigate as we progress through 2025.
Speaker Change: At our independents Magnetics facility progress has been outstanding.
Speaker Change: As Jim mentioned, we began full commercial production of metal and expanded our production capability.
Speaker Change: We achieved extended periods of strong production with very high quality.
Speaker Change: Our teams continued to gain experience in operations and troubleshooting with further progress expected in production yield and conversion rate.
Speaker Change: The full scale strip casting equipment is running an increasing number of trial mills.
Speaker Change: Aided by developments in our prototype facility, we are working to improve fleet quality and micro structure in advance of additional scale equipment installation.
Ryan Corbett: In partnership with the Department of Defense, we have been executing on a project to separate the contained dysprosium and terbium in this heavy feedstock, while designing the plan to also accept third-party feedstocks from around the world to further bolster DY and TB production. We expect to bring the facility online next year. And importantly, we have sufficient heavy earth feedstock now and as the plant comes online to enable the rapid scaling of our magnet. As we look at the expansion of magnetics beyond our initial independence capacity, which Jim mentioned in his opening, we believe MP is best positioned to be the refiner of choice for heavy rich feedstocks, particularly as the rare earth market further decouples from China.
Speaker Change: In addition, our centering furnaces to support the 1000 metric ton initial capacity are now installed commissioned and running test blocks.
Speaker Change: And our prototype facility our technical teams are advancing our understanding of desired equipment operating parameters, while also producing prototype magnets with GBT for testing.
Speaker Change: Overall, it's been a whirlwind of activity.
Speaker Change: As it pertains to our outlook for Q2 and early April Melton past executed the first semiannual outage of 2025.
Speaker Change: With an expanded team of planners and ever improving coordination among planning maintenance projects and operations.
Ryan Corbett: We have already invested significant capital in this effort, and the vast majority of remaining spend is reflected in our current outlook for this year's capital expenditures net of government grants.
Speaker Change: This was executed well and in general the process, we started well.
Speaker Change: During the outage, we addressed an unusual number of equipment installation deficiencies that had held us back in product, finishing and has resulted in higher than acceptable ongoing maintenance and operational challenges.
Michael Rosenthal: With that, let me turn the call over to Michael to go through our operations in a bit more detail. Michael. Thanks, Ryan. The materials segment had a good quarter. Upstream concentrate production was strong, with improved recovery, solid grade, and good uptime. As alluded to in our last call, in January, we were hampered by somewhat poor settling and dewatering of concentrate and tailings that impacted throughput and uptime. This was in the range of normal process variability, though the new upstream 60k assets somewhat compounded the challenge. We have since put the issues behind us. Throughout the quarter, we made further progress in those two previously commissioned Upstream 60k circuits.
Speaker Change: The scope of the work and necessary inventory and re inventory being extended the resumption of normal operating cadence after the outage.
Speaker Change: Since then we are seeing significant improvement in performance with several key initiatives that will be addressed later this quarter.
Speaker Change: In all despite the extended outage, we believe we will record a slight increase in Q2 and DPR production versus Q1.
Speaker Change: We then plan for greater sequential progress in Q3.
Speaker Change: On the last call I mentioned material handling as one area of focus.
Speaker Change: In Q1 and during the April turnaround, we installed several upgrades at modest cost that appear to have made a big difference in these areas, particularly in concentrate roasting and lanthanum, finishing.
Michael Rosenthal: for the quarter as a whole, both generated positive impact. About 30% of our feed is now passing through the first of these assets, which is generating 65% final grade and high recovery in one pass. The cyclone and screening circuit, the newer of the two, has also largely stabilized and is contributing to improved recovery as well. Over time, we expect a significant narrowing of our grind distribution, and this will contribute to further improvements in mineral recovery and grade. We are working with the vendor of the screens to incorporate screening materials better suited to the fact that our concentrator operates on nearly 100% recycled water.
Speaker Change: As a result, we have been able to improve throughput and reduce product losses.
Speaker Change: There are several more material handling improvements planned, particularly in PID, finishing.
Speaker Change: As we address one issue, we often expose a new bottleneck.
An expectation of an acceleration in progress we are trying to get ahead of these issues in order to accelerate the trajectory of our ramp.
Speaker Change: In the upstream business in light of the current environment and our decision to halt shipments of concentrate to China. We are slightly adjusting our focus towards increasing concentrate grade and evaluating other means of improving best in site recovery versus the recovery of other rare earth bearing minerals.
Michael Rosenthal: Midstream circuits made significant progress in the quarter. I am pleased that we were able to sustain stronger uptime while increasing throughput. We did have a couple of short, though untimely, unplanned maintenance interruptions in two primary circuits that impacted our overall midstream production. As we progress through our ramp, we expect these types of events to continue, so hopefully to moderate in their impact and become less frequent. We experienced a similar pattern of issues during the ramp up our upstream business in 2018 through 2019 on the way to achieving 93% or greater uptime and above nameplate throughput every year since.
Speaker Change: We will also be trialing reagents could improve our recycled water quality and support higher grade.
Speaker Change: Both of these initiatives may have some short term impact on operations.
Speaker Change: Spite this in Q2, we look forward to significant year over year growth in upstream production on an easy comparison with stable sequential output per operating hour.
Speaker Change: Similarly, we are not abandoning our efforts to optimize our concentrate production and resource usage.
Speaker Change: For the upstream 60, K initiative, we will re prioritize certain investments that have ancillary benefit of improving the performance of our midstream operation.
Michael Rosenthal: During the quarter, we achieved more stable roasting performance and improved NDPR yield in leach. We see incremental improvement in Q2 to date. We also implemented adjustments in purification and separation that have begun to help leverage reagent usage per unit of production. These gains will become more evident in Q2 and beyond.
Speaker Change: This two focuses on concentrate grade as well as the isolation of certain more challenging impurities.
Speaker Change: Overall, our teams at all sites are energized by the opportunity and the interest brought about by the current environment.
And I appreciate the hard work and additional sacrifices of many as we work to accelerate our progress.
Michael Rosenthal: Mechanical issues in product finishing have been a pain point. I will provide more detail in a moment, but we are expecting this to mitigate as we progress through 2025. At our Independence Magnetics Facility, progress has been outstanding. As Jim mentioned, we began full commercial production of metal and expanded our production capability. We achieved extended periods of strong production with very high quality. Our teams continue to gain experience in operations and troubleshooting, with further progress expected in production yield and conversion rates. The full scale strip casting equipment is running an increasing number of trial mills. Aided by developments in our prototype facility, we are working to improve flake quality and microstructure in advance of additional scale equipment installation.
Jim: With that I will turn it back to Jim.
Jim: Thanks, Michael.
Jim: Let me summarize things.
Jim: This past month validated the strategy, we have pursued since founding.
