MP Materials Corporation - Ordinary Shares - Class A Aktie

Good morning, and welcome to JPMorgan's Natural Resources Conference. My name is Bill Peterson, U.S. metals and mining analyst. I'm really pleased to start off with MP Materials. We have Ryan Corbett, the CFO, with us here this morning. So thanks for supporting us. You've been in -- well, MP has been at our conference as long as I've been covering the space. And it's never a dull moment in the space, and we're going to walk through a number of things in this call. This is actually being webcasted. So if there are any questions, make sure to use the microphone.

Ryan, to start off, I think most people are aware of MP, but maybe you can speak briefly about the evolution of the vertically integrated Magnet business model. And maybe as an aside, we hosted Jim last year. This was before the deal announcement. So lots have changed in that 1-year time frame.

No question. Yes. Thank you, Bill, for having us. Happy to be here again. So for those of you that aren't familiar with MP Materials, we're the second largest producer of rare earth products globally. We operate the Mountain Pass rare earth mining and refining facility in Mountain Pass, California, which is one of the world's preeminent rare earth ore bodies, the only fully co-located mining and refining facility in the world. We also are in the midst of transitioning the business to be a fully vertically integrated business.

When we went public in 2020, we talked about bringing the Magnetics opportunity online and starting to think about it in 2025. And here we are in '26 on the verge of commercial deliveries to our first foundational customer, General Motors. That will be out of our Independence facility, which is a fully integrated metal flake magnet, finished magnet manufacturing facility in Fort Worth, Texas. That's our first magnet plant. That was initially designed for 1,000 tons of capacity will be expanded to 3,000 tons.

And to your point a moment ago, Bill, one of the more exciting initiatives for us is in July of last year, we announced a transformational public-private partnership with the Department of War. The Department is now our largest shareholder and our business partner in what we call 10X, which is our much larger scale Magnet facility that we just broke ground on in Northlake, Texas, just several miles away from Independence, where we will take our magnet capacity from that initial 1,000 that we've built out for GM to 10,000 tons of ultimate finished magnet capacity.

Great. So we're going to dive in a lot of these things, but we just got news yesterday that we saw that China's export restrictions. First of all, these export restrictions have been around now for some time, but MP was named and included on the list, I think, yesterday. So I guess how should we think about the implications of this? Is the damage it done at this stage? Maybe -- and kind of inform me, how do these export restrictions at all impact the company, if at all, either directly or indirectly?

Look, this is something that, in general, is not a huge shock to us. Given what I mentioned a moment ago about having the Department of War as our largest shareholder, it's not a tremendous shock that the Chinese may view us as in the defense supply chain. We've spent many, many years building out a robust supply chain. I think you see a lot of newcomers to the space. We've been doing this for many, many years. We are a scaled producer. We've built out a secure supply chain, particularly for the magnetic side, you think about the fact that we've been at this since 2020, building up the entirety of our value chain ex China.

And that's one of the things that I think is pretty interesting about this announcement and the developments in the market at large is what good is a western magnet supply chain if it's not decoupled from the strategic adversary here in the space, which is China, who dominates the space today. And I think that this announcement, while we don't see, at this time, any immediate impact to our business given how we've planned, I think it underscores the strategic value of what we're building. And it's one of the things that we spend a lot of time thinking about as we see a lot of these moves in the space.

Jim mentioned on our last call, our CEO, Jim Litinsky, really the binding constraint on building out the supply chain, we believe, is scaled NdPr oxide production. And there are 2 scaled producers outside of China right now, ourselves and Lynas. And a lot of the moves that you're seeing, I think, underscore the fact that, that is the case, that NdPr is the binding constraint. And it's not as easy as saying shovel-ready and putting a shovel in the ground. It takes many, many, many years and billions of dollars. And so I think that the strategic value of the integrated supply chain that we can bring to customers at this point is so critical and frankly, underscored by announcements, moves you see in the space, et cetera.

Let's stick with the announcements. There's been just a plethora of announcements of U.S. magnet projects. How should investors think about the viability of these as well as the competitive landscape? And maybe just higher level, even this morning, we see an announcement with Energy Fuels and VAC. We've seen announcements from USA Rare Earth and a lot of their M&A activities. How should we think about the broader landscape?

Well, I think what you need to think about here in general, when you look across the space, fundamentally, the demand profile is growing so significantly that there will be many winners in the space. However, what I think you need to look at is demonstrated capability at scale. You need to look at balance sheets. You need to look at management teams, and you need to look at fundamental capabilities, right? I think there's a lot of discussion of, okay, we'll do a mine over here, we'll do a magnet plant over here. There are a lot of steps in between. And sub steps of the steps that I think, frankly, some of these folks that are getting into the business are just learning that they're going to need to do. I mean, you can have all the metal making you want if you don't have fluorination capability, you can't feed it unless you're getting supply from China.

And so this is a complex multistep process to go from something in the ground to a magnet of the quality that's required for an electric vehicle that meets the quality and repeatability standards that are required for that industry, same with aerospace, et cetera. And so certainly, the demand growth in the space will necessitate incremental capacity.

But to my point a moment ago, if you just break down the space right now and look at the capacity of ex-China NdPr to be produced and the capacity of ex-China magnet making, where the vast majority to date of actual in-process magnet makers outside of China are the Japanese and ourselves. That market is balanced at the moment. It's roughly 30,000 tons, let's say, of magnet capacity and 15,000 tons of ex-China NdPr capacity. And that is sort of the rule of thumb, divide magnets by 2 to get to NdPr oxide.

We've now seen announced another 30,000 tons of magnet capacity ex China. I don't know where that NdPr is coming from. And then the view is that, that number will go to 160,000 tons. And so you just think about the scale of investment and time and intellectual property that is required to support something of the scale of Mountain Pass, which you've been to. Think about the amount of time it took Lynas to go from something in the ground to a refined product. I think it was 7-plus years, and they're a proven operator. This stuff takes time.

So I fundamentally believe that the binding constraint here is going to be provable, demonstrable scaled access to feedstock to be able to power that downstream part of the business. And that's without getting into the technology of the downstream, where we've been investing significantly since 2021. We brought our first employee on in that business since 2021. We sort of joke best funded start-up in the space. It's a benefit of kind of having the umbrella of the vertically integrated platform. But what that has brought to bear is grain boundary diffusion technology, know-how, et cetera, on the magnet making side that, of course, the Chinese have been doing this and dominating the market for decades. We're not saying we're surpassing them tomorrow. I do think that today, we are the leading ex-China magnet manufacturer in the Western world and give us a few years, and we will be absolutely on the cutting edge.

We can dive into the various sort of parts of the value chain from upstream to downstream. But I wanted to talk a little bit about policy and government support. So the government has provided a lot of support to the industry in MP, you mentioned before. And now the Bipartisan House Select Committee on China has introduced a bill for additional magnet metal and production tax credits. I guess what's the importance of this type of legislation? And what could it mean for MP specifically?

Sure. Yes. I think that certainly, there's been a renewed focus, certainly since what we saw with the initial trade restrictions from China in April, which effectively shut down exports of magnets to the United States from China. It took several weeks before we saw the first automotive plant shut down because they didn't have access to magnets. And so I think that still, despite all the focus on the space today, there still is not a full understanding and grasp by the general public of just how critical these parts are to, you name it, vehicles, AI, all of these growth engines of the economy.

I think that what we saw with our public-private partnership with the Department of War really catalyzed general formation of capital broadly in the space, which we expected would happen and which we think is a great thing. The uniqueness of our deal with the Department of War is a true alignment of incentives and bringing to bear a floor price on our commodities and contracted cash flow across our businesses allows us to invest into this with confidence.

We know what our cash flow looks like at a minimum on the other end of building a 10,000-tonne magnet plant. That's not something that you jump into without real visibility if you're being a responsible steward of capital. And so that gave us a tremendous advantage to continue to invest in technology and people. By the time that is done, I think we'll be in incredible shape.

You look at the bipartisan bill that was introduced. And I think it gets even further to what is required from an industrial capacity perspective to continue to support this industry and really decouple in a way that serves downstream industry needs or downstream of magnets, right? And so one of the interesting parts of that bill is a tax credit for ultimate motor manufacturers that are consuming domestically produced magnets. Unquestionably, that's great for us, right? That's an opportunity for our customers to look out and see if we invest in capacity to take MP magnets into our motors in the United States instead of somewhere else in the world, it drives incremental economics for them, which, of course, ultimately will accrue across the supply chain.

And so I think that the initiatives from government, it's been a whole of government approach. I think some elements of it are smarter and longer lasting than others, but you see the importance of this demonstrated by the actions that are being taken across executive, legislative, et cetera.

Yes. You just talked about the arrangement with the Department of War. Maybe just walk through the floor pricing on NdPr side, the 10X side on the magnet side, what that means? But one of the things that I get asked quite a lot about is what can drive upside to the numbers? What's the most likely scenarios? Or what do you -- how do you view the potential upside?

Yes. Look, I think that when we announced the deal with the Department of War in July, that was actually before we had announced a very exciting arrangement with Apple, where we'll be providing the magnet side of Independence. It was before we announced Apple as our foundational customer for the recycling business, which we're building co-located with the refining facility at Mountain Pass. And so what we attempted to do is give a real view of what we look at as floor earnings power, pro forma for getting these operations online and scaled. And that is what we view it as. I don't think anyone will be celebrating if that is the ultimate outcome. I think we view that as the bare minimum over time.

And so the critical thing with the Department of War arrangements is we are the largest producer of NdPr oxide in the western world, save, for Lynas and catching up pretty quickly. We'll be at -- our target is to get to 6,000 tons on a run-rate basis exiting this year. What the price floor brought for us is confidence and reinvestment economics to be able to support the broader build-out of the business. And so the way it functions is, we continue to sell our product, as we always have, to the extent market prices are below $110 per kilogram, we have a top-up payment from the Department of War to the Materials segment of the business.

What you've seen since that was announced is the beginning of a real bifurcation in pricing. And one of the things that we've pointed out for a long time is the mercantilist policies in China and the focus on this industry as highly strategic had led them to subsidize this space with low pricing for a very long time. When we announced the deal, I believe NdPr market pricing was in the $50s. It's now over $100. It's hovered pretty close to the $110, and it got there pretty quickly after we announced that transaction.

And since that transaction, you've also seen the only other scaled producer in Lynas have a similar arrangement with the same price floor with the Japanese where they committed the vast majority of their offtake to the Japanese market. And so I think it speaks to the fact that one of the critical missing pieces here is being able to compete when you're looking at a capital structure where you need to earn market returns and competing with a couple of hands tied behind your back versus the Chinese. And I think the incentive for them to operate the way that they've operated in the past is greatly reduced when essentially 100% of scaled production outside of the country is now being guaranteed a certain floor price. So I think that, that's critical.

On your point on 10X, what we structured with the Department of War is a guaranteed minimum EBITDA of that facility when we bring the capacity online. And so we're targeting getting initial capacity starting at the end of 2028 and scaling into that. And so that gives us a view of our minimum economics in that facility. We also indicated the opportunity for significant upside to that earnings power of -- within the 4 walls of 10X, our minimum EBITDA is $140 million. I think if you translate the economics that we see in existing and various potential deals that we're seeing in Independence that we're seeing potentially for 10X at this point, I think the earnings power in the 4 walls of that facility is much closer to $400 million. And so we have a structure where we share that upside with the Department of War. But certainly, for us, that $140 million could easily double once we start to commercially syndicate that capacity out to commercial customers.

Maybe on that last point on upside from the magnet side, what types of customers do you envision working with to drive that upside?

So the demand has become increasingly broad-based. I think that when you look at the scenario that scaled manufacturers faced in April, it was a food fight, right? It was how do I keep my plants operating when the vast majority of magnet consumption was coming from imports from China. That has translated from sort of a short term, I just need to keep the lights on to I need a long-term strategy to ensure that never happens again. And so if you look at -- automotive, certainly, is a very exciting space. That's where we have our initial foundational customer in General Motors. And it's beyond just electric vehicles, right? It's hybrids, it's internal combustion, 20% of the market is plus is automotive today.

I think where we're seeing a tremendous amount of growth is consumer electronics. Apple is our second customer in Independence and certainly, all consumer electronics have a pretty significant amount of magnet content. And then you look at everything that's happened in the world, frankly, since then, the future of warfare is drones and robotics. You're seeing physical AI starting to really take shape. Fundamentally, permanent magnets, rare earth permanent magnets are the absolute essential piece of dexterity for a humanoid robot. You cannot get the degrees of freedom in a hand or in any of the actuators that are necessary from a torque density and size perspective without rare earth permanent magnets. And so it's all of those physical manifestations of AI.

And then the traditional sense of AI that people are thinking about right now, which is a data center build-out, 75% of memory that is going into -- or storage that is going into AI data centers right now is hard disk drives. Hard disk drives are significant magnet consumers. That's a really exciting opportunity set for us. Drones, all of these really exciting growth industries rely on a secure supply of rare earth permanent magnets.

And so I think that we're entering an era where -- in 2021, everyone was very excited about electric vehicles and what that meant for demand over time. That trend obviously looked different than some people were expecting in 2021. But I actually think the ultimate numbers will end up being quite similar, if not eventually better because what we're seeing is not just EVs and ICE and eventually, they meet and overtake, it's -- every ICE platform now is being hybridized and electrified. And you have no alternative often in a hybrid powertrain. There are a variety of motor technologies you can use in a full BEV permanent magnet motors have a 90% market share. But for a hybrid, as an example, you tend to find the electric powertrain embedded in the transmission. You cannot fit anything other than the more compact size that you get from a permanent magnet motor. And so there's a tremendous number of growth vectors that we're focused on.

I'm going to come back to magnets in a second, but you mentioned that you feel you're on track to reach run rate levels of your NdPr production later this year. Where do you see upside to this? And you talked about even the needs you seen for your magnet side. Is this through efficiency gains, other incremental investments? How should we think about upside to your run rate?

Well, in general, we are a company that wants to execute first and then provide forward guidance later. And so our focus right now is getting to that run rate before we start talking about expansion. However, what I would say is what is often not captured when people talk about the ultimate output of Mountain Pass is the integrated recycling line that we're building. And again, talking about the benefits of scale and integration, the ability for us to bring scaled recycling online, leveraging, as an example, the installed base of assets at Mountain Pass. We have our own power plant. We have our own water treatment plant. We have a tremendous amount of, let's call it, sort of baseload primary production that allows us to bring in a wide range of feedstock without sort of upsetting the circuits, right?

We have such a large base under us of primary material that our ability to bring in other recycled feedstock is second to none, given that opportunity set. Recycling will be additive. And you can imagine that we've talked about the fact that Apple is the vast majority of the expansion from a magnet perspective at Independence. We intend to feed the Apple magnets with recycled feedstock. And so you can kind of do the math. There will be significant upside from a recycling perspective at Mountain Pass as well.

Yes. Coming back to magnets. Another question we get a lot is related to your qualification process at your lead customer, which is GM. Maybe you can speak to that, what needs to be solved or how that's going, but also then the cadence of magnet production, that ramp thereafter.

Sure. I think the important thing for us is that we have already produced magnets to the required specifications, quality specifications, et cetera, both on the new product introduction line, which you've seen is sort of a factory within a factory to prove out our technology and our capabilities. And then the phase that we're in right now is qualifying the much larger scale operation, the full commercial operation, every piece of equipment. And so I think what's probably underappreciated about the beauty of being in the automotive business is it's not just can you deliver me a magnet on spec, it's exactly how did you make it.

And so we are in a process right now of the production part qualification process, PPAP -- or approval process, excuse me, that is not just about can we deliver magnets. I think we've demonstrated that we can deliver magnets. It's really getting into the nitty-gritty of taking stopwatches and observing the cycle time at every piece of equipment, really understanding the quality characteristics and our ability to identify quality at each stage. And then, of course, they have their own needs on their side of motor testing, et cetera, including regulatory testing that's required that are certain timelines for them to be able to put our magnets into a vehicle, run it through regulatory testing, things like that.

And so I think that where we are at right now, we've talked about second half starting initial deliveries for revenue on the magnet side. A lot of that is in our control, a lot of it is not, given the time lines of the customer and ultimately, our goal is to support the customer. But it's very clear that we are well on our way and we're excited to sort of start delivering at commercial scale for them.

From a cadence perspective, we had always planned for a very modest set of growth quarter-over-quarter once we get into production. And so this is not -- anyone that tells you we've heard some people say, oh, you just turn it on. For an automotive customer, that's not how it works. You go through a bunch of processes to prove out your run rate capabilities and you add to those as you go. And so it will be a modest increment over time. But certainly, given the structure of that contract and our capabilities that we've proven to ourselves and vast majority that we've proven to the customer, we're very excited about where we are at this point.

Another question we get is around MP's heavies strategies and some of this relates to M&A we've seen in the space. You nonetheless talked about limiting even the amount of heavies you even need. And then you talked about recycling as well as even maybe stockpiling. So I guess the question is, is that -- how do you see your heavy strategy evolving? You're building a separation facility? Do you need to buy something? Or do you feel you have ample feedstock? How should we think about the heavy strategy?

Well, I think that the way that we structured our business with focusing on contracted cash flows at each piece, that methodology followed its way to how we contract for critical raw materials, right? And so if you think about Independence and 10X, or the 2 magnet facilities, Independence, we will cover all of our heavy rare earth needs from the Mountain Pass ore body and from the refinery that we're bringing online as we speak. For 10X, we have the Department of War as the contracted offtake party and have them with an agreement to provide their best efforts to source with us for third-party feedstock. And that feeds into the strategy of building a very robust and flexible refining facility that can bring in not just the Mountain Pass ore and separate the Mountain Pass ore into the heavy rare earths for magnets, but also third-party feedstocks.