Jim: To build a fully integrated rare earth supply chain that supports American industry and security.
Jim: We delivered record and DPR oxide production at <unk>.
Jim: <unk>, our first on spec metal production for Jim and turned EBITDA positive and our Magnetics Division and our ramp is just beginning.
Jim: We have reached an inflection point geopolitically.
Speaker Change: Geopolitically commercially and industrially.
Speaker Change: And MP is now well positioned as the national champion and rare Earth Magnetics.
Speaker Change: With intensifying engagement from both government and industry and our execution already underway, we are transforming from a producer into a pillar of American industrial resilience.
Michael Rosenthal: In addition, our sintering furnaces, to support the 1000 metric ton initial capacity, are now installed, commissioned, and running test blocks. In our prototype facility, our technical teams are advancing our understanding of desired equipment operating parameters, while also producing prototype magnets with GBD for testing.
Speaker Change: With that let's open the call for questions operator.
Speaker Change: Thank you.
Speaker Change: At this time, if you would like to ask a question. Please click on the right hand button, which can be found on the black bar at the bottom of your screen.
Michael Rosenthal: Overall, it's been a whirlwind of activity. As pertains to our outlook for Q2, in early April, Mountain Pass executed the first semi-annual outage of 2025. With an expanded team of planners and ever-improving coordination among planning, maintenance, projects, and operations, this was executed well, and in general, the process restarted well. During the outage, we addressed an unusual number of equipment installation deficiencies that had held us back in product finishing and had resulted in higher than acceptable ongoing maintenance and operational challenges. The scope of the work and necessary de-inventorying and re-inventorying extended the resumption of normal operating cadence after the outage.
Speaker Change: It is your turn you will receive a message on your screen from the host, allowing US talk and then you will hear your name called.
Speaker Change: Please except on mute.
Speaker Change: And ask your question.
Speaker Change: One moment to allow the acute form.
Speaker Change: Our first question will come from David <unk> with TD Cowen.
Emilio: Please emilio.
Speaker Change: And ask your question.
Speaker Change: Thanks, everyone and I appreciate you guys, taking my questions today.
Speaker Change: Jim perhaps for you I think you highlighted.
Speaker Change: Given the backdrop of what's happening now globally.
Speaker Change: You were talking to more partners out there.
Michael Rosenthal: Since then, we are seeing significant improvement in performance, with several key initiatives that will be addressed later this quarter. In all, despite the extended outage, we believe we will record a slight increase in Q2 NDPR production versus Q1. We then plan for greater sequential progress in Q3.
Speaker Change: I'm interested in just some additional details there you are.
Obviously, you are not sure on capital right now.
Speaker Change: When you think about ways that partners might be able to help you accelerate your business or look at other opportunities or shoring up other parts of your supply chain.
Michael Rosenthal: On the last call, I mentioned material handling as one area of focus. In Q1 and during the April turnaround, we installed several upgrades at modest cost that appear to have made a big difference in these areas, particularly in concentrate roasting and lanthanum finishing. As a result, we have been able to improve throughput and reduce product loss. There are several more material handling improvements planned, particularly in PR&D finishing. As we address one issue, we often expose a new bottleneck. In expectation of an acceleration in progress, we are trying to get ahead of these issues in order to accelerate the trajectory of our ramp.
Speaker Change: What are you seeing sort of the most white space for MPD create value here.
Speaker Change: Hey, David So hopefully you appreciated the words freak out.
Speaker Change: The song of course.
Speaker Change: Ashish.
Speaker Change: Yes, yes.
Speaker Change: I mean, that's really the best way to describe it. This has been I think postal Liberation day has been one of the busiest months of all of our lives.
Speaker Change: Industry layers government, we're talking to government on pretty much a daily basis and it's.
Speaker Change: The cutoff. This idea that there was a threat that has now been utilized.
Speaker Change: Has really changed psychology, I think from everybody.
Speaker Change: Across the board.
Michael Rosenthal: In the upstream business, in light of the current environment and our decision to halt shipments of concentrate to China, we are slightly adjusting our focus towards increasing concentrate grade and evaluating other means of improving basmasite recovery versus the recovery of other rare earth-bearing minerals. We will also be trialing reagents to improve our recycled water quality and support higher grades. Both of these initiatives may have some short-term impact on operations. Despite this, in Q2, we look forward to significant year-over-year growth in upstream production on an easy comparison with stable sequential output per operating hour. Similarly, we are not abandoning our efforts to optimize our concentrate production and resource usage.
Speaker Change: And so I think there is there is frankly a lot of confusion in the supply chain.
Speaker Change: I mean, we will see what happens in Switzerland, This weekend, but.
Speaker Change: Theres talk of potential.
Speaker Change: Potential shutdowns I think you've heard Ford mentioned rarest specifically on their call Tesla mentioned it.
Speaker Change: Pretty much every household name that you could think of in auto in defense.
Speaker Change: We've had sort of some contact or another or visits it's really been quite remarkable.
Speaker Change: And and obviously sort of validating to the.
Speaker Change: The approach that we've had the whole time to be vertically integrated and really focus on bringing this capability back.
Speaker Change: To answer your question specifically.
Speaker Change: The point I wanted to make on that is that if you look at all of these conversations.
Michael Rosenthal: For the Upstream 60K initiative, we will reprioritize certain investments that have ancillary benefit of improving the performance of our midstream operation. This too focuses on concentrate grade as well as the isolation of certain more challenging impurities. Overall, our teams at all sites are energized by the opportunity and the interest brought about by the current environment, and I appreciate the hard work and additional sacrifices of many as we work to accelerate our progress.
Speaker Change: The key question is is how can you how can you do this faster how can you accelerate this.
Speaker Change: Everyone everyone wants.
Speaker Change: US to go faster.
Speaker Change: And the point that we like to make is that we've invested a lot of capital.
Speaker Change: And we've taken a lot of risk in now.
Speaker Change: We're in a much better place I think thanks to the efforts of M. P.
Speaker Change: And any additional capital that we put to work I mean, we've always had as you know a pretty high threshold.
James Litinsky: With that, I will turn it back to Jim.
James Litinsky: Thanks, Michael. Let me summarize things. This past month validated the strategy we have pursued since founding MP to build a fully integrated rare earth supply chain that supports American industry and security. We delivered record NDPR oxide production. achieved our first on-spec metal production for GM, and turned EBITDA positive in our Magnetics Division. And our ramp is just beginning. We have reached an inflection point, geopolitically, commercially, and industrially, and MP is now well positioned as the national champion in rare earth magnetics. With intensifying engagement from both government and industry and our execution already underway, we are transforming from a producer into a pillar of American industrial resilience.
Speaker Change: For return on capital to kind of put downstream capital to work, but as we do that particularly to the extent that we were to go faster we expect.
Speaker Change: Scaled commitments.
Speaker Change: Or obviously, there is a variety of ways to get there with respect to commitments and other capital in so.
Speaker Change: The takeaway that I think you should take from that is that I.
Speaker Change: I think that the.
Speaker Change: The validation and the supply chain should lead to to the extent that we are putting incremental capital to work. The returns are going to be pretty extraordinary or we're not going to put the capital to work. So.
Speaker Change: So we feel really good we feel really good about the dialogue, obviously, we'll just be cautious and thoughtful about.
Speaker Change: What steps, we take and again, we don't want to take on anything that we don't think we can execute but I will say again aside from the fire hose aspect of it is really exciting.
Speaker Change: <unk>.
Unknown Executive: With that, let's open the call for questions.
Speaker Change: Historic times.
Speaker Change: But just as a follow up.
Unknown Executive: Operator? Thank you.
Speaker Change: I'd be interested just how you all are thinking about the heavy as you pointed out you want to bring your own your own separation circuit next year.
Unknown Executive: At this time, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk and then you will hear your name called. Please accept, unmute your audio and ask your question.
Speaker Change: How do you think about managing that heavy supply chain vis vis independence.
Speaker Change: Obviously successfully sold some mechanize precursor, but how do you think about managing that speed as you move toward <unk>.
Speaker Change: Permanent magnets towards the end of the year.
Ryan: Yeah, Hey, David It's Ryan it's a good question.
Unknown Executive: We will wait one moment to allow the queue to form.
Ryan: Talked about obviously the precursor of sales already beginning and then moving into commercial production at the end of the year as you can probably see and obviously you don't give the detail that I do on the balance sheet, but we've been.
David Deckelbaum: Our first question will come from David Deckelbaum with TD Cowan. Please unmute your audio and ask your question. Thanks, everyone. And I appreciate you guys taking my questions today. Jim, perhaps for you, I think, you know, you highlighted just given the backdrop of what's happening now globally, you're talking to more partners out there. You know, I'm interested in just some additional details there. You know, you obviously are not short on capital right now.
Ryan: We've been very thoughtful about this risk for a very long time.
Ryan: About the potential for heavy births.
Ryan: Becoming an issue and so what I'd say is we got ahead of the issue and we have.
Ryan: The relevant amount of material stockpile to supply ourselves for startup of the independents facility and then obviously, Michael and his team are executing rapidly to bring our own.
James Litinsky: When you think about ways that partners might be able to help you accelerate your business or look at other opportunities, or shoring up other parts of your supply chain, where do you see sort of the most white space for MP to create value here? Hey David. So hopefully you appreciated the words freak out from the song. Of course. It's chic. Yes, yes. I mean that's really the best way to describe it.
Ryan: <unk> and operations online to be able to produce from the mountain pass or.
Ryan: I think the other thing that we're seeing.
Ryan: That that Jim laid out well is with the increased focus on.
Ryan: The industry.
Ryan: I think a further appreciation for what mountain what mountain pass brings to the table as a potential refiner of choice globally for other heavy rich feedstocks. The fact that we've got the baseline production of.
James Litinsky: This has been, I think, post liberation day has been one of the busiest months of all of our lives. You know, industry players, government, we're talking to government on pretty much a daily basis. And it's, you know, the cut off this idea that there was a threat that has now been utilized, has really changed psychology, I think, from everybody across the board. And so I mean, I think there's, there's, frankly, a lot of confusion in the supply chain. And, and obviously, you know, sort of validating to the, the approach that we've had the whole time to be vertically integrated and really focused on bringing this capability back to answer your question specifically, you know, the, the point I wanted to make on that is that if you look at all these conversations.
Ryan: The significant.
Ryan: <unk> that we've got from our own.
Ryan: Mine allows us to be probably the most flexible buyer of potential third party feedstock to refine and bring into the fold in the United States and potentially for ourselves.
Ryan: The other part of their state you hear a lot of sort of pinpoint solutions to some of these problems, but I think the great thing about our integrated strategy also is the ability to recycle.
Ryan: And so with independents and with incremental focus on interest rates. We believe recycling is another pretty significant potential source of incremental heavy feedstock and so.
Ryan: Suffice to say, we feel good about where we're positioned right now and.
Ryan: And where that could lead us for the future of independents.
Ron: Thanks, Ron.
Ryan: Thanks, guys.
Thanks, David.
Speaker Change: Our next question will come from Bill Peterson with Jpmorgan. Please go ahead with your question.
Speaker Change: Yes, hi, good afternoon, thanks for taking the questions and providing all the details.
James Litinsky: You know, the key question is, is how can you, how can you do this faster, how can you accelerate this, you know, everyone, everyone wants us to go faster. And the point that, you know, we, we like to make is that we, we've invested a lot of capital. And we've taken a lot of risk and now we've, we were in a much better place I think thanks to the efforts of MP, and any additional capital that we put to work and we've always had as you know a pretty high threshold for return on capital to kind of put So, I, the takeaway that I think you should take from that is that.
Speaker Change: Wanted to ask about stage, two and your ability to push more product in there recognize that Mike will provide a lot of color on the efforts youre, making to improve efficiencies and throughput and so forth, but how should we think about your production and sales volume in the second quarter and into the back half of the year.
Speaker Change: Just basically in what areas have you been able to kind of increase your net.
Speaker Change: So we're putting utilization.
Speaker Change: Thanks Bill.
Speaker Change: As mentioned, we are targeting to increase production in Q2 versus Q1, despite the outage and some other events.
Speaker Change: And then wed expect further growth in Q3, but without having a scheduled outage and.
Speaker Change: But beyond that for the foreseeable future that suggests that the trajectory of growth should at least.
Speaker Change: Proceed along the lines that we've seen historically.
Speaker Change: Unfortunately, Joe anything could happen any day, so it's hard to give a longer term prediction, but we're really optimistic that the process is working the chemistry was working and it's just.
James Litinsky: I think that the validation and the supply chain should lead to to the extent that we are putting incremental capital to work, the returns are going to be pretty extraordinary, or we're not going to put the capital to work. So we feel really good, we feel really good about the dialogue. Obviously, we'll just be cautious and thoughtful about, you know, what steps we take. And again, you know, we don't want to take on anything that we don't think we can execute.
Speaker Change: A matter of execution and working through that.
Speaker Change: There will be issues.
Speaker Change: Towards reaching our ultimate targets.
Speaker Change: Yes, thanks for that and this is somewhat of an industry question, but also I think Chris maybe part of your own development efforts, but what are your thoughts on christine or eliminating or eliminating the use of having as many how should we think about content and maybe the vehicles today versus.
James Litinsky: But I will say again, you know, aside from the the firehose aspect of it, it's really exciting. Absolutely. Historic times.