And so we're in the market acquiring third-party feedstock now. We're working closely with our government partners to bring other feedstocks to bear. And so from our perspective, our strategy is such that we are very well protected and have clear pathways to ensure that we've got what we need. And I think to your point, that you started with from a technology perspective, there are folks in the market right now that are talking about, oh, you need heavies, you need heavies, but meanwhile, they don't have grain boundary diffusion technology, which means the quantity of heavies that you need for any unit of magnet could be 2 to 3x what you otherwise would get if you have that technology.

I think the amazing thing to think about is when we sort of initially scoped out the parts that we'd be making for our foundational customer, we had settled on a recipe, if you will, with a heavy rare earth content that since we have continued to develop our process and our technology from that 2021 time frame to today, we've reduced the heavy rare earth content that we've taken into production that we're using right now on commercial scale. We've reduced it by 60%. And so you hear and see headlines all the time about thrifting and rare earth thrifting. What that really is, is heavy rare earth thrifting. There really is not a great way or any way to replace the strength that you get from an NdFeB magnet by getting rid of NdPr. And this sort of circles back to our fundamental view of NdPr as the binding constraint. We do not see heavies as a binding constraint. We see access to scaled NdPr as the driver for who we will be successful in this space.

Just want to see -- we're getting close to the end. I just want to see if anyone has any questions. And if you do, we do have a microphone. Just wait a second here.

So can you talk -- you just mentioned that for the magnet part, you have a guaranteed EBITDA of $140 million, but you see a lot of upside for that. Can you talk a little bit about how you get the upside there?

How do you get to the upside? Sure. The way that this was structured was we faced the Department of War as the initial 100% offtake party. And so if we never sign a single contract for a commercial customer, we would get that baseline EBITDA inflated at 2% a year starting in July of last year. The reality is that the way this was structured was to align incentives between us and the Department on going out both to the defense industrial base, which is technically -- well, of course, it's defense-oriented, it's a commercial customer, right? We face a prime or a tiered supplier of a prime. In addition to broadly commercial customers, automotive, hard disk, consumer electronics, et cetera. And all of those contracts will be done on a purely arm's length commercial basis.

And so the economics that we see as viable from a pricing perspective get you an earnings profile that is well in excess of that minimum EBITDA. And so as we go out and commercially syndicate these volumes, that's how we expect to unlock the incremental earnings power of that facility. The beauty of this structure, though, is we are in no rush. We do not need to go sign contracts now to put out a press release. We do not need to go sign contracts now to go get project finance. The way we structured the balance sheet and the way we structured these agreements is we are in construction right now with a robust balance sheet and visibility on cash flow, and we can take our time.

And frankly, all of the moves that we've seen in the space I think, play directly into our strategy of just showing how strategically valuable the access to true scale demonstrated access to raw materials are. It's one thing to say, I've got a shovel-ready project that they may be ready in 6 years to if you contract to get a magnet out of 10X starting in 2028, you can go see where the NdPr oxide is that's going to be needed to make that. And that's a tremendous advantage that nobody else has in the space.

Well, we have reached 30 minutes. We probably could have gone for another 30 minutes, but we covered a lot of topics. Ryan, look forward to following the -- all the projects you have going on, and thanks for your time this morning and all the insights you shared.

I appreciate the time. Thanks, Bill.

Everybody, welcome to the afternoon session of our 43rd Annual Metals and Mining Conference. This next panel has become a bit of a mainstay at the conference, and I hope it continues to be that way. The interest has been fantastic. And to complement that interest, we have 2 fantastic guests. With us today, we have Ryan Castilloux. He's Managing Director of Adamas Intelligence and a true expert in the space of rare earths. And from MP Materials, a U.S. champion in rare earths, we have Ryan Corbett, he's Chief Financial Officer of the company. And then my colleague, Kate McCutcheon, is here to share the stage with me.

How we're going to start things off is I'm going to invite everybody on stage. Ryan Castilloux from Adamas Intelligence is going to start with an overview of the sector, supply and demand, pricing costs, all that sort of stuff. Then Ryan Corbett from MP Materials will give a bit of an overview of MP, but more specifically, a view of the industry and from a U.S. and MP perspective. And then the 4 of us will put our heads together and have a chat about the industry. So if you guys want to come on stage, Ryan Castilloux, the podium is all yours.

Thank you, Lawson. Good afternoon, everybody. It's a pleasure to be here speaking with you today. Thank you to Lawson and the team for inviting me to participate in the rare earth panel once again this year. As a Canadian, it is always a pleasure to follow this conference from sunny destination to sunny destination. As mentioned, my name is Ryan Castilloux. I'm the Founder and Managing Director of Adamas Intelligence, a global market research and advisory firm focused exclusively on the rare earth industry and home to the biggest rare earth-only focused intelligence team globally by multiples.

So I thought it would be helpful today to start off with a bit of an overview to the rare earth industry, a bit of 101 for anybody that has just tuned into the space recently and then to provide a view of the current state of the market, how we see things evolving in the years ahead and then lots of food for thought and hopefully, discussion to follow thereafter. So can I jump ahead on this, Lawson and -- Perfect.

So let's take ourselves back to chemistry 101 for a moment and that periodic table of elements, on which the rare earth elements include the lanthanide series plus scandium and yttrium. Scandium and yttrium are not lanthanides per se, but they are often categorized as rare earth elements because of their tendency to concentrate into many of the same minerals and mineral deposits. As you can see on the slide, rare earths are arbitrarily subcategorized as either light rare earth elements or oxides or heavy rare earth elements or oxides based on their electron configurations. And by virtue of being present in the earth's crust in substantially higher concentrations, light rare earth elements tend to make up the vast majority of the rare earth content in a typical rare earth deposit and thereby also make up the vast majority of total global output each year.

Heavy rare earths, on the other hand, are present in the earth's crust in significantly lower concentrations and as such, make up a much smaller share of total global production. Rare earth elements are used in hundreds of unique end users and applications that collectively fall into 1 of 8 end-use categories. We have battery alloys, catalysts, ceramics, pigments and glazes, glass polishing powders and additives, metallurgy and alloys, permanent magnets, phosphorus and other end uses and applications.

As shown in the middle, by volume, permanent magnets and catalysts were collectively responsible for 70% of total global rare earth oxide demand last year. However, by value, permanent magnets alone were responsible for over 95% of the total value of all rare earths consumed globally. And this already large share is poised to expand even further in the years ahead as both demand for and prices of the so-called magnet rare earths which include on the light side of the spectrum, neodymium and praseodymium and on the heavy side, dysprosium and terbium as both demand for and prices of those magnet rare earths continue to outperform.

So when we're talking about rare earth permanent magnets and neodymium-iron-boron magnets specifically, it's important to recognize that there are over 80 different grades of neo magnets commercially available today, each defined by their maximum energy product or magnetic strength, which is increasing along the y-axis and their intrinsic coercivity or maximum working temperature, which increases along the x-axis.

At the basis of all of these grades of magnets, neodymium and praseodymium in their combined form, often referred to as didymium, provide the base magnetic strength for all of these grades shown. However, as we move towards the right side of those 2 red lines, we often see small concentrations, minor concentrations of dysprosium and terbium, those heavy rare earths added to the magnetic alloy to preserve the magnet strength at the elevated temperatures that it would see on the right side of that line.

So to add a bit of color and context to this, I've overlaid this grade chart with some common end uses of neo magnets sitting at top grades that we may find in those particular applications. And I need to emphasize here that there are exceptions to every rule shown on the chart. There is no hard and fast determinant of what grade is used in what application. It's a function of what operating temperature, what demagnetization forces and other conditions that, that magnet will see in that application.

The key takeaway here is that when we look at electric vehicles, robotics, electric vertical takeoff and landing, aircraft, which are part of the advanced air mobility package and other fast-growing demand drivers, many of them straddle or sit to the right side of this red line. And what that means is that as the rare earth supply side continues to tune itself to support this demand growth going forward, we need not only the NdPr for the base magnetic strength of these magnets, we also need sufficient volumes of dysprosium and terbium to enable production of those specific grades for those applications.

So you can think about the rare earth market, much like a Swiss watch, where the various COGS need to move in perfect harmony or they effectively jam up the works and bottleneck demand for other rare earth elements. So looking forward at demand for neo magnets, we expect it will more than triple by 2040, led by double-digit demand growth for electric vehicles, for robotics and advanced air mobility. And if you squint and look hard to the right side of the chart, this leads us to a future where, by 2040, robotics surpass passenger EVs as the single largest demand driver for neo magnets. And in the decade to follow, if we were to model that out, we will increasingly eclipse demand from all other end users and applications as that fast growth captures market share.

Thus, robotics is what we refer to as the new frontier of neo magnet demand over the medium to long term. And this is our robot deployment forecast that underpins the forecast shown on the previous slide. So from a market of around 10 million robot units deployed this year, we project the market will grow to around 65 million units annually by 2040. And at that time, we'll be primarily led by humanoid robots for commercial applications, humanoids for consumer applications and other advanced robot types, whereas today, the market is primarily driven by low-end consumer robotics like Roomba floor cleaners, window cleaners and other similar robots.

So this may look quite aggressive. It's quite a steep incline post 2030. But I assure you, this is a very grounded and conservative forecast relative to some of the other outlooks that have been put forward. Other leaders in the robotics space, Elon Musk, you may have heard of him, is projecting billions of humanoid robots to be on earth by 2040. And others are speaking about tens of billions in the decade to follow many entering space and doing exploration work in that realm. So should reality come somewhere in between this grounded, conservative forecast and the very ambitious outlooks put forward by Elon and others, it would almost certainly ensure that robots do surpass EVs prior to 2040 and would absolutely eclipse and minimize demand from other end users going forward as they increasingly capture market share.

So the good news for Elon and for others that are looking ahead at this very aggressive demand growth for neo magnets is that outside of China, the magnet factories are coming. Today, there is approximately 45,000 tons of capacity operating globally outside of China. And we see another 70,000 tons potentially emerging by as early as 2030, taking into account the announcements and plans of magnet makers to date. This is a figure that, month after month, quarter after quarter, continues to increase. And I'm confident that next year, this time, this 120,000 tons or so by 2030 will be substantially higher.

The reality, however, is that a lot of this magnet capacity faces challenges, faces bottlenecks that may inhibit it from coming to realization by 2030, if at all. And 2 of the major bottlenecks that we foresee in the near term, the first being, we don't see sufficient supplies of the heavy rare earths, dysprosium and terbium coming to the market in the imminent near term to support this growth. Secondly, we foresee that metallization, the midstream, the conversion of those oxides into the metals and alloys needed to produce magnetic alloys that are then machined into the finished magnets. We don't see sufficient capacity coming online to metallize all of the oxides needed to support that magnet production capacity. So that is a second imminent bottleneck.

The companies that will be best positioned to navigate these challenges are those that are vertically integrated like MP Materials, companies that own the mine production of heavy rare earths and light rare earths that have the metallization stage in the middle and that own the downstream magnet factories to finish up the process. Conversely, companies that are simply aiming to build a magnet factory and to look upstream and to source metals and heavy rare earths from third parties, those will be the companies most exposed to these risks going forward.

So that concludes the slides that I had prepared for today. I'm very happy to take any questions that you may have on this or on anything else related as we go forward. But thank you thus far for your time and attention.

Thank you, Ryan. Fantastic slides. Ryan Corbett, I'll have you jump in, and we'll address both of your comments together.

Our numbers are close. They're not exact, but they're close. So thanks so much for having me. Happy to be here again, the troop of Ryan Cs giving this presentation. So for those of you that don't know about MP Materials, I'll give a quick overview of what we make. Before I jump into that, I'll refer you to our SEC filings. I may make forward-looking statements, so I will have you look at those there.

But this is our product suite. MP Materials leverages Mountain Pass, which is one of the world's richest rare earth ore bodies in existence. We've rebuilt that asset to be one of the world's largest global producers of rare earth content in the form of this high-grade concentrate that you see here. And since 2023, have been ramping a world-class and world-scale refining facility to make NdPr oxide. Today, we're producing on a run rate basis, approximately 4,000 tons a year of NdPr oxide and getting to our target nameplate capacity of 6,000 tons by the end of this year.

To Ryan's earlier point, the strategy that we've employed here has been one of vertical integration from the outset. And I do think that certainly, there is a lack of focus and understanding from a lot of market participants and observers of the steps in between. You don't go from an oxide to a magnet. You have to make high-quality NdPr metal. You need to be able to make alloy flake. And interestingly, some of the initiatives that we'll talk about in a moment in terms of our ability to bring down the utilization of heavy rare earth oxides within our magnets relies on high-quality production of NdFeB alloy flake. The microstructure present there and the compositions are sort of the other growth vector within magnet manufacturing that allows you to reach higher temperature -- maximum operating temperatures and higher performance with a lower mix of heavy rare earths within that finished magnet.

For those that are a bit more familiar, I'll just do a quick rundown and an update on the status of MP Materials. We reported our first quarter earnings a couple of weeks ago. Last quarter, we delivered about 917 metric tons of NdPr oxide, significant growth year-over-year and sequentially as we continue to ramp the Mountain Pass refining facility. We also achieved record upstream production for first quarter for us as we continue to grow our upstream business as well. And given the change in market dynamics that have come into play since our July 2025 announcement of a public-private partnership with the Department of War, we've seen the NdPr market in particular as well as the remainder of the magnetic heavy rare earths and the other heavy rare earths change drastically from a pricing and supply-demand perspective, and that has flowed through to the financial performance of the business.

As Ryan also mentioned, from a vertical integration perspective, we have been pursuing a downstream magnetics initiative since 2021. We're at a pretty pivotal and exciting time in the development of MP Materials Magnetics segment, where we've just commissioned the commercial equipment at our inaugural magnet facility in Fort Worth, Texas that we call Independence. That facility was initially targeted for 1,000 metric tons of NdFeB magnets, primarily going to our foundational customer, which is General Motors. We have since announced an expansion of that facility to 3,000 tons of capacity with our anchor customer for that expansion being Apple. And on top of that, we have announced a new magnet facility that we refer to as 10X as that facility, combined with our expansion will take us ultimately to about 10,000 metric tons of magnet capacity. That facility, we just broke ground is in Northlake, Texas, about 10 miles from our existing facility.

The exciting thing about where we are in the magnet business right now is you saw the chart that Ryan put up there in terms of the demanding nature of the magnets that would go into an EV traction motor. So we're making one of the hardest types of magnets that you possibly can. And we are doing it with an incredibly quality-focused customer like GM in the automotive space, where we've had to build out the technical depth and know-how to make it through the production qualification process to get into automotive traction motors for EVs, for GM. We are in the process of doing that right now. We have discussed that we expect to be generating revenue from magnet products in the second half of this year. We are currently producing and selling NdPr metal out of that facility to GM as well, driving the current financial performance of that segment.

I think the concept that we're in violent agreement on with Ryan is that there are critical bottlenecks to enable the growth of this industry. Certainly, we see the same growth drivers that were just discussed, robotics, EVs, frankly, ICE vehicle production. Really, anything that's in your pocket or that you drive or that flies has NdFeB magnet content within it. I think the thing that we see is as all of this incremental Western magnet capacity gets announced, the scale of NdPr oxide production required to support these facilities is astronomical.

And I'll kind of give a rough sense of where we shake out on this analysis. A lot of these numbers are pretty close to Ryan's and some of it, we, with his permission, utilize some of his research with a bit of ours on top. But if you look at the current ex-China market, we're effectively in balance right now on supply and demand for scaled production of ex-China magnet manufacturers and ex-China NdPr capacity. The thing that I think is underappreciated is as we, at MP move through our vertical integration strategy, we will become effectively nearly fully vertically integrated over time. And so our 6,000 tons of NdPr capacity will be used to feed our downstream initiative.

The other only scaled producer of NdPr oxide in the world is Lynas outside of China. And the vast, vast majority of their output was just spoken for in a deal that had some similarities to our deal with the U.S. Department of War, but with Japanese industry to support the Japanese magnet business. And so 7,200 tons of their NdPr capacity is dedicated to the Japanese market.

So if you look at what that means, the announced capacity of Western magnetics players is such that the increase in NdPr capacity needed to support them is gigantic. Certainly, we see the same dynamic that Ryan described as it relates to heavy rare earths, particularly in the short term. And some of the comments that we made on our earnings call, I think, got a little bit of attention on what our view of the ultimate key constraint being, given the fact that some of the very exciting growth cases and growing end use cases of magnetics are in robotics, HDDs that go into the data centers that are powering the physical manifestation of AI that we're all talking about.

A lot of them do not require any heavy rare earth content. And so I think our point really is if you look at the growth trajectory that you see here of magnet capacity, we expect that the NdPr required to feed that to grow in line, if not slightly above that trend line. Whereas what we see from a heavy rare earth perspective is we have -- as just MP, but the industry at large have made tremendous steps forward on thrifting of heavy rare earths within the high-performance magnets that were on that chart. And so as an example, the formulation that we expected to go into production with for EV traction motors for initial production, when we looked at that in about 2022, 2023 versus where we are actually going out and locking production today, we've reduced heavy rare earth content in that formulation by 60%. And that's us starting from a greenfield.

I certainly believe that the head start that we have as a company in this space is a tremendous competitive advantage for us and a major component of the moat that we have in addition to the fact that staring at this, there's a real capacity issue from an NdPr perspective. And that's one thing also that being vertically integrated allows us to pursue our growth ambitions in a secured way. I think our view is, as you see buyers of magnets start to embrace the fact that they need to diversify their supply sources away from just China, which has 90-plus percent market share in the space today, depending on Chinese NdPr to feed those facilities is not a business case. And so something is going to have to give here.