Ryan Corbett: But just as a follow up, I'd be interested just how you all are thinking about the heavies you pointed out you want to bring on your own separation circuit next year.
Speaker Change: Versus robotics and other areas.
Speaker Change: Can you just kind of what are your expectations about lowering of content and what are you doing specifically in terms of kind of drifting within your own development efforts.
Ryan Corbett: How do you think about managing that heavy supply chain vis-a-vis independence? You obviously successfully sold some magnetic precursor, but how do you think about managing that feed as you move toward permanent magnets towards the end of the year?
Speaker Change: Thanks Bill.
This is Jim that's obviously been.
Speaker Change: A topic that we've had since the very beginning since we built the magnetics business.
Speaker Change: We have over 100 people in the magnetics business today.
Speaker Change: You've seen that facility, we have 40 engineers in really from day, one we've had a team working on formulations IP thinking about how we get to where we want to get and obviously, we're now making auto grade magnets, which are the hardest ones to make and so.
Ryan Corbett: Yeah, hey, David, it's Ryan. It's a good question. You know, we've talked about, obviously, the precursor sales already beginning, and then moving into commercial production at the end of the year. As you can probably see, and obviously, you don't get the detail that I do on the balance sheet, but we've been, we've been very thoughtful about this risk for a very long time, about the potential for heavy rare earths, you know, becoming an issue. And so what I'd say is, you know, we got a head of the issue, and we have the relevant amount of material stockpiled to supply ourselves for startup of the independence facility.
Speaker Change: Suffice to say that I think we've generated a central repository of some pretty extraordinary IP and knowledge and you can imagine that quite a bit of that focus is on the concept of thrift ing and reduction and obviously depending on the use case.
Speaker Change: The the heavies can be lesser or more in the case of say robotics and drones it might be less than say auto.
Ryan Corbett: And then obviously, Michael and his team are executing rapidly to bring our own facility and operations online, to be able to produce from the mountain pass ore. I think the other thing that we're seeing, you know, that Jim laid out well is with the increased focus on the industry, I think a further appreciation for what mountain pass, what mountain pass brings to the table, as a potential refiner of choice globally for other heavy rich feedstocks. The fact that we've got the baseline production of, you know, the significant, you know, ore feed that we've got from our own, you know, mine, allows us to be probably the most flexible buyer of potential third party feedstock to refine and bring into the fold in the United States and potentially for ourselves.
Speaker Change: The last thing I would say in <unk>.
Speaker Change: Touching upon something Ryan mentioned at the end of what he said that does sort of tie into this whole issue of material is just the inherent advantage that we have with the ability to have the vertically integrated assets and recycling and so the fact that we can take swarf.
Speaker Change: And.
Speaker Change: Obviously eventually when we're fully normalized we've got a lot to do to kind of ramp everything up but the fact that we have the ability to input material back into our process is an enormous advantage I mean, particularly now I think with this issue being so topical rare Earth magnetics, and I think youll see probably a number of of up starts out there trying to form capital.
Speaker Change: And we wish them all well, we hope we hope a number of successful, but I have to say I find it really difficult to see how a standalone producer can succeed relative to somebody who's vertically integrated when you think about <unk>.
Ryan Corbett: And, you know, the other part of this that, you know, you hear a lot of sort of pinpoint solutions to some of these problems. But I think the great thing about our integrated strategy also is the ability to recycle. And so with independence, and, you know, with incremental focus on the industry, I believe recycling is another pretty significant potential source of incremental heavy feedstock. And so, you know, suffice to say, we feel good about where we're positioned right now. And, you know, where that could lead us for the future.
Speaker Change: In the case of.
Speaker Change: Typical auto application you may have 20 or 30% of the material in the finishing process is cut and sometimes in the case of consumer electronics like a smartphone be more than half.
Speaker Change: Of the material falls off the production line as youre, finishing at or somewhere in the process and so our ability to kind of think holistically about.
Speaker Change: The business the use of material from one from an IP heavy standpoint, all the way downstream, but all the way really from the resource through downstream.
Speaker Change: And figure out how to maximize throughout the process. We think is just an inherent advantage to our vertical integration that.
Ryan Corbett: Thanks, Ryan.
Unknown Executive: Thanks, guys.
William Peterson: Our next question will come from Bill Peterson with J.P. Morgan. Please go ahead with your question. Yeah, good afternoon. Thanks for taking the questions and providing all the details.
Speaker Change: Again allows us to be hopefully over time substantially low cost than anybody else, but but frankly able to survive in a very competitive landscape, where others are just sort of structurally on economic.
William Peterson: I wanted to ask about stage two and your ability to push more product in there. I recognize that Michael provided a lot of color on the efforts you're making to improve efficiencies and throughput and so forth. But how should we think about your production and sales volume in the second quarter and into the back half of the year? Just basically what areas you've been able to kind of increase your, your, your throughput and utilization? Thanks, Bill. As, as mentioned, we are targeting to increase production in Q2 versus Q1, despite the outage and some other events.
Speaker Change: Yes, Thanks, Jim Michael for sharing insights and good luck navigating the SaaS some curious environment.
Speaker Change: Thanks, Bob.
Speaker Change: Our next question comes from Laurence Alexander with Jefferies. Please go ahead with your question.
Laurence Alexander: So good afternoon could you touch on two things. So one is your working capital needs for the balance of the year and as you ramp up and how that ties into your views on what is the appropriate minimum cash balance in this environment and second is have you had.
Michael Rosenthal: And then we'd expect further growth in Q3, without having a scheduled outage. Beyond that, for the foreseeable future, I'd suggest that the trajectory of growth should at least proceed along the lines that we've seen historically. Unfortunately, anything can happen any day, so it's hard to give a longer term prediction, but we're really optimistic that the process is working, the chemistry is working, and it's just a matter of execution and working through the issues. um you know towards reaching our ultimate target.
Laurence Alexander: Any are you seeing any real shift in automaker discussions.
Laurence Alexander: In terms of somebody else coming in to help you scale up.
Laurence Alexander: And in your priority of negotiations your overall return on capital is it to get capsule to help.
Laurence Alexander: Fund a ramp can you just give a sense for.
Laurence Alexander: What's your relative priorities might be.
Laurence Alexander: Sure Hey, Laurence it's Brian.
Speaker Change: I think an important thing to keep in mind in terms of where we sit today in our growth plan and from a balance sheet perspective is if you look at sort of the state of our various growth projects. We're really entering the harvesting mode of what has been a pretty significant.
William Peterson: Yeah, thanks for that. And this is somewhat of an interesting question.