I think the great thing about the strategy that we've employed is whether it's fewer magnet facilities end up getting built because they can't access this NdPr, it really speaks to the strategic value of our magnet business. And then on the flip side, of course, if you do see a supply reaction to feed this ultimate growth that we see in the magnetic space, that indicates, at least in our estimation, significant potential price growth in NdPr where we benefit on the upstream and midstream side of the business. And so we feel great about the way we're positioned. Obviously, a lot of execution ahead to bring all these initiatives into play, but that's MP in a nutshell.

That was really great. Great slides, too. It's the first time I've seen a few of those.

We'll roll them out soon for everybody.

Yes. So please take a seat. Where I'd like to start this conversation is with the pricing environment on NdPr in particular. So after 2 years, 3 years of the Chinese price hugging that like USD 60 per kilogram level. The Chinese benchmark price for NdPr astonishingly reacted to your Department of War agreement and within a very short period of months, rose to $110 per kilogram, the minimum built into your agreement with the Department of War. What are the mechanisms that would have led to that reaction? And then what should we infer about the nature of the Chinese-based benchmark given that reaction?

Is that for me?

I'll let you take it. You seem ready to go. But I'd like to hear from Ryan Castilloux as well. Go ahead.

Look, I think the fundamental view from our perspective is I think it speaks to the mercantile policies that have been put in place focused on this industry from the Chinese side for many, many decades, driving the price to a position where the view was you could not have scaled ex-China volume enter the market.

When the incentive for the Chinese to flood the market effectively disappeared, particularly now that you have the 2 only scaled producers of this commodity with a price floor, you've seen pricing react in a way where I think it is getting much closer to a rational place. I don't think it's anywhere near the incentive price to drive the supply reaction that I think we will need. But it certainly speaks to, I think, the fragility of what the market price had been when sort of denominated by the Chinese producers.

Yes, agreed. I think the only thing I would add is that April last year, China restricted exports of a handful of important rare earths. And at the same time, MP halted exports of concentrate to China, which were a very voluminous source of supply for China's processors. So I think in addition to the fundamentals catching up in China on the price side, they're also seeing tightness with respect to upstream supplies, and that is contributing to the price levels that we're at today as well.

So let's pick up on the incentive price comment. So as equity investors, when we think about -- we think about $110 a kilo as being how we should think about projects. So 2 questions. Is $110 as good as it gets? Where do you see prices going to, Ryan? And then perhaps the second question is where do you see that incentive price level?

Yes, sure. I don't believe it's as good as it gets. Long term -- medium to long term, our view is $150 per kilogram for NdPr is a price point that makes sense in terms of how we see demand evolving, elasticity to price evolving and just supply-demand fundamentals evolving. But we may have some ups and downs in between where we surpass that level or maybe where we dip slightly below, but $150 is what we think makes sense.

I think from our perspective, with commodities, you never know. But I think the thing to really keep in mind is when you look at the potential projects that are slated to be developed, most of the time, we sort of have an internal joke of you take the 3 -- you go out to get 3 bids on an EPC contract to build a facility. Generally, you add those 3 up, and that's what it actually costs to build it. Time line is maybe not 3x, but it certainly is longer than you think.

And so from a capital intensity perspective and a scale perspective of all of these individual potential projects, I think there needs to be a very significant price reaction to drive the sort of volume that I think this market will need over the long term. And so short and medium term, it's anyone's guess. But undoubtedly, I think up and to the right is where prices need to go to support some of these projects coming online.

Ryan, as you alluded to, MP's CEO, Jim Litinsky, captured the attention of investors and the rare earth market on the Q1 '26 call when he declared that he wouldn't be surprised to see prices of the 2 heavy rare earths, terbium and dysprosium decline from here.

Yes.

Because I mean the conventional view is the only direction for those is up.

Yes.

So what would cause prices of terbium and dysprosium here today to actually decline? And then what are the risks that they actually increase?

Sure. Look, I think from our perspective, zooming way out at a very high level, I think the view internally is if you look at the charts that we put up, if you trace what we expect magnet capacity to look like, NdPr will track that chart and that trend line either exactly or plus a bit, maybe 1.05 to that line. Heavies, on the other hand, we think will grow at a much, much slower rate given what we've seen from the technological innovation that we've been able to bring to bear, that we see the Chinese bringing to bear very aggressively within their market.

And then also looking at the mix of use cases with robotics eventually being the largest driver, there's a significant portion of the robotics market that with today's technology, forget tomorrow's technology, does not require heavies within the magnet composition. And so you combine all of that, and I think our view is just that the demand curve is much less attractive in the magnet heavies, if you will.

And on top of that, if you look at the structure of the market in the same way that we think metal overall is somewhat underappreciated as a bottleneck in the space. People talk about heavy rare earth ore bodies and sources of heavies. They forget that it's billions of dollars to build a refinery to actually turn those into usable products. And the interesting thing is you're seeing similarly to the concentration and benefits of scale that you see on the light rare earth side, I think the only 2 scaled Western separators of heavies at this point are going to be ourselves and Lynas.

And so from that perspective, I think we are in a place where a lot of upstream capacity is potentially available that is richer in heavy rare earths. I think the refining complex is relatively tight and very capital intensive. And so it puts everyone in a position where if you forecast out many, many years, you're looking at a price differential ex China versus in China right now of nearly 4x for dysprosium and terbium. When I am able to compete from a willingness to pay perspective with my heavy rare earth separation capacity online, that allows me to bid a different way for these feedstocks. And so ultimately, I think there will be real convergence. And so assuming that terbium is $4,000 forever, I think, is not a great bet to make.

Yes, that's very fair. But -- so Ryan Castilloux, in your presentation, I mean you mentioned, I think, a fairly bullish comment on terbium and dysprosium. I think that was more short term, but can you clarify what?

Yes. Yes, it is short term. So agree with Ryan. MP and Lynas are likely to be the near-term suppliers of heavies. But today, those supplies are just coming into their own, and it will be a seller's market. I think there's ample demand given the magnet factory capacity that's coming online that Ryan and Lynas can set prices as they see fit. But completely agree, the $4,000 that we see today, that big differential is going to compress, and that's very much part of our own forecast for DyTb. Yes, not much else to add other than that. I think your answer was very solid.

So let's talk about demand for rare earth magnet, maybe [ Ryan C ]. So we like to think on the sell side that we're very good at forecasting demand. But in reality, those expectations for EVs and wind turbines probably disappointed. But yet today, we're still in a balanced market, as you pointed out. So what subsectors of demand have picked up the slack and surprised to the upside?

Yes. Great point. Off the top, I guess I'll acknowledge that all forecasts are wrong and some are useful. And that is where we aspire to exist all the time. There's a lot of decimal places that you have to predict to be absolutely right. Certainly, there's a variety of drivers of demand as we saw in the chart that I showed. Basically, every avenue of demand that I plotted is continuing to grow, whether that growth is double digit, whether it's GDP plus a couple of points. Growth is happening across the board.

There are very few sectors today where demand for -- that use rare earth magnets where that demand is declining. I think consumer hard disk drives is one that comes to mind, but there are few and far between. The EV space has not performed as was perhaps projected or expected 5 years ago, but I think the devil is in the details on that. What has really not performed as expected was full-battery electric vehicle sales and deployment. And we now see automakers refining their own strategies to incorporate more hybrids into that mix.

What has picked up the slack there is largely plug-in hybrids and soon will be extended range EVs, so-called EREVs. Looking at the market in China, EREVs over the past 2 to 3 years have been extremely popular. They were the fastest-growing subset of EVs. And in a typical EREV, it not only has the powerful motors needed to drive that vehicle forward, it also has a generator to convert power from a gasoline engine and charge the battery as it moves. It sounds archaic on the surface, but it's a very popular technology that addresses that range anxiety. And in China, with the popularity of those EVs, it ultimately became a net positive for neo magnet demand, given that an average EREV in China has a combined motor generator power, maybe 2x that of an average battery electric vehicle.

So when we look ahead at what is coming in the West, the EREVs are coming in full force. We continue to see major OEMs announcing new models that will hit the roads in the next 2 or 3 years. So that is a net positive that is pulling up the slack. And another one quickly is that all types of vehicles, whether electrified, whether internal combustion engine, have a variety of micro motors and sensors and speakers throughout that also use neo magnets. And as we move over time, the number of micro motors, the number of electrified functions in a vehicle continues to expand. And that, too, is pulling up the slack where battery electric vehicles have somewhat disappointed.

One mental model for thinking about demand, and Ryan Castilloux, I'm going to direct this to you first, but Ryan Corbett, of course, if you have any views, I'd love to hear it. But one mental model for thinking about demand is GDP growth level end uses and then the really high-growth stuff, and that's electric vehicles, it's air application, it's robotics and defense. I mean today, where do you see that split? And then over the next 5 years, so just in the short term, where do you see that split going? And then how are those traditional sources of demand going to either contribute or take away from that? Do you see them being a net positive or net negative?

Yes, great point. There are a few demand drivers in the rare space that track GDP on a one-to-one. Almost every growth, even industrial, consumer electronics is GDP plus. And in some cases, they're accelerating for a variety of reasons. Today, the market is approximately 40% legacy applications that are relatively price sensitive. In 2015, it was a split between 50-50. And as we look out to 2040, it is going to be approximately -- I think it's 76% driven by those high-growth end uses, robots, EVs, wind, energy-efficient appliances, industrial applications versus 24% that will be driven by price-sensitive, ubiquitous gadgets and electronics where the price of magnets makes up a significant portion of overall cost.

So that leads us to a future where we see demand being less sensitive to price than it is today and than it was in the past because that lion's share of demand in the future will be within applications where there is a system-level benefit that the rare earth magnets provide. So to add some color on that, if we consider an EV today that uses a permanent magnet motor, that is the most efficient motor available. Thus, it uses the least amount of battery capacity to do a unit of driving range. That allows an automaker to in turn, thrift the size of their battery, which translates into a very material savings.

And thereby, there is a lot of wiggle room for prices to go up before it would ever make sense to switch to a rare earth-free alternative. The same goes if we consider an HVAC system in a hotel, probably one of the biggest spends of the operation annually. Consider open air fridges and freezers and grocery stores, also a massive spend. So in those cases, they use permanent magnet motors, to power compressors for HVAC, for fridge freezer, and that induces a massive savings over a year of operating and again, allows for a lot of price increase on the rare earth side before it would ever make sense to switch to an alternative.

I think the systems level point is so important. Because I think you think about it from the perspective of huge growth vectors in the U.S. economy being the build-out of data centers and AI and things like that. And so your point on HVAC is a critical one. If the binding constraint for the growth of that market is power, you have to focus on ways to reduce power consumption. And the way to do that is introduce, if you haven't already, permanent magnet motors within those various use cases. And so just all of these trends sort of converge in a way where these products are so critical to growth.

Folks, if there's anybody in the crowd that would like to ask a question, we do want to give you a chance to do that. [ Jack ], I'm not sure if you saw the hand go up here, but there's a question right here.

[ Shawn Milan ] from [ VanEck ]. Ryan, can we talk about just recycling? You've got recycling magnet concept with Apple. And maybe can we also just talk about swarf and what's the sort of cycling process on that, please?

Sure. Yes. One of the elements of this industry that further solidifies, I think, the criticality of vertical integration is the fact that from a material yield perspective, going from a magnet block to a finished magnet, oftentimes best case is you get 70% material yield. You have to slice grind and shape the magnet to its ultimate final shape to fit into a rotor, you lose a significant amount of the material in that process. That material that's from the cutting and slicing and grinding is called swarf. And so that's a great example of what we call post-industrial potential recycling opportunities for us to bring back into the fold of Mountain Pass.

The other example, of course, is with Apple as our foundational customer in that recycling business, end-of-life iPhones, right? Granted in any individual iPhone, the magnet content is quite small. I think that's why it's actually a fairly attractive business, to your point on price elasticity. But at the end of the day, there are billions of devices. And so you combine that and it can be a real driver of potential recycled feedstock. And so I think the thing that's so interesting to observe is in order to have a competitive magnet business, what you really need is an integrated ability to recycle your swarf and ultimately, to be as competitive as possible, bring in end-of-life products into that -- into the fold.

And so we are building out a dedicated recycling circuit at Mountain Pass. We think that that's a huge competitive advantage. And having that integrated with the scale that Mountain Pass brings to the table and sort of the baseload supply, if you will, of the virgin feedstock, it allows us to be able to accept such a wide range of potential feedstocks because any one piece of the puzzle within the scale of Mountain Pass is small enough that we have more degrees of freedom to be able to operate efficiently and recycle efficiently.

And so certainly, that is a big portion of the market in China. Most of that product right now that's post-industrial is consumed back into the production process, given they have not necessarily vertical integration within one company, but certainly within country. I think we really are the only ones that are bringing to bear vertical integration within one company and certainly within the United States to be able to achieve that.

So Ryan, can I sneak in a question here? So if you think about the ecosystem that's needed for the rare earth mining and the refining and the magnets, what are we missing in the West versus China, for example, which has had a big head start? Like I know Lynas is having issues with power, for example, at Kalgoorlie . So what's missing in the ecosystem and what?

I think that at the end of the day, if you're looking at a purely Western supply chain, it starts with the ore body. We've been in this industry for long enough that we've looked at most every opportunity out there. And at the end of the day, one of the biggest competitive advantages that we have is the scale and quality and mineralogy of the ore body at Mountain Pass. And then combined with the fact that we have co-located and optimized refining for that feedstock.

In the Western world, there is nothing of similar quality or scale available. And what we need is scaled incremental supply. And so certainly, to your point on the Chinese may have larger scale, for example, in commodity chemical reagents. We're a large consumer of hydrochloric acid and caustic soda. Certainly, they are able to procure those materials cheaper than we are. We have ways to address that. We certainly are able to compete from a cost perspective. But at the end of the day, if you don't have quality feedstock, it's all for naught.

Ryan, unless you had any further thoughts on that?

Not really. No, I think Ryan hit the nail on the head with that. The bottlenecks that we foresee in the imminent near term, I pointed out in my slides, heavy rare earth production, metallization, and that's at a holistic view for all of that capacity to be realized. And beyond that, I think it's an important point Ryan made about the whole ecosystem that surrounds the industry to provide reagents, to provide acids and bases is in its infancy because the rare earth industry is also in its infancy outside of China. So that, I think, presents a massive opportunity for people to capitalize on the rare earth industry's growth outside of China by becoming suppliers of some of those key chemicals, reagents, et cetera.

I think this is a good point to leave it on. Gentlemen, thank you for being here. Everybody, thank you for your attention today.

Thanks.

Thanks.

Thank you.

Hello, and welcome to the MP Materials Q1 2026 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time.

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 2026 Earnings Conference Call. 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.

As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation, earnings release and in our SEC filings. 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 appendix to today's presentation. Any reference in our discussion to EBITDA means adjusted EBITDA and tons means metric tons.

Finally, the earnings release and the slide presentation are available on our website.

With that, I'll turn the call over to Jim. Jim?

Thank you, Martin, and thank you all for joining us today. Building on a very strong 2025, we carried that momentum into 2026, delivering solid operational and financial performance across our platform in the quarter. We continue to scale and execute with discipline.

In our Materials segment, the team produced a record 917 metric tons of NPR oxide up 63% year-over-year and 28% sequentially. We also began initial shipments to our newest U.S. customer referenced last quarter driving total NDPR oxide sales of 1,006 metric tons more than double prior year levels and 79% higher than Q4. We also delivered 1 of our strongest concentrate quarters producing just under 13,000 metric tons of REO, a 6% year-over-year increase and our highest first quarter output to date. Importantly, Michael and the team continue to make meaningful progress on the heavy rare earth separation circuit, which we expect to begin commissioning here in the second quarter.

In parallel, we meaningfully advanced the engineering design of the recycling circuit underpinning our agreement with Apple, another critical step in building a differentiated closed-loop supply chain. Michael will provide additional details on these and other projects shortly.

Strong sales volumes, improved market pricing and the PPA agreement combined to generate $114.5 million of materials segment revenue and PPA income, approximately double last year's first quarter and generated $36.7 million of segment adjusted EBITDA in the quarter.

Turning to our Magnetics division. We continue to make steady progress commissioning our commercial production equipment. Magnetic performance is meeting customer specifications, and we remain focused on ramping the core processes with Precision. Building on that foundation, we are advancing through customer validation ahead of full production.

In parallel, we recently broke ground on 10x, and we are advancing every aspect of the project with urgency. Drawing on the hard-earned lessons from constructing, commissioning and production at independents we are confident that we can move faster and execute better as we scale this platform.

With proven partners and full Department of War support we expect construction activities to accelerate throughout the year and we'll provide updates as we progress.

On the financial side, as we noted last quarter, we received a $32 million Apple prepayment in February, bringing total Apple prepayments to $72 million. Alongside that, magnetic precursor production and independence drove $21.1 million of magnetic segment revenue and $9.6 million of segment adjusted EBITDA in the quarter.

Overall, we are off to a strong start in what we expect to be a consequential year with policy tailwinds and continued urgency around onshoring and supply chain security, we are advancing our platform with momentum, executing with discipline and delivering durable financial performance.

With that, I'll turn it over to Ryan to provide a brief overview of the quarter's financial and operating metrics. Ryan?

Thanks, Jim. At the consolidated level, the company generated $132.9 million of revenue and PPA income, representing a 28% sequential increase from the fourth quarter along with $36.6 million of adjusted EBITDA. These results were driven by the record NPR oxide sales volumes, higher market prices and PPA income. These factors also drove adjusted diluted EPS to $0.03 per share compared to a loss of $0.12 per share in the first quarter of last year.

On a sequential basis, adjusted EBITDA declined modestly, primarily reflecting the composition of PPA income in the prior quarter. As of March 31, we had approximately 815 tons of NDPR oxide and metal on hand in transit at toll processors or waiting for shipment.

Regarding pricing, most contracts continue to price on approximately a 1-quarter lag to prevailing NDPR market prices with shipment timing driving some puts and takes.

Based on our current view of sales mix and timing, we expect second quarter realized pricing to be in the low to mid-90s per kilogram with the PPA agreement mostly offsetting any difference between our realized price and the $110 per kilogram floor.

As concentrate production available for stockpiling continues to decline with the ongoing ramp-up of our midstream operations and with NPR market prices remaining close to or above the $110 per kilogram floor, we do not expect to generate a material amount of PPA income from stockpiled concentrate in the coming quarters.

Turning to magnetics. As Jim noted, the segment delivered another solid quarter of revenue and EBITDA performance. This leaves approximately $62 million of prepaid revenue to be earned for magnetic precursor products over the next 4 quarters on a modestly declining basis quarter-to-quarter. Once this prepayment is fully recognized, we would no longer expect to produce such products for external sale and instead we'll dedicate metal production capacity towards our needs for the manufacture and delivery of finished magnets. We continue to expect initial magnet revenue in the second half of 2026, beginning with modest deliveries as capacity ramps over the following several quarters.

While financials quarter-to-quarter will be impacted by the eventual roll-off of precursor product deliveries, the early scaling of magnet production, timing of certain product testing milestones at our customer as well as investments in our team and product development capabilities in the short term. We are setting the stage for scaled manufacturing for and strong financial performance from our marquee contracts with GM, Apple and the Department of War. We remain very pleased with the progress from the team and the significant strategic and financial opportunity in Magnetics, where our scaled vertical platform meaningfully sets us apart.

Regarding cash flow. CapEx in the quarter was $77.4 million with about 60% attributable to the Magnetic segment. Second quarter CapEx will step up meaningfully as we acquired the 10x site, broke ground and are accelerating construction. We continue to expect full year CapEx of $500 million to $600 million.

Lastly, we ended the quarter with $1.7 billion of cash and short-term investments on the balance sheet. Together with strong operating cash flow, this fully funds our long-term capital plan and preserves our fortress balance sheet.

With that, let me turn the call over to Michael. Michael?

Thanks, Ryan. As discussed, we delivered a solid quarter of production at Mountain Pass with concentrate recovery and grade performing particularly well. That performance stands out even as we continue to experiment with new processes and across different components of our ore body. These efforts are yielding valuable insights that are informing operational optimizations, and we are encouraged by the potential to translate those learnings into sustained performance gains.

In our midstream operation, prior process enhancements contributed to strong NDPR production during the quarter. Importantly, we see meaningful opportunity for improvement across roasting and leaching and product finishing circuits. Over time, we expect these initiatives to increase production volumes and reduce costs.

As planned, we successfully concluded our semiannual maintenance outage in April, which included installation and commissioning periods associated with several projects. These projects caused a slightly slower resumption to normal production, and as such, we expect to achieve a single-digit quarter-over-quarter decline in NDPR oxide production in followed by significant sequential growth in Q3 as the benefits are fully realized over a full 3-month period.

Following the commissioning of the remaining commercial scale processes at independents in Q4, we are now focused on ramping the facility, driving throughput, improving yields and ultimately stabilizing operations. This is detailed painstaking work that takes time to fully optimize but we are making good progress.

We have a strong and growing team in place and the core processes are translating effectively from development into production. The magnetic performance of our commercial magnets is meeting customer specifications, confirming that the system is operating as intended at scale.

In parallel with the commercial ramp, our product development efforts are advancing. This includes new magnet grades and specifications with improved underlying chemistry, including materially reduced heavy rare of content. This work is aligned with customer programs, including Apple and the Department of War.

As our Magnet Recipe road map expands, we are positioning the platform to address a broad portion of the commercial market, including emerging applications such as robotics, drones and defense with meaningfully reduced, and in some cases, no heavy rare of content.

Back in Mountain Pass, we expect to begin recommissioning the first phase of our chlor-alkali capability in short order, representing an important resiliency and efficiency opportunity. While our primary reagents, hydrochloric acid and sodium hydroxide, are available domestically and are not directly impacted by recent global supply chain disruptions. Chlor-alkali provides a compelling opportunity to further reduce external dependencies lower our environmental footprint and reduce costs over time. Our heavy earth separation circuit remains on schedule to begin commissioning in Q2 and to produce terbium and dysprosium later this year.

In addition to those products, the circuit will generate 2 intermediate feedstreams mixed samarium europium gadolinium and holmium tyletesium plus yttrium concentrate, that we can either store for future separation or sell to third parties, supporting broader supply chain development.

Under our agreement with the Department of War, we are committed to producing high-purity samarium oxide, and we continue to make steady progress on plans for that product alongside the potential for gadolinium oxide production and other attractive HRE product capabilities.

Separately, our magnet recycling line in Mountain Pass developed in support of our Apple agreement, has completed conceptual design and is further advancing engineering and procurement. This line represents both an important strategic asset and a compelling business opportunity closing the loop on our end-to-end capabilities and creating an incremental source of third-party feedstocks containing both light and heavy rares.

In addition to breaking ground to 10x, our expansion efforts at Independence towards 3,000 metric tons of annual magnet capacity, also in support of our Apple agreement continues to advance. Design is nearing completion. All major equipment is now in order and we remain on track to achieve our targeted start of production dates.

Overall, this was a very solid quarter of execution across the business. We delivered stable upstream performance, continue to advance our midstream operations, confirmed the viability of our commercial magnet processes and made steady progress across a broad set of growth initiatives.

As we move through the remainder of the year, our focus remains on disciplined execution, applying what we learn and converting that progress into higher output, lower costs and an increasingly integrated operation. I'm encouraged by where we are continuously impressed by the ingenuity and grit of our team and optimistic about the path forward.

With that, I will turn it back to Jim.

Thanks, Michael. As we have discussed today, 2026 is off to a strong start. As we look ahead, the strategy is clear: scale to capture demand complete the integration of our platform and execute with discipline. We are the national champion with a unique platform grounded in real assets real production and real customers.

Moreover, as I have consistently said, I continue to believe that access to NDPR oxide will remain the binding constraint for economically viable rare earth magnet production outside of China for at least the next 5 years.

During the quarter, we saw the Japanese government and industry secured nearly all of Lynas' NDPR output under long-term arrangements. As a result, there is very limited uncommitted NPR supply available to support what Adamis research projects to be more than 60,000 tons of existing and announced Western magnet capacity over the coming years. A useful rule of thumb in the industry is that every 2 tons of magnet output requires approximately 1 ton of NDPR oxide feedstock. Put differently, bringing online a 10,000 tonne magnet facility ultimately requires upstream mining and refining capacity on a scale comparable to Mountain Pass and industrial capability that would likely require over 5 years and substantial capital to replicate, even assuming such a resource were identified today. We believe this reality strongly validates our vertically integrated strategy and positions MP exceptionally well as the market continues to evolve.

Importantly, we are doing so with substantial contracted visibility across the platform, including our partnerships with GM, Apple and the Department of War. These agreements provide durable long-term growth and cash flow with meaningful upside as we continue to scale.

We are confident in the path ahead and grateful to our team and partners for their continued support.

With that, operator, please open the line for Q&A.

[Operator Instructions] We'll take our first question from George Gianarikas with Canaccord Genuity.

Hi, everyone. Can you hear me?

Yes, George.

Jimmy, just sort of addressed this, and I'm sure you've noticed, but there's now a lot of momentum outside of MP to build a Western magnetic set of champions. And you've been on the journey for some time. And as you move towards your 10,000 ton target. How would you characterize the knowledge or operational moat you've built through stages 1 and 3. And specifically, if you're a greenfield competitor today, what are the primary set of barriers to catching up?

Sure. Well, thanks, George. And yes, I mean, as you said, there's a lot out there. I think capital formation is generally helpful. We want to see more in the supply chain. So it's good to see a lot of projects out there. Obviously, with respect to heavies, for example, it's great to see capital formation on that because from a heavy standpoint, we are focused on a pretty diversified feedstock supply chain. We're not necessarily as interested in upstream project ownership. So we want to see a lot of capital formation out there. We think that having our existing refinery is really a significant advantage, at least for the foreseeable future, 5-plus years because any of the projects that we see around the world, ultimately, if it's non-Chinese supply chain, it's ultimately going to come into or very likely come into our refinery. And so we don't necessarily need to be involved in those projects to grow our business, but we can certainly benefit from them. And what I would say, I mean, I think what -- I guess, these projects are really hard, having done this for a decade now. I think that there's a tendency out there to look at projects and say, P-times-Q equals this. And so that's the cash flow of the project. And the reality is, is that these typically take a long time to bring online. They're very often more expensive than you think. It takes several years to ramp. You don't just build a facility and turn it on. And often, when you look at sort of the potential of a deposit versus what the reality is once you get through the processing challenges even if it's all the way upstream, just to get recoveries what you typically find is sort of what your sort of theoretical opportunity is, is not necessarily what the resulting opportunity is. And so I think that's a -- it's a long-winded way of saying that we really -- we take a careful view about where we're going to commit capital because I joking you may have heard me say this before, George, but there's that famous Bezos expression, your margin is my opportunity. We view it as I look around and I say, your investment is our opportunity, sort of the Litinsky corollary to that statement for MP, which is just we want to see a lot out there. We're a little skeptical that people will be able to bring online projects as quickly and get pricing that they think and all of those things that go into when sort of the fantasy story becomes a reality. But we do think that ultimately, it is good for the supply chain. It's great to see governments around the world excited. It's great to see capital formation. And I think, ultimately, it's going to be really beneficial to us because we have the great position of, we control our fate here from the standpoint of we continue to execute our cash flows are contracted. If you look at GM Apple, the Department of War and the growth of our business through 10x, having all of that business contracted, knowing that we have, from a financial standpoint, we're completely protected.

And then lastly, and sorry for the long-winded answer, but it's such an excellent question, just given everything we see out there. But I do want to reiterate, George, the comments I made on the -- in the prepared remarks about NDPR oxide being the binding constraint. I really would -- not to pitch competitor, but I would recommend people look at the Adamis intelligence research. And if you look at the next, call it, 18 months to 2 years, we see, call it, roughly 60,000 tons of magnet capacity in the non-China sort of the non-China world. growing to something like north of 100,000 tons. And if you look at the only real scaled material out there is MP and Lynas. And Lynas is spoken for with Japan. Obviously, we're going to be able to feed our magnet facility. And so I see all of these magnet businesses out there and I'm just wondering where the feedstock is going to come from. And so again, I think it positions us really well. I want to be realistic. I don't want to discourage a lot of investment around the space. But I do think it's going to set up some amazing opportunities for us.

It's okay to pitch Adamis, they're great. And just 1 quick follow-up. How are you adjusting, if at all, your metallization strategy as you ramp production in magnets?

Sure. Well, Michael, do you want to cover metallization?

Sure. Thanks, so much. Our view is to have a hybrid approach where we continue to operate. And to expand our capability at independence. We will have capability at 10x. And we're talking to domestic and international partners on further mineralization. We currently utilize certain total processors. And we expect to continue to use that while we look at other low-cost low-cost metallization options around the world.

Our next question comes from Brian Lee with Goldman Sachs.

I guess first question I had was just around the Materials segment EBITDA margins. They were pretty healthy here, maybe ahead of expectations. One, would you say that's fair? And is that related to better price? Or are you seeing anything on the cost side as well? Maybe if you can walk us through some of the puts and takes? And then also how to think about EBITDA margins off these levels going forward as volumes ramp?

Yes. Brian, it's Ryan. Thanks for the question. I think as we look at the performance in the Materials segment, certainly, we were pleased with Michael and his team's ability to continue to ramp production ahead of expectations there. So I think that's great. We also had a very successful sales quarter. As we've talked about in the past, there are always quarterly puts and takes on shipment timing as it relates to sales recognized ultimately in that 3-month period. But certainly, with the exciting new partner we announced last quarter, we were able to start deliveries into that contract as well. And so that drove some incremental strength in sales volumes. I think that we continue to see a clear path to us pulling costs out of that business. We see no material change to the trajectory that we've laid out as we get ultimately to run rate volumes stably operating at run rate volumes. And so we still continue to march towards that. We have work to do there, but I think that the path is quite clear. So I don't expect that there's really anything in this quarter that caught us materially by surprise. I think we're really just heads down in execution mode continuing to move towards our ultimate targeted throughput and targeted cost structure.

Okay. Great. Helpful. Appreciate that. And then maybe just bigger picture, a lot of good operational milestones here and discussion. But on the customer development side. I know last quarter, you had announced a new customer. I know it's not reasonable to assume a new customer every quarter. But can you speak to kind of where the engagement activity levels are and then kind of how you're looking to secure more offtakes and maybe what types of customers you're most engaged with here?

Sure, Brian. I mean, the engagement is -- it's very high and it's it has been pretty extraordinary and it remains as such. I think we're having a lot of great conversations. Certainly, what we see around the world with the change in warfare, I think there's a particular and increasing recognition that the world has changed. And then obviously, given all of the excitement that we see in physical AI and what that means, I think already NDPR is a binding constraint in the magnetics business. And I think as we see that growth, I think that people, particularly in some of these growth verticals are recognizing that as well. So it positions us really well. What I would say and just remind you, and I know you've heard me say this, but our business is contracted. We're in a good position with respect to Obviously, independence is going to be essentially for GM and Apple. And then when we look at 10x, we will take our time to kind of thoughtfully sort of build out the customer base of that facility, but it certainly is not for lack of interest or demand we will approach that methodically. And I would say there'll be some customers that are extraordinarily sensitive where you certainly won't hear a name or an announcement. And then there'll be some that want to announce. But what I would say is that, that discussion continues. We're going to -- it's going to -- I think it's going to be really attractive for us, and we'll just keep -- stay tuned obviously for things we announce in time.

Our next question comes from Corinne Blanchard with Deutsche Bank Research.

Can you maybe talk about the cadence of production that you're expecting for the rest of the year? And then my second question would be maybe like a general view on the Middle East conflict any change in customer approach or demand?

Michael, why don't you go ahead and take the first part and then I'll do the second part.

Okay. Great. Thanks. As I mentioned in my prepared remarks, we expect production of DR in the second quarter to be down slightly quarter-over-quarter. We do expect for the third quarter to show a material improvement again. And then I expect continued progress towards reaching our 500 tonne per month run rate by the end of this year. So no real change to what we previously discussed.

And then, Corinne, on your second part on the Middle East, sort of just expanding on that, touching on it again. It started over the past few years as we saw what happened in Ukraine and the developments around essentially physical AI, right, the use of drone and robotic warfare. And then I would say that the events in the Middle East have certainly just sort of accelerated and magnified, I guess, pun intended, the perspective around drones and robotics being the future of warfare. So what I would say is I think that the importance of this supply chain was sort of already widely known. So sort of like is Infinity times 2, still infinity kind of thing, like I don't think we necessarily needed those events to remind people of the status quo and sort of the rare earth magnetics as a national security industry needed to change. But there's no question that it is just a further recognition and maybe even pulling the timetable and the scale of that demand forward. I think that it's very likely that the future of warfare will be around millions of eventually not billions of robots and drones working in cohesion. And obviously, that is just a huge demand accelerant for rare earth magnetics.

[Operator Instructions] We'll take our next question from Lawson Winder with Bank of America Securities.

Nice quarter, great update. With independence, that ramp-up appears to be going extremely well. At this point, I expect you to be somewhat close to knowing a sensible time line to reaching nameplate capacity of 1,000 tonnes on the first phase. Is that something you could start to guide us to now? And then -- yes, and then I have a follow-up on that one.

Lawson, I'd say we're obviously incredibly pleased with the performance of the team there. There is plenty ahead of us, though. We are now at the point where all of the commercial equipment is commissioned. And we're in the stage right now where we're in the product qualification process with our foundational customer with GM. As we probably talked about before, that is a fairly rigorous and demanding process that's not really just about can you make the part. It's about defining a very detailed quality management plan, testing run-at rate scenarios. And frankly, a lot of this has to do as well with taking validation parts that have to be made on the commercial equipment, not the NPI equipment, putting those parts into motors doing regulatory testing, things of that scale. And so there are a lot of puts and takes as to how that will look over the next couple of quarters. And so we're pleased with where the team is. But certainly, we expect that to take a bit of time, and then deliveries will be modest and then grow over time. We've guided to the fact that we expect to be in production for our second marquee customer there towards the middle of next year for Apple. And so when you start to layer those volumes on, certainly, the momentum starts to build. So from that perspective, I think we're pleased with our progress.

And follow-up on that would just be thinking about 10x and really the second part of independence with Apple. I mean, how would you frame the timing of the next phase and then 10x given the first-of-kind learnings that you've already had at independents?

Yes. Look, I think certainly, we have learned a lot of lessons from building this business from scratch, right? I mean our first Magnetics employee was in 2021. It's pretty amazing to see the progress that we've made, but they're a tremendous set of learnings including right now, as we move through the process, I think Michael explained it well in his prepared remarks, that will give us -- and frankly, circling back to George's question, the moat that we've built from this operational know-how in building this business out is tremendously valuable. And so each incremental customer hopefully is probably easier than the 1 before it. We've given rough guidance on where we think 10x will be from a time line perspective. We are moving with extreme urgency to bring that facility online in line with our partners at the Department of War. And so it's really just all hands on deck from an execution perspective, getting those ramped up as quickly as we can.

Our next question comes from Bill Peterson with JPMorgan.

Nice job on the quarterly execution. I want to ask a few questions just sort of follow-ups maybe with some more precision on some previously asked questions. So taking the cost side, so a year ago, you had a cost bridge outlining a target to drive costs from over $60 per kilogram down to $40 on higher utilization, fixed cost absorption have been as well as benefits from the chlor-alkali. You discussed the chlor-alkali, but as a snapshot, I wanted to check on where you are on that journey notwithstanding the second quarter impact from downtime as well as your path to get to that prior target.