William Peterson: But also, I think, maybe part of your own development efforts, but what are your thoughts on thrifting or limiting or eliminating the use of heavies? Maybe how should we think about content and maybe the vehicles today versus, versus robotics and other areas? You just kind of what are your expectations about lowering the content? And what are you doing specifically in terms of kind of thrifting within your own development efforts? Yeah, thanks, Bill.
Speaker Change: Out of investment over the last several years and so with that and with the fact that we are accelerating pretty rapidly as Michael touched on our midstream production.
James Litinsky: And this is Jim, that's obviously been in, you know, a topic that we've had since the very beginning, since we built the magnetics business. You know, we have over 100 people in the magnetics business today. You know, you've seen that facility, we have 40 engineers, and really, from day one, we've had a team working on formulations, IP, thinking about how we, you know, get to where we want to get. And obviously, we're now making autograde magnets, which are the hardest ones to make. And so suffice to say that, I think we've generated a central repository of some pretty extraordinary IP and knowledge.
Speaker Change: Sure.
Speaker Change: Sales of concentrate which insurers where this question is coming from from a working capital perspective, we're always going to be a smaller and smaller part of the business and I think it's easy enough for everyone to sort of model out our cost of production there and assume assume we don't sell any con until we're fully ramped up.
Speaker Change: This is a pretty small working capital use that we view really as that.
Speaker Change: As something that was sort of an inevitability as we continue to scale our.
James Litinsky: And you can imagine that quite a bit of that focus is on the concept of thrifting and reduction. And obviously, depending on the use case, you know, the heaviest can be, you know, less or more, in the case of, say, robotics and drones, it might be less than, say, auto. The last thing I would say, and touching upon something Ryan mentioned at the end of what he said, that does sort of tie into this whole issue of material, is just the inherent advantage that we have with the ability to have the vertically integrated assets and recycling.
Scaled the business and so.
Speaker Change: Even the state of our balance sheet, which remains incredibly strong.
Speaker Change: We're not thinking remotely in terms of.
Speaker Change: Minimum cash I think we have ample cash on the balance sheet.
Speaker Change: Which would be further supported by some of the things I laid out.
Speaker Change: In my prepared remarks regarding.
Speaker Change: <unk> prepayments from.
Speaker Change: Our foundational customer as well as another $50 million coming from our tax credits from from 2024.
Speaker Change: Which we expect to continue to be a source of cash on a go forward basis. So we continue to feel very comfortable.
James Litinsky: And so the fact that we can take SWRF, and, you know, obviously, eventually, when we're fully normalized, we've got a lot to do to kind of ramp everything up. But the fact that we have the ability to input material back into our process is an enormous advantage. I mean, particularly now, I think when, with this issue being so topical, rare earth magnetics, and I think you see probably a number of upstarts out there trying to form capital, and we wish them all well, we hope a number are successful. But I have to say, I find it really difficult to see how a standalone producer can succeed relative to somebody who's vertically integrated.
Speaker Change: From that perspective.
As it relates to your second question on <unk>.
What is our priority and every single deal is different.
Speaker Change: The analogy of drinking from a fire hose I think was a pretty after one that Jim mentioned.
Speaker Change: The desire from a pretty wide swath of names you would know that want to see us in production yesterday from our magnetics perspective is pretty large and so.
Speaker Change: Every single deal is different I think what we're prioritizing is capitalizing on what feels like a real sort of generational opportunity to make this business. Many multiples of its current size and so that may come in various forms and I think how Jim laid it out in terms of.
James Litinsky: When you think about, you know, in the case of a typical auto application, you may have 20 or 30% of the material in the finishing process is cut. And sometimes in the case of consumer electronics, like a smartphone, it'd be more than half of the material falls off the production line as you're finishing it, or, you know, somewhere in the process. And so our ability to kind of think holistically about the business, you know, the use of material from a one from an IP heavy standpoint, all the way downstream, but all the way, really, from the resource through downstream, and figure out how to maximize throughout the process, we think it's just an inherent advantage to our vertical integration that, you know, again, allows us to be, hopefully, over time, substantially low cost than anybody else, but, but frankly, able to survive in a very competitive environment.
Speaker Change: We've done the hard work already there is a lot more hard work to come but I think the amount of capital that we put to work we expect to see a pretty significant commitments from industry and government alongside us to continue to accelerate this.
Speaker Change: Yeah, and I'll just touch on that I referenced this in one of the.
Speaker Change: And one of the earlier questions, but I just want to make sure people understand this point as we think about what's happening.
Speaker Change: In the trade war, obviously, theres sort of tariffs both ways, but.
Speaker Change: They are.
Speaker Change: As it stands right now and of course this could all change tomorrow, but there.
Speaker Change: Pretty much going back to the beginning.
Unknown Executive: Yeah, thanks, Jim and Michael for sharing insights and good luck navigating the fast and furious environment. Thanks, Ben.
Speaker Change: April rare Earth magnets are not leaving China.
Speaker Change: This is an enormous source of leverage.
Lawrence Alexander: Our next question comes from Lawrence Alexander with Jeffreys.
Speaker Change: Against against our government and so this is a key national security industry, and so irrespective of which way. This goes and obviously, we hope that the world evolves.
Lawrence Alexander: Please go ahead with your question. So good afternoon. Could you touch on two things?
Lawrence Alexander: One is your working capital needs for the balance of the year, and as you ramp up and how that ties into your views on what is appropriate minimum cash balance in this environment. And second is, have you had any, are you seeing any real shift in automaker discussions in terms of somebody else sort of coming in to help you scale up? And is your priority in negotiations your overall return on capital? Is it to get capital to help fund a ramp?
Speaker Change: Software constructive way, that's that's great for America, and good for everyone, but rigor.
Speaker Change: Regardless of how this goes this is a point that.
Speaker Change: Can no longer be on the table I think there is a.
Speaker Change: Again, we speak to the government pretty much on a daily basis and I think there is widespread recognition that this issue must be taken off the table going forward and so.
Speaker Change: The scale of what needs to happen.
Speaker Change: It's pretty pretty remarkable and we are.
Ryan Corbett: Can you just give a sense for what your relative priorities might be? Sure. Hey, Lawrence, it's Ryan. You know, I think an important thing to keep in mind in terms of where we sit today, in our growth plan, and from a balance sheet perspective is, if you look at sort of the state of our various growth projects, we're really entering the harvesting mode of what has been a pretty significant amount of investment over the last several years. And so, you know, with that, and with the fact that we're accelerating pretty rapidly, as Michael touched on, our midstream production, you know, our, you know, sales of concentrate, which I'm sure is where you know, this question is coming from, from a working capital perspective, we're always going to be a smaller and smaller part of the business.
Speaker Change: The National champion here I mean, we are.
Speaker Change: Thanks to us were years and billions ahead.