Yes, sure, Bill. It's Ryan. Thanks for the question. I think as I laid out before, with all of the inputs we sort of put into that guidance, we don't see any meaningful deviation from our ultimate plan. I think if you think about taking a snapshot in time in any given quarter, making, let's call it, roughly 1,000 tonnes last quarter. There are a lot of different ways to make 1,000 tons, some are lower costs, some are higher costs. And I think, certainly, as we move towards stably producing at our run rate target, that is going to unlock that operating leverage that we've talked about. Within any single quarter, there's -- there are a lot of moving pieces on investing in this debottlenecking as we speak. And then certainly, I think 1 of the impacts that you're seeing right now where you don't have perfect visibility into the stand-alone NDPR operation is the fact that we're investing quite heavily that shows up in the P&L in ramping staffing for the heavy wear separation facility as well as getting ahead of ramping for team and tools for that chlor-alkali plant ahead of it being online. And so when you fast forward over the next several quarters, you combine getting to our targeted throughput can you bring these operations online is when you really start to see the leverage flow through.

Yes. Thanks for that context. And then maybe following up on Lawson's question. So like to clarify the magnitude revenue trajectory for the balance of the year and into next year. Taking into consideration the declining precursor sales ahead of the finished magnet ramp for your customers. So I guess, in essence, should we assume overall revenues in the magnet segment would decline at some point in the back half of the year or early next year before ramping as a finished magnetron. Just trying to get a sense for how we should model that business from a revenue side?

Yes. Look, I think what we see right now is obviously getting through the PPAP process is going to unlock moving into revenue on the magnet side. It's reality is we are producing behind the scenes, but we need to get into a salable PPAP status to start recognizing revenue there. And so certainly, I think we gave you the moving pieces of the remaining deferred revenue that will roll off and sort of start to decline sequentially. And then we are working as quickly as we can to pick up the delta there on the magnet side. But we'll keep you updated as we get through these next couple of quarters. I think the reality for us is zooming out for a second. Certainly, heads down executing, there's going to be lumpiness in the next several quarters. But if you look at sort of how Jim explained where we are in this business, the operation that we see right now, magnetic characteristics of our parts are performing extremely well. And so we've proven out at this point that we can take what we've done on smaller scale and scale it up. And so it's just a matter of time. And so we're looking forward, obviously, to layering in increasing volumes once we're through the PPAP process, bringing in our next set of customers. And so over the next several quarters, that financial model will certainly start to play out.

Yes. Thanks, Ryan, and thanks to the team for all the insights.

Our next question comes from Davis Sunderland with Baird.

I actually want to start by going back to 1 of the parts of Lawson's question as well, just on Ryan, I appreciate you talking about the learnings. And wondering if you guys could just expand maybe on how the learnings from independents might make 10x more efficient on a dollars per capacity basis or time line or -- any other metrics on how version 2.0 might be better than the first, if you will?

Sure. Michael, why don't you go ahead and take that one?

Sure. Well, certainly, we've learned a huge amount over the last couple of years in designing building and then ramping in new facilities. So there's a lot of engineering that can be, to some extent, copy and paste. We don't need to reestablish certain vendor relationships. We leverage the existing knowledge. So the design process will be a lot faster and as prone to mistake, change order, rework, et cetera. So we're -- certainly, the pace of engineering and design and construction will be a lot faster than expected. We also think the ramp of independence or starting last year and through this year and beyond, will give us tremendous insight into a process producing great magnets, driving cost down. So that will be applied from day 1 into the -- into operation of 10x. And the fact that our teams will be able to travel between the 2 different sites will enable us to leverage that knowledge without having to rebuild it all. So we certainly expect 10x to be significantly smoother in terms of start up, then we will look back on for independents. But of course, the scale that we're doing additional product complexity, there'll be no doubt share of challenges as well.

And just -- Davis, this is Jim. Just adding on to what Michael said. There's 1 point he hit that I think is really important when he mentioned about equipment vendors and how we think about our magnet business. If you go back to when we went public about 5 years ago, and we started the Magnet business from scratch, there were really a handful of things that I was focused on in building that business. Obviously, number 1 is hire a great team, right? We hired a great leader and then we started building out a great team there.

Number 2 on that list was developing a non-China equipment sourcing strategy. At the time, even though the world was in a very different state, we thought it would be sort of very odd and hard to argue that it made sense for non-China supply chain for rare with magnetics, but then be wholly reliant on Chinese equipment, right? And so we started and this probably was certainly expensive and painful to us over the years, but we really built that facility from day 1 with the thought in mind that we needed to truly restore this supply chain all the way through the equipment.

And then the last thing that I think we're compounding on is that the last piece of that sort of great team, adding to that team, equipment, but is sort of mapping and understanding the IP landscape and specifically within their grain boundary diffusion strategy. Certainly, the Chinese magnetics makers are outstanding at pushing the boundary, I guess, again, another pun intended. But sort of Chinese and Japanese industry are very effective about advancing the IP and making the best magnets for the buck, so to speak. And so we were very focused on that from the beginning. And I think we've now taking the MP team to the cutting edge. And as you may have heard me say, I believe over the next few years, we will ultimately leap ahead from an IP standpoint. One of the goals that I've set for the team with 10x is that I believe that -- but when that facility comes online, MP will be from an IP standpoint, we will leap ahead and be the best magnet maker in the world. Obviously, we're going to learn a lot of painful lessons as we ramp that facility and as we grow our business. But we're already thinking about all of those things to make sure that we're leaving ahead technologically. It's not just about sort of building a giant box and putting equipment in it.

Super helpful. And maybe just 1 more, maybe a boring housekeeping question, but probably for you, Ryan. I just wondered if you could talk at all about contract adjusters or any other inflation protection mechanisms you gas might have to I guess, mitigate the impact of increased shipping and logistics cost or maybe this will manifest in a longer than typical sales leg or any other considerations there?

Sure. As it relates to the Materials segment, at least, the shipping and logistics component, at least from sort of cost of fulfillment perspective is extremely minimal relative to the cost of the product. So even with sort of inflation out there in logistics costs, I don't expect that to be a material driver of the business. As it relates to the cost structure and materials, certainly, we've heard other producers, particularly those that are relying on Sulfuric for their process, talk about challenges and cost challenges there. I think we're fortunate that, as Michael mentioned, those are not the materials that we use in our process. And so of course, we're not immune from sort of general inflation, gasoline and diesel certainly are used in our mining fleet, but that is a very small proportion of the cost structure. And so overall, the we feel pretty good. And then magnetics is sort of a bit of a different beast in terms of the way we've set up the contracting. I would say that without getting into details of individual contracts, we have always been thoughtful about protecting ourselves from raw material price increases wherever they come from, any type of raw materials. And so we feel quite good about how we've contracted around that.

Our next question comes from Max Yerrill with BMO. We'll take the next question from Sam Brandeis with Wedbush Securities.

Can you guys hear me okay?

Yes, Sam.

So Jim, with your kind of framing as NDPR oxide as the binding constraint for non-China magnet production over the next 5-plus years, it's definitely compelling with 6,000 tonnes announced scaling towards 100,000 plus limited feedstock with independents, essentially spoken for between GM and Apple, as you guys mentioned, and 10x building out, how are you thinking about the right balance between locking in additional long-tended offtake agreements and also preserving optionality to capture pricing and margin as [indiscernible]?

Yes. And by the way, Sam, it's 60,000 over sort of the next, call it, 18 months, 6-0, which, by the way, apply approximately 30,000 tons of NDPR demand, which -- so it's sort of a -- already, it's quite -- it's sort of blindingly obvious that NDPR is the binding constraint just over the next year or 2. And then that number of 60 is supposed to go to over 100 over the next 5 years. Obviously, all of those won't get built. But I do scratch my head, if you are building a magnet business today without a certain and dedicated feedstock at scale and that's demonstratable. I just don't see how you can produce a magnet.

To answer your question, it's an excellent question. And I think this actually goes down to the sort of the foundation of the company when we started building this business, we were very -- we've been -- we've said this many, many times, which is we view these businesses as distinct the midstream and the downstream, although the strategy to be vertically integrated is critical. We want to make sure that we maximize returns and that we're thoughtful, i.e., we don't rob Peter to pay Paul. So that when we look at our magnetics business, we don't want to subsidize by taking bad pricing, let's say, in the midstream business and think, "Oh, gee, we invested this money in Magna business, and we gave some kind of price protection, and we ended up losing money on that investment. No. It's -- for the most part, we want to make sure that our magnet business is getting material at the equivalent of market right.

Now obviously, there are some puts and takes on contract structure. But for the most part, the Magna business is getting material at market and then is sort of expecting a very attractive return from there. So that's a long-winded way of saying that we will benefit from that exposure, but I actually think there's a compounding effect, which is, yes, the price will go up, in my opinion, for NDPR. I don't think so much so for the heavies. I think actually that if you look I know that there's some talk out there of sort of heavies. And I think, again, nobody knows with commodities prices, but I think versus market expectation, I wouldn't be surprised to see the heaviest prices, specifically the magnetics heavies ITB decline, not the others, just the magnetic ones YTV declined quite substantially from here. because they sort of are secondary now to this binding constraint of NPR. But we do expect to benefit from the price of NPR as well as then the fact that we have this business together. Our customers are going to want to come to us. I mean if you were out there and you wanted to buy a magnet, why would you risk supply chain, even if you're willing to pay more and all of the things to onshore, why would you go out and take an unstable supply chain situation. It's kind of the reason you're there. And so I think we can sit in front of customers and we have, I mean, we're seeing this real time. where because we have the feedstock, we're able to contract long-term attractive business at incremental attractive margins in the magnet business on top of getting the benefit of the price of the commodity.

Great. No, that was very helpful. And to kind of follow up. So you have framed physical AI, drones, robotics, autonomous defense systems. As another step change demand accelerant for the industry and for empty materials in particular. As you talk to customers across these emerging verticals, how are you sizing incremental NDPR demand pull from physical AI relative to the more established EV and traditional defense channels? And how does that reshape how you're thinking about 10x capital allocation and the pace of expansion beyond that?

It's a great question. And actually, that ties into the last question, which sort of is another piece of why I feel like we may really see sort of DYTB prices decline materially is that as we look at the physical AI market. Our expectation is that from a robotics standpoint and some drones, that likely the vast majority of that are going to be heavy free magnets. I mean we're pushing the boundaries today, our ability to produce magnets at the specs that are needed with very little or no heavies is just being the reduction in advances that we're making are pretty extraordinary. And so I think that, it's a great question. It's what we think about pretty much every day in how we're going to build out 10x because I do think that the physical AI boom is so critical from both a national security standpoint, but also just an economic opportunity. And I say this with a big grain of salt. And so again, I want to just kind of say you look at what's happening in some of the AI supply chain out there where all of a sudden in advance happens and then you see this cascading effect, whether it's memory or CPUs or some of these things where things are going parabolic because all of a sudden they realize, "Wow, we have this technology breakthrough and we need more of x."And we don't have it. and it's so critical to downstream sales and value that the prices go sort of parabolic. And I do think -- and again, I don't know the timing, I'm not saying it's next week or next month, but I do think that at some point, as humanoid robotics, in particular, becomes a reality, if we believe what sort of the great technologists are saying, where at magnetics are the key item, right, along with obviously chips and the ability to figure out how to make them manufacture the product. But I do think that there'll be sort of that psychological revisiting of the importance of our product, and we really want to position the business along with some of the other customer areas, but we are very focused on that vertical for when that day comes.

Our last question comes from Carlos De Alba with Morgan Stanley.

Can you hear me?

Yes, Carlos.

Great. So just -- sorry, just 1 question. On -- given the discrepancy between supply and demand that you just alluded to, a very strong outlook for NDPR. Have you assessed what the incentive price would be for NDPR capacity or supply to possibly respond to the demand that will be ahead of us?

Yes. I mean it's a great question. I think about -- obviously, we think about it, we've talked about it over the years. I think that, as I've said, that having lived this for a decade now, getting these things online is once you've identified an ore body, again and have worked through the challenges of sort of what you can really get out of it and you figured out the refining piece and whether you're selling it to a refiner or you're -- let's say you're building a mine and refinery there's a big time component, right? It's not just building a big refinery takes a lot of capital and then ramping it, you don't just kind of hit a button and turn it on, right? There's typically a multiyear period to bring it on. I think that Lynas took over a decade, we did much, much faster. But any of these things, they take time. And so then when you actually adjust a model for not just sort of, oh, we look at our reserve report and then take all these rare earth in there and multiply it by a price and look at that basket and then we think we can build it for X and so therefore, our NAV is Y, right? Like that's sort of the history of the industry and we're seeing it today, right, and out there. And the reality is, as well, you won't get that full basket, you'll get some recovery of that. It won't be perfect. It will take you years longer than you think. The cost of capital inevitably does change over time with cycles. And so what you find is that -- these things are just harder to get online and more difficult. And again, I'll say it 1 more time because I'm just having fun here. But the corollary to the Bezos quote of just your investment is our opportunity. The foundation of this company is sort of benefiting from an enormous amount of investment that we've sort of come in and fix. So I do -- we're already seeing some of that out there that I think we'll get opportunity from that.

But -- and so -- but I guess to directly answer your question, it's materially higher than sort of people think when you add in all those things. And it also really depends on the geology, right? I mean, capital is the easy part if you have an attractive project. The real question is, what is the geology, how are you going to mine and refine and then how long does it take you to get online? And when you add up all of those things, you can come to a number, but it's certainly materially higher than today's prices.

Yes, that makes sense. It's very clear what you alluded to. Maybe it was a very solid quarter, right? Maybe the only thing that I would say is cash from operations, surprised a little bit to the downside. Maybe we should just be marked given the pace in which the company is right now. But how do you see that in the coming quarters so that maybe we fine-tune our model more to reality -- close to reality?

Yes. Carlos, it's Ryan. I'd say, in general, Q1 tends to be our weakest working capital, cash flow quarter. There's a lot of prepayments for certain things that occur in the first quarter of the year, employee compensation, all of those sorts of things from a working capital perspective, end up being a drag in Q1 that's not really repeated throughout the rest of the year. Other than that, it's really just puts and takes. Certainly, there are pieces of the earnings pool at this point and pretty significant amounts of sales that we're starting to collect on as we speak. And so it's really just a timing issue of working capital.

Congrats on the strong quarter.

This concludes the question-and-answer portion of today's call. I will now hand the call back to management for closing remarks.

Well, thank you, everyone. It was certainly an outstanding quarter of execution, and we are going to get back to work and look forward to seeing you next quarter.

Good morning, everyone. We're going to start our fireside chat today. I still see people joining, but we're just going to do a quick intro before we dive into the topic today. So this is our last of our series of expert call/fireside chat that we brought to you guys over the last 3 weeks. We had the first one, thematic view on critical minerals. The second one or last week, with Adamas Intelligence really, I would say, digging into the rare earth market supply chain and the landscape of NdPr was pricing. And then today, we thought we would bring the main player here and that we are going to coverage MP Materials. So I have Ryan Corbett, CFO, and he's going to be with us for the next 35 minutes. So Ryan, thank you for taking the time.

Thank you, Corinne, happy to be here.

So I see -- by the way, just as usual, we're going to give some time for Q&A. So few ways you can email me, you can ping me on Bloomberg. I already saw some questions coming through. But we would prefer if you could just raise your hand and ask a live question. So we're just going to start, Ryan. Obviously, there's been almost 9 months close to a year now since the transformative agreement that you have with the Department of Defense. Can you kick off today's discussion with a high-level view of MP and the integration -- the vertical integration player that you are trying to be?

Sure. Yes, absolutely. I think the important thing to keep in mind about MP Materials for those that are newer to the story is it's -- the strategy of vertical integration isn't just an aim. It's something that we're doing at scale today. MP owns and operates Mountain Pass, which is one of the world's richest rare earth ore bodies. We're the second largest producer of rare earth content in the world today. We're one of the largest refiners of rare earth as well. We exited last year at a run rate of approximately 4,000 tons of NdPr oxide production on our way towards our targeted throughput of about 6,000 from our initial capacity.

And importantly, there's a lot of talk about magnets, of course, given their criticality but there are a lot of process steps in between going from an oxide to a magnet. And so we've been on a pretty methodical approach to solving the entirety of the supply chain issue and really are the only company in the world with a true vertical integration capability that is operating today and generating positive earnings today at scale. So going from mining material, refining that material at Mountain Pass, producing rare earth metals, strip cast alloy flake, finished magnets all under roof is not done anywhere else, and we are doing that today.

Certainly, the framework and really transformative partnership agreement that we announced with the Department of War as you mentioned in July of last year, allows us to meaningfully accelerate that vertical integration and really scale the Magnet business to match the tremendous scale that we have on our upstream and midstream assets, which we're working on as we speak.

Great. And then can you talk about the current agreement? I mean obviously, you have a floor price, you have an offtake agreement, you have a 10X capacity as well. Maybe just step by step kind of right from upstream to downstream, if you can talk about this?

Sure. Absolutely. I think the important thing about the partnership that we have with the Department of War is really -- we were the only ones that were positioned to be able to meet the needs of the moment. What we really need in the United States is to build on the existing capacity that MP Materials has been focused on building since 2017. What that brought to bear for us was a price floor agreement for our upstream and midstream assets referenced on NdPr pricing.

And certainly, I'm sure we'll talk about this, it's really paved the way, I think, for other scaled producers in the industry, and it's really transformed already, and you've seen it manifest in pricing, the way the market operates today. And so on the material segment for us, we have a guaranteed floor price while maintaining upside to market prices for the critical value driver of that segment. In addition to that, one of the exciting parts of this agreement is our 10X facility that we announced in partnership with the Department of War. And so what that enabled us to do is invest rapidly and significantly in taking our ultimate targeted throughput of Magnet production in the United States from first, the initial 1,000 tons, that's the initial capacity of our independence facility that we're ramping as we speak.

We're expanding that facility to 3,000 tons. And then we're building a brand-new facility that we call 10X. That's an incremental 7,000 tons of capacity. Importantly, that entire new facility has an offtake agreement with the Department of War guaranteeing us sales of magnet products as well as a guaranteed minimum earnings profile from that facility. I think the thing that I get questions on quite often at this point is when we announced the transformational deal, we gave a view as to what our minimum earning potential was given the various facets of the agreement. And we talked about roughly a $650 million targeted EBITDA minimum. I think a lot has happened since then. Namely, we announced a transformational deal, another one with Apple where we will be making magnets at independence for them and building a scaled recycling business with them as an anchor customer. In addition to a variety of other initiatives that we have in the works that provides very significant upside.

That minimum guaranteed EBITDA. And so I think -- what's important to keep in mind is of that $650 million of EBITDA, north of $400 million of that is in the Materials segment. And we maintain upside exposure to raw materials pricing and NdPr pricing in that segment. And so we've seen the market react obviously, to the recent supply-demand dynamics and certainly to the fundamental changes that are present in the market given our deal. And so there's a significant amount of upside that we can get into on that in addition to the fact that the guidance that we gave on the magnet segment assumes just the minimum earnings that's guaranteed from our offtake agreement. We expect very significant upside to that as we commercially syndicate the capacity of the 10X facility.

That makes sense. And then we will come back on the 10X facility in terms of like ramp-up and progress. But I just want to continue kind of on government intervention and policy. So we have seen recently some replicates of the deal that you have got, right, if I can say so, with all the non-China firms and very similar floor price. What's your view on this and kind of the overall support that we're seeing throughout the industry? Is it positive that you mean the government is at least not backing away and how the impact on MP basically near term and medium term?

Yes. I think one thing that's probably missed in the investing community is just how meaningfully positive some of these follow on, particularly the Lynas deal, which I'm sure you're referencing is for MP and particularly our competitive position, both in the material space, but namely in the magnetic space. And so undoubtedly, our agreement with the Department of War sort of paved the way for what we are seeing in the market today and you saw a reaction in market prices almost immediately. What I think is underappreciated about how meaningfully different the market is today post this follow-on announcement versus what it looked like before is effectively you have 2 scale producers of NdPr oxide outside of China, with Lynas deal with the government of Japan, they have guaranteed 5,000 tons of their output to the Japanese magnet industry, which also is a great customer of ours in our Materials segment.

They also have effectively a ROFR up to over 7,000 tons. And then when you look at their potential joint venture in Malaysia for a magnet facility, the vast majority of Lynas output is spoken for. Obviously, you look at our business, and we are rapidly vertically integrating. So the concept of the nearly 50,000 tons of magnet capacity that's been announced in the Western world over the last 18 to 24 months, and the availability of the critical feedstock of NdPr to power that is really in question. And so I think not only will you need to see meaningfully higher prices in order to incentivize any sort of reaction. I mean 50,000 tons of magnets is 25,000 tons of NdPr. We're one of the world's largest producers by far, targeting 6,000 tons.

And so the dynamics of this market from a supply-demand perspective, primarily in the Western world ex China has really transformed. And the availability of that product is really a question. And so if you think about our competitive position as a fully integrated magnet producer, the only way to guarantee as a customer that the critical feedstock to power this product is available is to come to us. And so I think we're tremendously excited about what we've seen develop in the market. And I think what you've seen is proven producers are the ones that have been able to garner the requisite support with real teeth in it in order to drive this market forward.

No, I think that makes sense. And we had a very similar conversation with some, Ryan Castilloux from Adamas last week, and I think where really the bottleneck is in the industry. So that's very in line. Maybe one last question. Obviously, we cannot deny it the conflict in Middle East. I think it has begged some investor question. I wonder as well how it can impact you kind of maybe like a positive here? What's your view?

Yes, sure. I think I tend to get questions both on from our supply chain perspective what are the impacts on the business. And then to your point, I think there are implications from a demand perspective. And so on the supply chain side, I mean, obviously, fuel prices are up, fuel, diesel, et cetera are relatively immaterial proportion of our total production base and cost structure. And so from that perspective, there's no material impact. I think there are also concerns globally about sulfuric acid supply this sort of comes back to one of the great advantages of the Mountain Pass ore body being a bastnaesite site ore. We don't do a sulfuric acid leach or sulfuric acid roast. We do an oxidizing roast without acid in order to convert our product into oxide.

And so from the commodities that we do consume hydrochloric acid, caustic, et cetera, we haven't seen a meaningful impact and so from a cost structure perspective or a security of supply perspective, we don't have any major concerns. Certainly, a conflict is a conflict and that's tough generally on shipping, et cetera, but nothing meaningful. I think from a demand perspective, to your point, this really just underscores, we saw it and are seeing it actively in the Russia-Ukraine conflict. We're certainly seeing it with the Iran conflict. This is really almost a drone war. And so when you think about how the market is developing, and I know you covered this a bit with Adamas, drones are flying magnets, flying NdFeB magnets.

And so the reality is that as our industrial base in the United States and particularly the defense industrial base continues to mature and invest in some of these critical enabling technologies, whether it's robotics or drones, these are all major users of NdFeB magnets, even significantly more content often for some of them than you even see on EV platforms and automotive platforms and consumer electronics platforms. And so we remain incredibly excited about the demand opportunity. And when you think about the concept of how demand is shaping up, there are 2 critical elements of that, that I think are important to understand. First is something like a drone, whether it's a consumer drone or a defense drone or robotics application, that is a dual-use technology. And so if you are a producer, an OEM for those types of products, you will not be able to source your magnets out of China. There has to be a scaled producer in the western world where you get your material.

And then on top of that, if you look at the technologies that we're talking about, often these are technologies where both from our technology from a magnet making process and product development perspective and just generally, given the application, there is often much less heavy rare earth demand and content within those magnets. And so really, I think the underappreciated bottleneck here is not access to heavy rare earths, like a lot of folks like to point to is access to NdPr. And so with all of those things combined, again, we think that our cycling initiatives, it really -- the market is playing into our strategy perfectly at this point.

No, that's very interesting. Again, I think that's relatively aligned with what we have talked about with Adamas last week. So let me check -- maybe let me pause here. I know we have 20 more minutes. Does anyone here have any questions? I think I saw some hands being raised at the beginning of the call.

Sorry, we have a lot of people today.

That's good.

That's very good. Yes, I don't see any hands raised. I have some questions but I keep it light. You talked about drone and defense. And kind of don't have to be too deep, but what's your view on the demand vectors over the next 3 to 5 years? Is it really like AI and robotics taking over a part of most of the demand, I think, from Adamas, that was very clear. That was the key takeaway last week.

Sure. Yes. Undoubtedly, there are sort of -- if you look at the business and the demand profile without that significant new growth vector. The market remains very attractive, right, despite EV penetration, for example, not ramping the way that many anticipated 3 or 4 years ago even on ICE platforms, almost every single ICE platform is getting electrified in some way, any pure ICE really ends up being a mild hybrid. And so magnet content per vehicle continues to increase very significantly. And so we continue to see the automotive business as a very attractive and growing business for us.

Our deal with Apple, consumer electronics is growing really rapidly. And I think it's underappreciated, frankly, the scale of magnet demand within consumer electronics. There are the sort of less sexy items, elevators and escalators and things like that, but obviously being levered to real estate. But then you get into sort of these really exciting new areas that we've talked about and so if you look at AI, certainly, the physical layer of AI, robotics is hugely exciting. Every single actuator and you think about the dexterity that's required for these particular use cases is driving and is anticipated to drive really significant demand for incremental magnet capacity. And then you think about almost the underappreciated sort of behind the scenes piece of powering the growth in AI. Data centers need cooling.

Every HVAC system, efficient HVAC system has magnets in it. While there's a lot of focus on memory and what we see is -- not all that memory is flash. A lot of that is HDDs. HDDs are a big spinning magnetic head. And so the use cases there are multifaceted and are growing very, very rapidly. And so that absolutely opens up new and exciting opportunities for us. And then the drone comment that we talked about before, undoubtedly, that's driving new demand, both consumer and defense use cases. And so there are a lot of new growth elements to the story. And I think what was always present continues to be pretty attractive in its own right.

Have you seen a shift in terms of like you haven't announced an offtake agreement with like a robotic company, right? But like have you seen like an increase of maybe people approaching you from that part of the demand? Or is it taking longer?

Well, I think what I would say there is several thoughts. In April of last year, when the initial export restrictions from China were placed on the market, everyone was in tactical mode. Every customer was frantically trying to ensure that their assembly lines did not shut. And we saw some actually shut. We saw an automotive manufacturer have to curtail and stop production. And it's interesting, it wasn't a magnet going into a traction motor. It was a magnet going into a speaker. It's pretty tough to sell a car without an audio system. And so it gives you a sense of just how pervasive magnet content is across all of these technologies that we're used to just being able to buy with no problem.

And so I think what we have seen is a shift from a tactical mindset of ensuring that lines don't shut tomorrow to a much more strategic mindset of how do we ensure over the next 3, 5, 10-plus years, there is a solution here given how rapidly content is growing. And so we announced a strategic offtake for our Materials segment last quarter, which was a very significant transaction for us for an American industrial company that I think speaks to the change in mindset where the end user is now truly focused on ensuring the entirety of the supply chain is covered. And again, that is exactly where our strengths lie as an upstream and midstream producer and as a magnet producer, being able to guarantee that security of supply. So we see a meaningful shift.

And certainly, we have a tremendous number of conversations ongoing. I think what should be clear is General Motors is our foundational customer at Independence. That covers the initial capacity of that plant. Apple is anchoring the expansion of that plant. The Department of War is backstopping from an offtake perspective, the entirety of 10X. So effectively, from my perspective, I'm sold out. Certainly, I think the goal and the interesting thing about the Department of War partnership is if you read the documents that were filed publicly, the target is to work together to develop the various magnet grades, both for their use and for broader U.S. industrial use that opens up the widest aperture for us to address the U.S.' needs. We've already agreed with them on those particular specifications.

And so I think when you fast forward into when we are in production at 10X, we will be able to address the vast majority of the use cases that we've spoken about. And so it puts us in a very good position from a product and process perspective to meet the needs of the moment. And so from my perspective, we are in no rush to announce a bunch of offtakes. We've got sort of the fundamentals beneath us to continue to build this business and do it in a thoughtful way. And we have always been extremely methodical in the partners that we bring to bear on our platform. And so we'll continue to approach it the exact same way we always have.

That's very helpful. In the interest of time, let me move -- one more question on the rare earth's market and then kind of, on your mining and refining progress. So on the rare earth's topic like the market itself. I mean we had a conversation with Adamas about the price bifurcation, right? Like China versus ex-China and I think it's becoming evident. What's your view here? And do you expect the ex China should be around that 110? Do you expect it to further climb up? And then if you can talk us what I believe you are looking at some of the benchmarks, which come from Asia and China, so that's kind of a disconnect here as well.

Right, right. Yes. I think that in general, we're always reticent to give specific price forecast on what we think exactly things are going to do. But when you look at how meaningfully the fundamentals of the ex-China market have shifted over the last 18 months, it's really hard not to be extremely bullish NdPr -- particularly ex China, to your point, on bifurcation. Certainly, you've got the 2 largest ex-China producers now with a price floor agreement with various governments. The conversations that we are having on the midstream side of the business are certainly indicative of the fact that these other potential consumers of product understand that the market has changed.

Historically, the conversation completely centered around Asian benchmarks, that conversation is meaningfully shifting. And so I think we're seeing that pivot happen real time. And so that is a tremendously exciting development in the market, given the fact that we sit at a place in the cost curve where we can enjoy significant benefits from upside in pricing. And to the point I discussed earlier on the need for incremental supply, much of what we are seeing if it comes online, is going to be at a very different cost structure and point on the cost curve than where MP Material sits. And so that really positions the upstream and midstream business for success. And so I think that's a very, very good development. I think that as we think about how contracting will work over time.

The reality is that we've got the opportunity with our recycling business as well to continue to scale and drive incremental NdPr production out of our existing facilities and out of the recycling facility that we're building. And so even at 10,000 tons of magnet capacity, 10,000 tons of magnets is roughly on a yield adjusted basis, 5,000 tons of NdPr. So we already have that 1,000 at our targeted throughput add on to that pretty significant increment from recycling and we have either the opportunity to sell our product as an upstream midstream product into the market and enjoy that upside or continue to grow the magnet business and be able to enjoy the upside via that side of the coin. And so -- what -- I think the dynamics of the market will present to us and what we consistently tend to see is the highest return on capital opportunity for us. Often, it's just reinvesting in Mountain Pass for if you get any other sources. And so I think that, that opportunity set just continues to grow with what we expect we'll need to develop within the market.

Okay. That's fair enough. So maybe jumping on the asset itself and like Mountain Pass. I mean you have NdPr expected to exit this year run rate of 6 kiloton, right, I believe. Can you talk about the next maybe key dates or milestones to reach that target? Are you on track? And then I do believe like about 18 months ago when we all went on site with you guys, there are some discussion about maybe upside for production, like looking at the mine plan improvement, have you been giving more thought on this?

Sure. Yes. I think that where we sit today and our discussion on where we exited 2025 gives us tremendous confidence in our ability to hit our targeted throughputs. At this point, from a milestone perspective, what Michael, our COO guided to last quarter was at least a 20% sequential growth coming into this quarter, a bit of upside in the next 2 quarters, which if you look under the hood, what that really means is for example, in April, starting imminently, we'll take our planned plant shutdown where we do our typical preventative maintenance as well as addressing some of the key bottlenecks in this debottlenecking initiative of getting to 6,000 tons.

And so when you see slight growth sequentially from Q1 to Q2, what that really is, is some downtime and then some pretty meaningful growth coming out of that downtime. And so we will methodically reach and target by the end of the year to be run rating at our 6,000 ton throughput. And at this point, it's really addressing key mechanical and material movements through the plant as well as just continuing to hone and improve mechanical reliability on certain assets. There's a very clear pathway to address these. And so that sort of manifests and our obvious confidence in getting there. I think that what we expect to see from a resource perspective over time, you look at the existing mine life embedded in our S-K 1300 report. I think what we expect for Mountain Pass is many, many decades beyond what's already in that mine plan.

And so the way we've always thought about it is given the way we are running the business and the way we are leveraging the mine and the mine plan to date, and then generally, what we've experienced from our public markets investors is, there wasn't a tremendous amount of value placed on big headlines on resource and reserve statements and things like that. And so we've been focused on running the business. And if there is a business need to further define the asset, we will do so. I think what we're starting to see is both a business need to further define the asset as well as an appreciation, I think, in the investing public for the longevity of this asset. And so certainly, we are looking at the opportunity to further define the ore body. We think there is tremendous potential upside there.

And just putting it into basics, our cutoff grade is 2.5%. Our waste stockpile is probably the U.S.'s second best rare earth ore body. And so there are obvious pretty basic mining technologies that we can bring to bear to be able to leverage that over time. And so I think longevity of the Mountain Pass asset is not anything that I ever lose an iota of sleep over. And it is something that I think we will continue to invest in and prove out over time the potential upside within it.

No, I think that's fair for anyone that hasn't been on site. It's a pretty -- it's an impressive site and operation really. Maybe kind of a similar question for 10X and more like on the magnet and Independence. Can you highlight like the path to the 10X and maybe like the key milestone that investors should be expecting?

Sure. Yes. As you look at Independence, obviously, what we talked about is -- we are beginning the production qualification process for our products and for our commercial process within the facility. We expect to have revenue from magnet products in the back half of this year from a foundational customer. And so from that perspective, there's a very clear pathway to getting through that process and starting to generate magnet revenue out of that plant. Obviously, we're currently generating revenue and earnings from the precursor products that we produce here. We've talked about the start of production for our Apple partnership beginning in the middle of 2027. And so you'll be able to layer that ramp up on top of the ramp of the GM capacity. That -- both of those will be a modest ramp to get to the targeted throughput.

Then you layer on, again, what we've guided to for 10X. While it's an ambitious target, we feel like we've got the pieces in place at this point to get to a mid or end of '28 commissioning of that plant. We announced a couple of weeks ago, we have the site selected. We are imminently about to be moving dirt. We've made a tremendous amount of progress on long-lead equipment ordering, design, et cetera. We're certainly extremely appreciative of the state of Texas and Governor Abbott's office for approximately $200 million incentive package for that plant, of which about $66 million is direct grants to us that we will achieve as we continue on our pathway to execution there. And so again, we've got supportive regulators, supportive environment and an absolute focused warpspeed mindset to get that facility online. And so there are a number of milestones to look out for over the next several years as we bring each of those pieces online.

So that's good. Why would you say it could be the most like a few of the challenges that could arise. Is this more from a technical point of view to reach it? Or is it more like maybe like a government support that could change over the next few years?

Sure. I think, fundamentally, we are in execution mode, right? We've got a binding agreement with our partner in the Department of War. We feel very good about that relationship, and that's enabled us to accelerate our investment plan. We are making tremendous progress as we just talked about on the upstream and midstream side of the business as well as the magnetic side. I think that we are -- we set ourselves very ambitious targets from a technical perspective on the magnetic side of the business. And mind you, we hired our first employee who is our EVP of Magnetics, our head of that business unit in 2021. And so this is a relatively new initiative and what we've been able to accomplish from a product quality perspective already and a process development perspective has impressed us even beyond what were very, very ambitious targets. And so I don't think of this as a specifically technical challenge. This is just an execution and debottlenecking challenge fundamentally.

And that's something that we have proven our ability to overcome with the progress that we've shown at Mountain Pass as an example. It's underappreciated. I think that we had 0 refining really until 2024, and now we are one of the largest refiners in the world from a total standstill. Same with the upstream business. In 2017, we started with nothing. We had 8 employees. And we're the second largest producer of rare earth content in the world. And so I think we have the fundamental building blocks in place and we've proven our ability to execute as an operator over time to meet our challenging targets. And so we expect to continue to do that.