Speaker Change: The question is just how we can sort of lead that effort and to do something like that our expectation is that this should be rewarding for our shareholders.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Our next question will come from Matt Summerville with D. A Davidson. Please go ahead video question.
Speaker Change: Yes, excuse me thank you.
Speaker Change: I wanted to just putting aside for a second.
Speaker Change: To help you might get from industry or government are you running I want to make sure I understand is are you running a different stage two playbook.
Speaker Change: Day or different magnetics ramp play book today in order to as you put it in your press release from a couple of weeks ago accelerate that stage two capacity or that.
Ryan Corbett: And, you know, I think it's, it's easy enough for everyone to sort of model out our cost of production there. And, you know, assume, assume we don't sell any con until we're fully ramped. I mean, this is a pretty small working capital use that we view, you know, really as that, and as something that was sort of an inevitability, as we continue to scale, scale the business. And so, you know, given the state of our balance sheet, which remains incredibly strong, you know, we're not thinking, you know, remotely in terms of, you know, minimum cash, I think we have, you know, ample cash on the balance sheet, you know, which would be further supported by some of the things I laid out, in my prepared remarks regarding prepayments from our foundational customer, as well as another $50 million coming from our tax credits from from 2024, you know, which we expect to continue to be a source of cash on a go forward basis.
Speaker Change: Stage, two ramp and fast track magnets I guess I'm trying to understand is the operational playbook evolved in the last month.
Michael Rosenthal: This is Michael.
Michael Rosenthal: I'd say in general we've been trying to ramp as quickly as possible at the margin however, with what's.
Michael Rosenthal: Going on and we are the.
Michael Rosenthal: So refocusing all of the operations too.
Michael Rosenthal: Maximize and optimize the ability to ramp the midstream assets.
Michael Rosenthal: So at the margin focusing on our concentrate production that best supports.
Michael Rosenthal: The midstream operation, but in general basically the same.
Michael Rosenthal: For the magnetic business I think it's it's business as usual, although thinking more about what.
Michael Rosenthal: As we can.
Michael Rosenthal: The leverage existing capacity or think about.
Michael Rosenthal: Capacity expansion might look as we've talked about within the existing footprint or or outside of it.
Ryan Corbett: So we continue to feel very comfortable from that perspective. As it relates to your second question on, you know, what is our priority, every single deal is different. You know, the the analogy of drinking from a firehose, I think was a pretty apt one that you mentioned, you know, the desire from a pretty wide swath of names, you would know that, you know, want to see us in production yesterday from a magnetics perspective is, is pretty large. And so, you know, every single deal is different. And I think what we're prioritizing is capitalizing on what feels like a real sort of generational opportunity to make this business many multiples of its current size.
Michael Rosenthal: Thanks, and then I just want to be clear relative to a prior question on the heavy side of things.
Is there a certain intersection if you will that you have to get to between how the magnetics facility ramps and how youre stage to separation.
Michael Rosenthal: Or excuse me your heavy separation.
Michael Rosenthal: Duration ramps such that you can remain sort of self sufficient for somewhat of an extended period of time or are you out kind of actively shopping in the actively looking to stockpile either spent magnets or other third party feedstock because that would mean to Jim's point earlier.
Speaker Change: Magnus are leaving China, I imagine, there's probably not a lot of heavy or.
Ryan Corbett: And so, you know, that may come in various forms. And I think how Jim laid it out in terms of, you know, we've done the hard work. Already, there's a lot more hard work to come. But, you know, I think the the amount of capital that we've put to work, you know, from, you know, industry and or government alongside us to continue to accelerate. This is an enormous source of leverage, you know, against our government. And so, this is a key national security industry. And so, irrespective of which way this goes, and obviously we, you know, we hope that the world evolves in, you know, in a thoughtful, constructive way that's great for America and good for everyone, but regardless of how this goes, this is a point that can no longer be on the table.
Speaker Change: Refining refined heavy leaving China, either although I could be mistaken.
Speaker Change: Yeah, Matt It's Ryan to clarify we are in a position to be self sufficient as it stands.
Speaker Change: Got in ahead of this issue and have the.
Speaker Change: The required feedstock and required and products from our heavy rock perspective to continue to scale independent on the schedule that we've anticipated.
Got it thanks for the clarification.
Speaker Change: Okay.
Speaker Change: Thanks, Matt.
Speaker Change: Our next question will come from Benjamin <unk> with Baird. Please go ahead with your question.
Speaker Change: Hey, guys. Thanks for taking my question.
Speaker Change: How do you guys think about.
Speaker Change: Since the time lines.
Speaker Change: You are prioritizing.
Speaker Change: Government.
Speaker Change: Industry lots of different options, but.
Speaker Change: How fast do you think solar stuff moves and.
Speaker Change: I think someone asked earlier.
Speaker Change: Stage, one two or three.
Speaker Change: Do you think.
Speaker Change: You would.
Speaker Change: Investment or partnership where that would occur.
Speaker Change: Paul.
Speaker Change: Hey, Ben it's Ryan.
Speaker Change: I think to your last part of the question, where where do we see opportunity.
Ryan Corbett: I think there's a, and again, we speak to the government pretty much on a daily basis. And I think there is widespread recognition that this issue must be taken off the table going forward. And so, the scale of what needs to happen is pretty, you know, pretty remarkable. And you know, we are the national champion here. I mean, we are, you know, thanks to us, we're years and billions ahead. And you know, the question is just how we can sort of lead that effort and to do something like that.
Speaker Change: I think what we've seen in this environment over the last month or so has been incredibly validating of the vertical integration strategy that we pursued.
Speaker Change: Over the last several years right.
Speaker Change: Important for us to continue to support a diverse magnetics industry, both in the United States and globally, but really what we are seeing a massive acceleration in interest in is having magnetics true magnet capacity in the United States at scale.
Ryan Corbett: You know, our expectation is that it should be rewarding for our shareholders. Thank you.
Speaker Change: Something that we have always said is an imperative for industry, an imperative for national security and so the level of interest there is light frankly, nothing I have ever seen before so we will continue to be extremely thoughtful they're on.
Matt Somerville: Our next question will come from Matt Somerville with DA Davidson. Please go ahead with your question. Yeah, excuse me. Thank you. I wanted to just putting aside for a second, you know, quote help you might get for from industry or government.
Speaker Change: How and when.
Matt Somerville: Are you running? I want to make sure I understand this.
Speaker Change: It's very hard to give you.
Michael Rosenthal: Are you running a different stage two playbook today or different magnetics ramp playbook today, in order to as you put it in your press release from a couple weeks ago, accelerate that stage two capacity or the that stage two ramp and fast track magnets? I guess I'm trying to understand his the operational playbook evolved in the last month.
Speaker Change: Perfect timeline, but.
Speaker Change: For context Magnetics was an idea on a piece of paper in 2020.