That sounds good. I think we're left with 1 or 2 minutes here. Maybe like a closing comment or commentary for investors. I mean the stock has had a lot of volatility as expected. I think after it was announced the agreement last year, we saw a lot of people just kind of jumping into the name, not necessarily knowing much about what you guys are doing. It was more like a geopolitical and government policy move. And then we kind of start saying like investor coming back to the fundamentals and exactly what we're talking today about progress and execution and even cost. But what would you say to those investors that are still a little bit on the sideline and waiting to enter MP?

I think fundamentally, everything that we've discussed I think, underscores the thoughtfulness and focus of the strategy that we have been on since the inception of the business, approaching this in a staged approach and building a true scaled vertically integrated platform. My view is that there is no one else that has the set of assets that we do that will enable us to meet the actual end need that the market is asking for. And there is no one that can do it at the scale that we provide. And so that scale, your comment on costs. I think this industry is a scaled industry. You look at the structure of the market.

The vast majority of the NdPr market is supplied by 3 mines. That is a structural issue that will not be overcome by announcements of some discovery out here or out there. And so what it comes down to is a demonstrated ability to execute. It comes down to the fact that this is not really an on-the-come story. Yes, we have a tremendous amount of growth and execution ahead of us that will continue to benefit the business and our shareholders. But right now, we are generating significant earnings in our Materials segment that we talked about a moment ago, is a huge piece of the puzzle, a huge piece of the pie for our targeted earnings profile.

And so we have a very unique mix of significant growth in cash from operations while having very high risk-adjusted return on capital opportunities to invest in. And so I'm incredibly bullish obviously about our opportunity set. And the X factor that I think kept a lot of people on the sidelines for a very long time was how do you control for the mercantilist threat from China. And the reality is we have addressed that problem uniquely in the partnership that we've created with the Department of War. And so with all of those pieces in place, we are heads down in executing this strategy.

Yes. No, I think that's fair. The China dependency, not just the fact that they were the #1 but price was dependent on whatever China decided to do, and I think that was a big factor. I think for investor now, you have a certain visibility and path like in terms of financial in the pricing that you get. We're like a minute or 2 late so I'm going to let you go. Ryan, thank you so much for being with us. I really appreciate. I appreciate everyone on the line. That was one of our most attended fireside chat of the year. So pretty good. I'm sure you guys may welcome any investor on site so don't hesitate to reach out through us or through Martin from IR. And yes, thank you again. Have a good day, everyone.

That's great. Appreciate it.

Thank you. Bye.

Okay. Good morning. My name is Bill Peterson, U.S. metals and mining analyst. And we're really pleased to have MP Materials join our industrials conference. They've joined some other JPMorgan events, but this is a company that is no longer just sort of an upstream rare earth supplier. It's really evolved over time. And so maybe -- first of all, we have Jim Litinsky, CEO of the company. He's going to sit here for a fireside chat and answer all of our questions.

But maybe, Jim, can you kick us off with a high-level review of MP's business, the vertical integration strategy that I just spoke to as well as really this great sort of unexpected, but this agreement with the U.S. government and the Department of War.

Sure. So thanks, Bill. Thanks, everyone at JPMorgan. It's good to be here. Although, I guess, some bad weather has made it tough couple of days. So MP, we are America's rare earth magnetics champion. We have a fully vertically integrated business. We mine rare earth material, we refine it. We then send it to our magnetics facility in Texas, where we turn it into metal, alloy and magnets. We are also, as part of that, building a recycling business, which we can talk about. So we really have sort of the full vertical integration of the entire rare earth magnetic supply chain. And there is no other company in the world, including in China, that has all of those assets and expertise under 1 roof.

And so we are very unique that way. As you mentioned, last year, we signed a deal with the Department of War. So the Department of War is our largest investor customer and business partner. And so what that means is as -- and we can get into this more. But as part of really the events of last year and the need to accelerate the supply chain and its importance for the future of warfare and frankly, the future of the economy, we needed to really accelerate all of the efforts that MP is doing. And so we signed a deal with the Department of War where they will provide a price floor in our midstream business, our refined products business as well as they are a 100% offtake customer for the new 10X magnetics facility that we're building that we announced actually very recently.

We're building that also in Fort Worth. So we are 10X-ing our business in very short order and as part of that, they will -- DOW will be a 100% customer on a minimum profitability basis, but we will syndicate the vast, vast majority of that to commercial industry. And so particularly as we look around the world today and see whether it's in Iran with drone swarms, or if it's in physical AI as we see the growth of robotics or frankly, what's happening in auto with maybe a little bit more of a switch to hybrids. We have a lot of demand for rare earth magnetics, and we are the American champion delivering.

So last year, maybe around this time, obviously, things are sort of, I don't know, heating up a little bit ahead of all of these announcements. And I would have asked you a question about supply and demand. I would have been particularly concerned about supply, maybe I'm less so now, but you've outlined just several times over the past year, all these demand drivers, and you just spoke to a few of them. But like -- when you look across your end markets, what does it look like today for permanent magnets, what areas are strong? I'm not sure if there's any that are weak, but more importantly, how should we think about the future dated demand as it relates to physical AI. You talked about robotics, drone. We've hosted a couple of eVTOL companies here today. How should we think about that on your business?

So it is -- what we're seeing behind the scenes today is pretty extraordinary. It's fever pitch. And I had thought that given that we're now about a year since sort of the trade war stuff kicked off last year that we might have seen that settle down. If anything, we've seen that accelerate. Sort of the big areas behind the scenes, physical AI is just -- and there are a variety of verticals, as you mentioned, robots, drones, EV mobility, all of the things that are happening that you all are seeing, we're seeing interaction on that front. Data centers are driving disk drives. That's another new one that we've seen in recent months, where we've -- some of what you're seeing out there with shortages around memory, that -- or CPUs that actually extends to a number of other aspects of the data center. And so we're seeing disk drive use cases go up.

And then obviously, across consumer electronics and some of those other use cases, it's sort of stable demand. But what I would say is versus a year ago, maybe or maybe really 18 months ago, kind of prior to the election. I think the -- it appeared that the EV use case was accelerating. I think you've seen some tempering of that, obviously, you're all seeing the same thing where EVs are slowing down. But in place of that, really hybrids are making up for that and then some because actually a hybrid motor typically uses a bigger rare earth magnet than an EV motor. So we're agnostic to that. And so as we look behind the scenes, I'd say that versus a year ago, it's quite extraordinary, all of the use cases sort of seem to have quite exciting growth.

And then obviously, just given the fact -- and we can talk more about this, but given the fact that physical AI is a dual use item, and so I think this is a really key point that I'd like to just end this question with, which is just that although we're in a trade detente with China right now and rare earth magnets are flowing to a reasonable degree for general industrial purposes. Anything that is a dual-use item is not coming out of China. And so if you are -- if you need magnets at scale for robotics or drones or anything that the Chinese government deems to be a dual use case, you're not getting them today. And so obviously, the customer conversations around that front are pretty extraordinary as well.

Yes. Thanks for that overview. So I talked a little bit about this agreement with the Department of War, but I'd like to double click on this. So this results, at least within our coverage universe, sort of unmatched earnings visibility. But can you run through the different components and I guess, avenues to the upside within this? You talked about the price floor, but what happens when prices exceed that. You have some opportunities to drive incremental output based off some of your prior expectations around the mine site. And then, of course, the 10X agreements.

Sure. So around last summer when we announced the Department of War transaction, we had a slide I love that sort of outlined our path to $650 million plus of normalized EBITDA. And so let me just give you the simple components of that. And that $650 million was what we really view to be post execution of the 10X facility and bringing online a couple items that we'll talk about in a second, that we sort of viewed our new normalized EBITDA floor of $650 million plus. The simple way you get there is with approximately 6,000 ton run rate NdPr of with a $110 floor on the commodity, less a low 40s cost that gets you a little north of $400 million EBITDA. And then the remainder is the EBITDA generation from our contracted business in the Independence magnetics facility, which is GM and we'll talk about Apple in a second.

And then our 10X facility as part of our deal, as I mentioned earlier, we have a minimum profitability threshold. With that $650 million did not include is any price above $110 so as the commodity prices, if we have materially higher moves NdPr, we have substantial upside in the commodity. It did not include Upstream 60K which is our expansion at Mountain Pass. We've made great efforts on that. You can sort of see our run rate production, and we believe we're really on track to hitting that. It does not include our recycling business. So actually right around that time, right after that, we announced our pretty transformational deal with Apple as well, where Apple, we had been working with them for 5 years, putting together the pieces of a great technical partnership and business relationship where Apple will be our global supply chain partner to source recycled feedstocks so spent magnets.

We're building dedicated facilities at Mountain Pass to receive that at scale. We'll be breaking ground on that soon. And we will send material from Mountain Pass to our magnet factory at Independence where we'll make magnets for Apple as part of that deal, we announced, it was a $500 million worth of magnet minimum buy from Apple. And so -- and then lastly, as we think about our business, all of those things that I mentioned that are not part of that $650 million where there's material upside. The last piece that I would say is if you look at when I took this company public in the fall of 2020, we were just a concentrate business. And we talked having been a hedge fund manager for 15 years, and I see one of my former partners here, so that's always fun. It was very important to us to build a thoughtful public company.

And we came to Wall Street in the fall of '20, and we said, this is our long-term plan. But in the near term, we've got to move downstream. But one day 2025 plus, we believe we can be in the magnet business, and we'll build that business. You fast forward to today 5 years later and you look at the scale and depth of our business, I think under any standard, we've dramatically outperformed what I think what we conveyed to Wall Street that we might be capable of when we went public over 5 years. And so what I would say, as we look out over the next 5 years, certainly over the next 12 to 18 months, we've got a lot of execution to do. We've really got to get this right. It's a privilege and honor to have the Department of War as all of those things, our biggest investor customer business partner, but there's no excuses, we must execute. And so we've got our hands full on that front.

But as we deliver on that, I think our ability, and as we look around the world today, with the amount of capital going into defense tech, there's going to be enormous opportunities for us to grow our business in a variety of ways. And so I think as we look out 5 years from now, I'd like to think that our business will look as different versus today as we look versus when we went public. And so I think there's just -- we're sitting with a front row seat and the best partners you could possibly have to the single most transformational business opportunity of our lives, the physical AI boom. So I think we're in a really good position to find further downstream opportunities as a company, and I'm very excited about it.

I certainly have more questions on the midstream and some of your downstream activities, but we recently got announcement from one of your -- well, the key Australian peer with another price floor announcement as well. What do you think that does to the market? Is that even more evidence that you're going to see just more constructive pricing long term, maybe exceeding the $110 floor?

Yes. It's an excellent question, Bill, because I will say there's kind of thinking back to my old hat days. There are a handful of times where if something happened in the market and maybe the market didn't react or didn't fully appreciate it. And whenever I was sitting in a conference and a CEO or a management team said, hey, X just happened, take note. The market didn't get it, like take note, usually, pretty soon thereafter, the market took note. So I will say the following: X just happened, take note, what Bill just mentioned, I don't think 48 hours ago, I just don't think the market fully appreciates what happened.

And what happened was Japanese industry essentially off took almost all of Lynas' output with a price floor sort of a nongovernment involved price floor with, obviously, material upside. It appears from everything public. But basically, what just happened is the Japanese magnetics industry, a couple of players took down essentially all of their output. So that means a couple of things. One, it means that there's a major concern around access to NdPr, right? Not heavies NdPr. There's a major concern that there is enough -- and you can see that because if you look at the amount of magnet capacity that's coming online in the West and the amount of available NdPr in the West, the math doesn't work. If you are building a magnet factory today and you don't have a secure source of supply, odds are very high, you will fail. Almost a certainty.

And so what that also meant is not only is it extraordinarily bullish for the price of NdPr. And as those of you who know me do this now for 5 years, commodities are commodities, you never know. And I always kind of preface price discussion with, it's a commodity and nobody knows, so take me with a grain of salt. But I will say that seeing that kind of reaction seeing Japanese industry take down their spot. That is a huge indicator. And it fits with -- for those who are following our industry closely on our call a few weeks ago, we announced that we have a new strategic partnership with a large industrial and technology company that wanted a huge amount much more than we could have given them of our NdPr. And so I think you're really seeing the beginning stages of a global squeeze on NdPr, which should be super bullish for prices, certainly more bullish than maybe the reaction as well as a recognition that the magnetics business that we're building that the strategy that we've undertook that, frankly, was validated by the Department of War and wanting to accelerate us, vertical integration matters.

You don't solve the problem until you solve the problem. You can have all the rare earths in the world but if you don't have magnet capability, you haven't solved the problem. You can have all the magnet factories in the world, but if you don't have the feedstock, you can't make magnets. And so at MP, we have put all of these pieces together -- there is no company like ours that has done that. And so we will be able to have an attractive magnetics business and we certainly have our downside protected whereas others trying to compete will scramble for frankly, unavailable feedstock. And so it puts us in a really extraordinary position. And so obviously, we're excited about that, but that would be my reaction to the news of 48 hours ago.

Great. And one aspect to build magnets, obviously, is having your stable supply, which actually for you is yourself. So how is the midstream going? What gives you confidence in achieving run rate levels later this year. And how should we think about any potential upside, whether it's through efficiency gains or maybe incremental investments.

So as we said on the call the other -- a few weeks ago, we exited the year at approximately a 4,000-ton run rate. So the vast majority of what we produce, we're now refining. That ramp is going extraordinarily well. If you think about from when we commission that to today and the scale that is approximately 4,000 tons -- metric tons of material. It's been going really well. We've got a bit more to go throughout the remainder of this year to get that to what we expect our normalized output to be. And that is just sort of standard blocking and tackling some material handling or a few bottlenecks in the process of things that we're going to get some incremental equipment or some changes to.

But we feel very confident about exiting this year at our run rate. While we're doing that, we also feel very confident about continuing to make incremental progress on Upstream 60K. When we went public, I believe our target was around 40,000. We blew past that. We blew past 50,000. And now -- so we feel that we're solidly on track on Upstream 60K. So from an upstream and midstream standpoint, we're really executing on all cylinders.

So moving to magnets, so you talked about execution being key here, but it's always difficult for us to kind of gauge your progress. So Independence is targeting the magnet sales later this year for GM. Can you talk about and speak to the qualification process and how we should think about the cadence of magnet production thereafter? Where do we stand and where are we going?

Well so in auto, there's something called PPAP, which is just a production part approval process. It's extremely rigorous. And the goal of it is to make sure that you can technically and capably produce what you're supposed to produce as well as do it at the scale that you're supposed to be doing it. That is a multi-month process. And actually, that is really in the magnetics business, certainly, that is the hardest -- doing an automotive PPAP is really the hardest thing. I think we've shown charts like this before, but auto spec, rare earth magnets are on the sort of the scale things are the sort of the most challenging doing physical AIs or robot or drones or other kinds of magnets from there is quite a bit easier from a technical standpoint.

And so we obviously have -- being able to execute in auto out of the gate is critical. And as we've said to the Street, we expect to be producing revenue from GM magnets, which means we're through that process and manufacturing at a scale in a way that is approved from that process. So we'll be producing revenue from that later this year. We're obviously now making magnets at commercial scale. So that's going really well and on track.

So coming back to sort of, I guess, more base materials. So we often get questions, I'm sure you do too, around heavies. And you guys, I think, have a pretty interesting story around this saying that heavies you still need, but maybe a less sort of intensity than before. China really does dominate this space. So what is the heavy strategy? What is your ability to, I guess, process third-party feedstock. Are you making third-party purchases today. If so, from what regions, but maybe you can also speak to all the work you've been doing to, I guess, limit the amount of heavies. You talked about this in the earnings as well.

Yes. So there's 2 pieces to this. First, there's our heavies what is our supply that we can put into our process. And so as we said on our call, we're going to be commissioning our heavy separation facilities at Mountain Pass imminently this summer so we'll be producing separated heavies this year, later this year. As we have been doing that, we have -- we've been stockpiling our own SEG+. So think of the SEG+ as when most of our feed goes into our process the lights go one way I'm really simplifying, but the NdPr that we're after is going one way. We've been taking the SEG+ in recent years and stockpiling that. So we have quite a bit of material to work with.

Then obviously, we'll be sending our continued material through that. But then once we bring our separated heavies online, we size the heavy separation capability to be materially higher than what our ore body would be able to produce with the thought that we'll bring in third-party feedstocks so we can really ramp that up. We've been sourcing third-party feedstocks, One attribute of our deal with the Department of War is that they're partnering with us to do that. And it's an attractive partnership that way because there's no financial cost to us to do so. And so we're sourcing third-party feedstocks. We've had our own stockpile and then we have our own material feeding through. So we feel really confident about our heavy supply. I would then say on the flip side, what's really interesting is that as we look at the business so if I rewind back to February of 2021.

So when we went public, we didn't have a single employee in our magnetics business. Our first hire was February of 2021. We started building that team. We now have north of 200 people in our Magnetics business, and we've really -- it was sort of a private market Manhattan project. We had to bring together a lot of disciplines, metallurgy, experts that could help us build a Grain Boundary Diffusion process, which is the doping process is the end of magnetics. There's a variety of disciplines that came together to kind of create IP and maybe I should step back in really simple terms, when you make a magnet, it's not like these are just standard commodity products where they're all the same. These are highly engineered industrial products.