Speaker Change: We made our first hire in 2021 ground on a state of the art facility in 2022 and here. We are in May of 2025, and we even EBITDA positive business. So from that perspective, I think we've got a pretty good track record of going fast when were going Greenfield.
Michael Rosenthal: Hi, this is Michael. I would say, in general, we've been trying to ramp as quickly as possible. At the margin, however, with what's going on, we are refocusing all of the operation to maximize and optimize the ability to ramp the the midstream assets. So at the margin focusing on our concentrate production that best supports the midstream operation, but in general, basically the same. For the magnetics business, I think it's business as usual, although thinking more about what ways we can leverage existing capacity or think about how capacity expansion might look, as we talked about, within the existing footprint or outside of it.
Speaker Change: And certainly there are probably a lot of opportunities to do brownfield and do other things of that sort. So it really depends on the opportunity we see a lot of opportunities and so it's sort of an unsatisfying answer in the sense that I can't give you something specific but.
Speaker Change: We're very very excited about the activity that we see.
Speaker Change: And throughout earnings season, there is.
Speaker Change: Some companies are assuming.
Speaker Change: The trade war.
Speaker Change: <unk> I think Joey.
Speaker Change: Kind of alluded to this.
Speaker Change: Thank.
Speaker Change: You lose momentum.
Speaker Change: Cruiser.
Speaker Change: Oh.
Speaker Change: Or is it because of this happen.
Speaker Change: This is <unk>.
Speaker Change: Stay fresh and there was no memory.
Momentum continues for you guys.
Speaker Change: Sure. It's a great question, well first let's start with if it doesn't deescalate.
Michael Rosenthal: Thanks.
Ryan Corbett: And then I just I want to be clear relative to a prior question on the heavy side of things. Is there a certain intersection, if you will, that you have to get to between how the magnetics facility ramps and how your stage two separation or excuse me, your heavy separation? operation ramps such that you can remain sort of self-sufficient for somewhat of an extended period of time? Or are you out kind of actively stopping and actively looking to stockpile either spent magnets or other third-party feedstock? Because I mean, to Jim's point, if earlier if their magnets aren't leaving China, I imagine there's probably not a lot of heavy rare earth refined heavy leaving China either, although I could be mistaken.
Speaker Change: Would not be shocked if we see factory shutdowns.
Speaker Change: Next month, whether it's aerospace or auto or consumer products.
Speaker Change: You'd be amazed at how many different things half magnets and them you'd be amazed at how many producers out there have suppliers that they didn't realize had magnets and their product.
Speaker Change: And.
Speaker Change: So it is a big issue.
Speaker Change: To the extent that there is a deal this weekend and everything is calm.
Speaker Change: My my guess would be that youre going to see a variety of reactions. There is I think it's fair to say that than most parties are in crisis mode right now.
Speaker Change: Because it's a crisis.
Speaker Change: Theres, probably some that will.
Speaker Change: Relax and not learned the lesson the second time around sort of speak.
Ryan Corbett: Yeah, Matt, it's Ryan. To clarify, we are in a position to be self sufficient as it stands, we've, you know, gotten ahead of this issue and have, you know, the required feedstock and required and products from a heavy work perspective to continue to scale independence on the schedule that we've Got it.
Speaker Change: There are some that will.
Speaker Change: I've learned the lesson. This time and there are some that will be in crisis mode still because they'll recognize so I think it'll be a mix, but I can tell you without.
Speaker Change: Without any reservation.
Speaker Change: It is very clear that physical AI is the future of warfare drones robotics at those kinds of things and it is very clear that the United States government and obviously I don't speak for them, but my impression from conversations with them and the department of defense et cetera is that theres a full on recognition.
Ryan Corbett: Thanks for the clarification.
Benjamin Kallo: Our next question will come from Benjamin Kallo with Baird. Please go ahead with your question. Hey, guys. Thanks for taking my question. How do you guys think about just the timelines? I know you're prioritizing the government industry, lots of different options, but how fast do you think some of this stuff moves? And I think that someone asked it earlier, just where in, I guess, stage one, two, or three do you think that you would, if you had an investment or a partnership, where that would occur?
Speaker Change: That we can't be reliant on Chinese magnetics for National security purposes, and in particular, I would say the defense Tech space.
Speaker Change: How does a exciting defense tech startup or prime or whatever.
Speaker Change: No longer answer the question of where their supply chain comes from for this exact reason so I don't know to what extent memories will get short if theres a deal next week sort of speak.
Benjamin Kallo: And then I have a follow-up.
Speaker Change: But there will be enough for us to do that it won't matter.
Ryan Corbett: Hey, Ben, it's Ryan. You know, I think to your last part of the question, where, you know, where do we see opportunity? You know, I think what we've seen in this environment over the last month or so, has been incredibly validating of the vertical integration strategy that we've pursued over the last several years, right? It's, it's important for us to continue to support a diverse magnetics industry, you know, both in the United States and globally, but really what we are seeing a massive acceleration and interest in is having magnetics, true, you know, magnet capacity in the United States at scale.
Speaker Change: So you guys.
Speaker Change: Our last question comes from Korean Bloodshot with Deutsche Bank.
Speaker Change: Please go ahead with your question.
Korean Bloodshot: Hey, good evening, Thanks, Paul Thank you Mike.
Speaker Change: Okay.
Speaker Change: And last one.
Speaker Change: Yeah.
Speaker Change: Question, but I really want to understand.
Speaker Change: What's your strategy in camera off.
Speaker Change: The shipment that ongoing anymore to China.
Speaker Change: The question is probably like a.
Chad quite.
Speaker Change: How long can you go without a shipment kind of ouch.
Ryan Corbett: It's something that we have always said is an imperative for industry and imperative for national security. And so, you know, the the level of interest there is like, frankly, nothing I've ever. So, you know, we will continue to be extremely thoughtful there on, on, you know, how and when it's very hard to give you, you know, a perfect timeline. But, you know, for context, Magnetics was an idea on a piece of paper in 2020, you know, we made our first hire in 2021, we ground on a state of the art facility in 2022. And here we are in, you know, May of 2025, and we have an EBITDA positive business.
Speaker Change: Shall we don't stop <unk> shop.
Speaker Change: <unk> thousand six months left in the same situation. So I'm just trying to understand in all I would say the key takeaway here.
And how is that going according to NPD.
Speaker Change: Thanks, so much.
Speaker Change: So Karen in the beginning you cut in and out there like Spice.
Speaker Change: Spikes like us if you've ever seen that seen with Chevy Chase, but I think.
Speaker Change: You want to suffer.
Ryan: Yes, yes, I can jump in as Ryan.
Speaker Change: I got the full question.
Speaker Change: Jumping grant if I missed parts, but I think the important thing to keep in mind is if you think about how low cost we are from a cost of production.
James Litinsky: So, you know, from that perspective, I think we've got a pretty good track record of going fast when we're going greenfield. And certainly there are probably a lot of opportunities to do brownfields and do other things of that sort. So it really depends on the opportunity. We see a lot of opportunities. And so, you know, it's sort of an unsatisfying answer in the sense that I can't give you something specific, but we're very, very excited about the activity. And throughout earnings season, there's some companies that are kind of assuming the trade war de-escalates. And I think, Jim, you kind of alluded to this.
Speaker Change: <unk> perspective concentrate.
Speaker Change: Stockpiling, a half a year of concentrate production as an example is like low tens of millions of dollars of working capital, which given the scale of the cash on our balance sheet is not something that we lose a ton of sleep over I think the react ality has always been that the same.
Speaker Change: <unk> of concentrate were always declining and rapidly declining the better we do on midstream ramp and the important thing as well is having that concentrate in inventory. The profit is deferred but it's not lost we will take that product and we will refine it.
James Litinsky: Do you think that you lose momentum if that occurs? Or is it because this happened that this is going to stay fresh in everyone's memory and the momentum continues for you guys? Sure. It's a great question. Well, first, let's start with if it doesn't de-escalate, I would not be shocked if we see factory shutdowns next month, whether it's aerospace or auto or consumer products. You'd be amazed at how many different things have magnets in them. You'd be amazed at how many producers out there have suppliers that they didn't realize had magnets in their product. And so it is a big issue.
Speaker Change: Overtime, and I actually think that having some level of corn inventory is actually advantageous for a variety of reasons that we're happy to get into but from that perspective, it's something that we've got the land at mountain pass you've been out there you've seen the scale of the site. There is plenty of room to store com.
Speaker Change: And so I think Jim laid out what our strategy is going to be.
Speaker Change: And so this is sort of always been in some ways an eventuality. This is a little bit of.
Speaker Change: A.
Speaker Change: Unexpected turn perhaps but one that we've actually prepared for in many many ways.
James Litinsky: To the extent that there's a deal this weekend and everything is calm, My, my guess would be that you're going to see a variety of reactions there. There's, I think it's fair to say that that most parties are in crisis mode right now, because it's a crisis. There's probably some that will relax and, you know, not learn the lesson the second time around, so to speak. There are some that will, you know, have learned the lesson this time and there are some that, you know, will be in crisis mode still because they'll recognize. So I think it'll be a mix.
Speaker Change: Okay.
Speaker Change: Did we lose you current.
Speaker Change: I think we lost our operator.
Speaker Change: Lunch.
Speaker Change: [laughter].
Speaker Change: Okay.
Speaker Change: Hey, I'm back and I have one more minute.
Sure.
Speaker Change: Hey, I think they have put me on this but.
Speaker Change: And then just wanted to understand so.
Speaker Change: Outside of politics shot.
Speaker Change: How much is non Shanghai I think that's one thing.
I'm trying to understand.
Speaker Change: All of it we're not spending anything to China right now.
James Litinsky: But I can tell you without, without any reservation, it is very clear that physical AI is the future of warfare, drones, robotics, those kinds of things. And it is very clear that the United States government, and obviously I don't speak for them, but in my impression from conversations with them and the Department of Defense, etc., is that there's a full on recognition that we can't be reliant on Chinese of where their supply chain comes from, for this exact reason. So, I don't know to what extent memories will get short if there's a deal next week, so to speak, but there will be enough for us to do that it won't matter.
Speaker Change: And you have the demand for all of that production ex China.
Speaker Change: Correct and given what we've seen in the last several weeks.
Speaker Change: We are incredibly optimistic about the ex China supply chain.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you.
That concludes the question and answer portion of today's call I will now hand, the call back to Mr. Linton ski for closing remarks.
Speaker Change: Okay.
Linton ski: Thank you everyone. Obviously, it was a very exciting quarter for us.
Linton ski: Execution wise across the board and I think geopolitics kept us a little busy in may for some time, so we will get back to work and see you all soon.
Unknown Executive: Thank you guys.
Corinne Blanchard: Our last question comes from Corinne Blanchard with Deutsche Bank. Please go ahead with your question. Hey, good evening, Jim. Thanks for taking my call. I'm going to go on the obvious here.
Corinne Blanchard: question, but I really want to understand, what's your strategy in terms of the shipment that are not going anymore to China? And I think the question is probably like a 40 check question, but how long can you go without the shipment coming out? What's your view on stockpiling production if, you know, in three to six months, we're still in the same situation? So just trying to understand, you know, I would say the key tech inputs here and how they're going that could impact your EBITDA and, you know, just your strategy on six to nine months.
Ryan Corbett: So, Corinne, in the beginning, you cut in and out there, like Spies Like Us, if you've ever seen that scene with Chevy Chase, but I think that you want to, do you stockpile? Yeah, yeah, sure. I can jump in, it's Ryan. I think I got the full question, and, you know, jump in, Corinne, if I missed parts, but I think the important thing to keep in mind is, if you think about how low cost we are from a cost of production perspective for concentrate, you know, stockpiling a half a year of concentrate production, as an example, is like low tens of millions of dollars of working capital, which, given the scale of the cash on our balance sheet, you know, is not something that we lose a ton of sleep over.
Ryan Corbett: We will take that product and we will refine it over time. And I actually think that having some level of con inventory is actually advantageous for a variety of reasons that, you know, we're happy to get into, but, you know, from that perspective, it's something that we've got the land at Mountain Pass, you've been out there, you've seen, you know, the scale of the site, there's plenty of room to store con. And so, you know, I think Jim laid out what our strategy is going to be. And so, you know, this is sort of always been in some ways an eventuality.
Ryan Corbett: This is a little bit of a, you know, a unexpected turn, perhaps, but one that we've actually prepared for in many, many ways.
Ryan Corbett: Did we lose you Corinne? I think we lost our operator. Okay, thank you. Hey, I'm back. I don't know if you have one more minute. Sure. Hey, I think they had put me on mute. But, um, I mean, just for me to understand, so outside of your production. How much is non-China? I think that's what, you know, investors are trying to understand. All of it, Corinne. We're not sending anything to China. and you have the domain for all that production X China. Correct. And given what we've seen in the last several weeks, you know, we're incredibly optimistic about the ex China.
Ryan Corbett: Okay, thank you. Thank you. That concludes the question and answer portion of today's call.
James Litinsky: I will now hand the call back to Mr. Litinsky for closing remarks. All right, well, thank you, everyone. Obviously, it was a very exciting quarter for us execution-wise across the board, and I think geopolitics kept us a little busy in May for some time, so we will get back to work and see you all soon. Thanks.