And so what that means is you get a spec, but how you get to that spec may be different. And so the ability to make formulations with your alloy and then to get maximum performance with your GBD, your Grain Boundary Diffusion, that's the name of the game. As we started building this business, clearly, the Chinese are on the cutting edge of technology as far as getting all of this done. For years now, we have been dissecting every magnet possible, understanding the IP landscape where the white space was, how we could work. We've been working on this formulation process and so if we go back to -- and I don't think people fully appreciate the scale of investment that was happening at MP over the last number of years to build out this capability, the IP that we now have, but if we go to about 18 months ago, if you had said to me, what is the heavy content that you will need to make your DM or automotive spec magnet that you're going to be making in a couple of years and what that number was.

And at that time, we would have believed -- we're sort of -- we're not fully there at the best of the best, but we're out there sort of in the top quartile and you look at what our estimate was for the need for heavies. Fast forward to today, we've made such advances that I think we're probably looking at something around the order of 60% less than what we thought we would need 2 years ago. And that really is a function of some great advancements that we've made from an IP standpoint in the lab, extraordinary team that we have doing all that work day-to-day painstakingly and so we feel very confident that, one, our heavy needs were lower than what we thought they were a couple of years ago.

And then add on top of that, that heavies are mainly for temperature resistance. And so actually, when it comes to physical AI, when we think about robots -- humanoid robots drones, it's very likely that actually there won't be any heavies usage. We believe we make humanoid level spec magnets. Obviously, there's not much of an industry today. But as we look at that use case, without them. And so I think as we fast forward to when 10x comes online and as we start to see some of this growth actually happen in the next 3 to 5 years, I think that it will be, frankly, an affirmation of what you've actually seen on the ground from the 2 big data points we discussed earlier, which is just that NdPr is the name of the game.

That is the bottleneck. You see it from Japanese industry and what they did. You see it from what we announced on our call, but really for the parties out there kind of talking about heavies being the bottleneck, I think that really reflects sort of maybe not a full appreciation for how magnets are made or how this industry works and for some of the advances that we've made on an IP front. But we feel really good about the leap ahead that we've made versus many others in executing that. And obviously, we're going to continue to invest in getting that business to be better. And I do believe that within the next, I used to say a year ago, in the next 5 years, I'd like to -- we should be the best magnetics company in the world. I think in the next 2 to 3 years, MP will leap ahead of anybody in Chinese industry as well, from a capability standpoint, from an IP standpoint in rare earth magnetics.

Yes, I had a question about 10X, but actually one leg to the stool that you mentioned earlier, but didn't mention just now, it was recycling. So how does that augment both maybe in NdPr but maybe like the heavies strategy as well. Does that largely help you meet your needs as well?

Yes. And I think maybe another thing that's for those who are newer to the space that might not be fully appreciated is the importance of recycling and again, our vertical integration strategy. If you make a magnet, let's say it's a smartphone magnet. These are tiny. You can pick up your phone. These are tiny thin oddly shaped things typically about 50% of the material comes off when you're finishing that magnet or earlier in the process, comes off in the form of dust or swarf, it's -- you lose it in the manufacturing process.

And maybe for an EV magnet, it's closer to 20%, but somewhere between 20% and 50% of your raw material that's going through your process you lose. Well, the Chinese historically are selling magnets for the cost of raw materials or less. And so if you're a western magnetics producer and you're losing 20% to 50% of your material, and you have no way to monetize that, that's a disaster. That's just -- the math doesn't work. And so we were very focused. And but by the way, you need to have the ability to refine and separate to really be in that business at scale. And so -- what we have been focused on, and obviously, for the last 5 years prior to the announcement, we were focused on with Apple is making sure that we could build a recycling business at scale where we could take end-of-life magnets, calcined magnets as well as the swarf from our manufacturing process, send that all back to Mountain Pass and so that we could take advantage of that raw material to really have sort of a full closed-loop process. And so that's sort of the genesis of the Apple deal.

And obviously, we're very grateful to them. There's probably -- they are one of the largest rare earth magnet consumers in the world. They're certainly one of the smartest and thoughtful supply chain companies in the world. And so to have them as a -- customer and business partner of our recycling business at Mountain Pass is a really important thing. And I think to be economic in the magnetics business, you really need to have that piece of it. Otherwise, let's say, you're a stand-alone magnet factory in the U.S. You're either losing 20% to 50% of your cost structure versus us or someone else or the Chinese or you're getting a small piece of that via some other recycling relationship that currently doesn't exist. And so it's really hard to be economic. And so really that vertical piece of just having that full loop positions us really well.

On the 10X, you recently selected a site, made that announcement here recently. This is slated to ramp later this decade. How should we think about the ability to accelerate the growth time line? What has been the level of interest from customer offtakes realizing that you have the backstop, but -- and when might we be -- expect to see further announcements from a commercial side.

Yes. Well, as I mentioned earlier, we are seeing fever pitch -- and I go back to this concept of dual-use technologies where people are just not getting access. And I think that's hitting hard across the defense supply chain and some of the other supply chains where people are realizing that even in this day time period, magnets -- rare earth magnets are really hard to come by. And by the way, if you can get them to get your license to get them you have to get a license, which means you have to share details about your product, your spec, sometimes pictures. But essentially, to get a rare earth magnet today, you have to hand over your IP to some entity of the -- some downstream entities, so to speak, of the Chinese government. And so I think, obviously, there's a lot of parties who don't like that.

And so what that means is we're very confident that we'll -- we wanted to fill 10X today, I think we could certainly fill 10X today. But the structure of our deal makes it such that we can be thoughtful about how and when we fill 10X, we obviously want to maximize value for shareholders and make sure, frankly, that we're an important supply chain partner to national security needs. And so the way our deal works is that the moment we bring that capacity online, we have minimum profitability with an inflation kicker that kicks in. And so it's a very financially attractive structure that allows us to be thoughtful about when and how we bring customers on to that.

And I think if you were building sort of an on the spec enormous facility, you'd sort of feel like you had to rush to bring customers online. It's sort of the opposite with us, which is we know the economics, we can be thoughtful about how we build out that customer base. And we're obviously having those conversations now. And I think I expect to have material upside to that business versus sort of what our stated minimums were. The good news is all of you get to participate, even if you're not MP shareholders, the DoW is an economic participant in that via 10X as well as obviously via shareholding. So it's really a win-win-win for us to kind of execute on that for everyone.

You spoke to it earlier, but in terms of -- there's been a lot of announcements on Western supply, including especially the U.S. domestic projects. You talked about maybe how you should have some competitive advantages, especially as it relates to recycling swarf so forth. How should investors view the competitive landscape with -- will there be enough demand to absorb the supply? How should we think about that?

Well, I think certainly, if you believe that in the next decade, we will see growth in physical AI use cases. I think we have a real shortage. We have -- there's -- what we're seeing, there's going to be a run on NdPr because pretty thing that's happening structurally in the economy today should mean more -- if you need -- if there's motion, there's actuation, that means you need rare earth magnets. And so I'm certainly very bullish about the demand backdrop. What I would say is what we see -- there are a lot of -- obviously, the excitement around both the trade war issues as well as now the growth cases that we're seeing in the economy admittedly a few years out. We're seeing a lot of excitement in capital formation, particularly on the back of our deal for other parties trying to be in the space.

What I would say is that, again, I'm biased, but I think this vertical integration strategy that really stems off of an extraordinarily economic mine and refinery that really matters. If you don't have those pieces upstream, you really can't have the rest, the idea that you could sort of start with magnets. I think there's certainly, multiples of what we're doing of magnet capacity that's expected to come online in the West. I don't think they'll have feedstock. I think that will sadly be something we'll sort of pick the best of those assets at $0.05 or less on the dollar and likely have that opportunity. But if you don't have an economic upstream, we don't see -- unfortunately, we don't see any viable mines in North -- and certainly in America today, I do think that we'll see some stuff out of Southeast Asia, some stuff in South America.

But these things, again, I would say, are incredibly hard to bring online. One data point that I think I mentioned a couple of calls ago. And so if you want more detail on this, take a look. But as we look around and see dozens of companies and people trying to promote a me-too strategy with respect to what we're doing. If you look at the rare earth industry today, there's really only 4 mines in the world that currently represents somewhere between 80% to 90% of supply. So there's 2 sites in China. There's Northern China Baotou and then there's Maoniuping and then there's Mount Weld, which is Lynas and then us. And so as we look around at all of these projects to really and then we've seen a number of projects that are really struggling to get online, I just -- I don't think we're going to see a state of the world 5, 10 years from now where you're going to see dozens of sites online.

I think you're going to see some of these structural forces result in sort of us having the ability to really grow our business and that will happen in the various verticals of mining and refining. When you talk about our refinery that we're going to build in the Middle East. But I think you're going to really start to see the industry form around champions. I think, obviously, that we're in a really good position for that.

So this year, fairly elevated CapEx. But as we think about cash flow improvements maybe in the coming years, how do you think about capital allocation, you kind of briefly mentioned potential for M&A? What about other things? You think about buybacks, dividends or further reinvestment?

Yes. Well, as you all know, I'm certainly an opportunistic investor. As a company right now, it's very clear that over the next 12 to 18 months, we've got to bring 10X online. We have to execute. We have it in Independence. We have to continue that. We have to certainly execute all the projects that we have in front of us. We have an enormous cash balance. So we feel very comfortable about our balance sheet. We're going to generate a lot of cash. And so we'll certainly think about attractive capital allocation things to do soon thereafter. But I think first and foremost over the next year and change we've got to execute to make sure that we get those things online right? But there's no question that I think we're going to quickly transition to generating a lot of cash. And so we'll take advantage of that accordingly. And then of course, I'm always free to change my mind.

Well, Jim, thanks for sharing the insights. And unfortunately we have run out of time. Look forward to following the progress and best of luck here ahead with all the projects you have going on.

Yes. Thank you.

Hi, everyone. I'm George Gianarikas, one of Canaccord Genuity's sustainability analysts. And we're blessed to have with us today, Ryan Corbett, CFO of MP Materials. Ryan, thank you so much for joining.

Thanks so much for having me, George. Appreciate it.

Maybe to start, if you could give us a high-level overview of Q4 and any highlights you wanted to share?

Sure. Yes, happy to do it. Obviously, we reported a couple of weeks ago, maybe it was last week, I'm losing track. But I think the story for Q4 was continued strong execution from the team. As you all saw, we continue to ramp both in the Materials segment and Magnetics segment very, very rapidly. We exited the year in the Materials segment at nearly a 4,000-ton production run rate. We produced our first commercial magnets to customer specifications on our commercial equipment down Independence, where I'm actually sitting right now.

And I think what we've seen over the last several months, and it's continuing and frankly, accelerating is real customer engagement across all parts of the business. And so we came out of Q4 and into Q1 with a tremendous amount of momentum. I think the other thing that is particularly exciting from a financial perspective is you saw a strong return to profitability in the business, which we expect to continue and really be enhanced with the market pricing environment that we're seeing. And our expectation is that's just going to continue to accelerate.

Awesome. Maybe to keep it topical, I'd love to hear your thoughts on the announcement yesterday from Lynas in Japan. What that means for you, what that means for the market and the overall magnetics supply chain.

Sure. I think certainly, we laid the groundwork with our transformational partnership with the Department of War to really bring focus to the criticality of fighting sort of a mercantile set of policies that have governed the economics of this industry for so long, an industry that is so critical to future-facing technologies. I think -- frankly, I think investors are really underappreciating how meaningful that announcement was, not just for Lynas in particular, but really for the market.

If you think about it, they've committed 5,000 tonnes of NdPr production capacity to Japan and 75% of their heavy rare earth capacity to Japan. And so Japan has sort of secured their magnet industry from a supply perspective. If you look at what we're building, we will become a fully vertically integrated player over time. What that means is there's not much NdPr to go around at this point. And so I'm sure you know that we tend not to prognosticate on what that -- what pricing is going to do. But I think fundamentally, looking at the value of our franchise that we've built here on a vertically integrated perspective, frankly, we almost benefit from what happened doubly versus Lynas given what this means for our magnetics business as really the only ex-China player at this point that has true security of supply to be able to continue to build and grow this business.

And so certainly, there's a view that this announcement provides further support under the $110 minimum price as one would expect. That's sort of the obvious conclusion. I think perhaps the less obvious conclusion is how beneficial this is broadly to the market and what that means for scarcity of NdPr, given what we've seen from an announcement perspective on sort of various projects out there on the magnetics side. And it really just plays into our strengths as a vertically integrated player. So I think it's tremendously positive for the market.

Speaking of getting to your NdPr refining and production. You have this target out there of 6,000 tonnes. Maybe an update on the current progress and any -- the issues that you have overcome in the past and getting to that 3,000 plus that you're at now? And how you foresee the next several months of getting to full scale up?

Sure. I think certainly, exiting the year at nearly a 4,000-ton run rate, I think, speaks to the fact that the plant is operating in a way that gives us tremendous confidence that we will hit our target. And our view is that we will be there by the end of this year. Michael spoke to a 20% sequential growth target for Q1 versus Q4. We talked about a bit of a plateau in the middle of the year and then reaching escape velocity, if you will, at the end of the year.

And really what that's from is addressing the various -- really what they are our mechanical reliability improvements, primarily on materials handling that are very clear opportunities for us that we have been sourcing for the last several months and have very, very clear plans to address. And so hopefully, folks can understand producing at the rate that we are producing, we're tremendously pleased with the progress and the debottlenecking that we need to do to get to that 6,000-tonne run rate is very, very clear to us. And we think we have a clear execution plan that we'll execute over the rest of the year.

We've always focused on hitting that 6,000 tons before we really talk about further growth. But given everything we've seen in the market recently, it shouldn't be lost on folks, of course, that we've talked about our recycling opportunity, third-party feedstock opportunities, some of these other things that undoubtedly will bring incremental volume of production into Mountain Pass. And so we'll work to size those opportunities for investors as we get to the target that we've laid out. But I think overall, we're tremendously pleased with the progress. I think Michael and his team have done an unbelievable job getting us to where we are, and I feel very confident in the execution path to getting to the target.

Maybe just to focus on that for a second. So you have the recycling opportunity. You've also talked and we'll get to this later, but Upstream 60K that should, in theory, at least enable additional processing volume. Is that fair?

Yes. I mean what you've seen from us on the upstream side, we exceeded 50,000 tons of REO production last year. And that is in the midst of really optimizing the quality of concentrate instead of quantity. And so the fact that we've been able to grow 12% annually last year while really shifting the focus to really maximize the full suite of economics as opposed to just maximizing volume on the upstream, I think speaks to the sort of latent opportunity and capacity that we have in the upstream business that undoubtedly, as we debottleneck the refining capacity, I think, will be a very clear opportunity for us.

And so we're working maniacally on all fronts. The focus continues to be maximizing REO production that maximizes the economics of the full suite of products, but that is not to say that there does not remain pretty significant opportunity to grow volumes on both sides over time.

A question we get a lot is whether or not the U.S. can truly scale its own competitive NdFeB magnet supply chain. So the way you see it, do we have the labor pool? Do we have the technical expertise that's required to compete against China?

I think, frankly, George, we have proven here where I'm sitting that we do. We've built this business methodically with a view towards executing for a large volume customer and focusing on knocking it out of the park from an execution perspective for this initial launch of EV traction motor magnets. In the midst of that, we've invested really significantly in our technical talent. We have over 100 engineers here working on exactly the things that are needed to scale the business.

And we talked a little bit on our last earnings call about what we've been able to do just in this short period of time. I mean, short is, I guess, in the eye of the beholder, we've been at this for 5 years, building this business from scratch. And we had targets in our mind of where we would be, for example, from a heavy rare earth content in order to hit the demanding needs of performance and heat tolerance of EV traction motor magnets. We are currently locking for production a recipe that has 60% less heavy rare earths than what we originally anticipated. And that original anticipation was towards the cutting edge of what is possible globally right now.

And so I think we have certainly proven that with the right leadership, with the right team, with the right strategy, you absolutely can do this in the United States. I think what's becoming clearer to my point earlier, is there's a critical missing link for a lot of other players out there, which is security of supply of the upstream. And I think that the platform and franchise that we've built here to be able to provide to customers visibility all the way through the chain in addition to some of the best technology available is completely unique in the marketplace.

And so I think that when you see projects out there that are -- can pencil on a spreadsheet, but when you ask where you're getting your NdPr, it's like, we'll get it from the market. That world changed 2 days ago. And so I think that, that is something that really plays to our strengths. The other thing that we're seeing that I think really plays into the platform that we've built, we talked about recycling a moment ago, is one of the ways that customers have engaged with our engineering team to continue to reduce heavy rare earth content per unit of NdFeB magnet is looking at various opportunities like more segmentation in magnets as an example.

If you put more segments within the same footprint of a magnet, oftentimes, you can create an environment where you reduce eddy current and the temperature overall of the application can lower, and so you need less heavy rare earths within that application. What does that cause? Well, it plays into our strengths from a heavy rare earth perspective by reducing that need. It also plays directly into our strengths of you have more segments, you have more cuts, you have more swarf. And so an integrated recycling capability is also absolutely essential to remain on the cutting edge in this space.

And so we've tried to be very, very thoughtful in how we've built this and having the Mountain Pass asset, not just from a feedstock perspective, but having that platform to build scaled recycling is absolutely essential to be competitive in this space. And so all of the trends that we're seeing, I think, really give us a tremendous amount of confidence in our go-forward opportunity set and really the potential margin profile of the magnet business over time.

So speaking of heavies, it's a question that also comes up a lot. So can you maybe give us an update on your -- the heavy rare earth separation circuit that you -- I think you have slated for mid-'26 or late '26?

Yes. Yes. We expect to begin commissioning of the separation assets in the middle of the year. What we've designed there is an opportunity to separate dysprosium and terbium for use in our magnetics business, both from the ore at Mountain Pass and the feedstock at Mountain Pass, which mind you, we've been producing SEG+ concentrate for 2-plus years now, and we have that stockpile available for us to begin separation immediately, and we're producing more SEG every single day as we produce our NdPr products and other products. And of course, as well, bring in third-party feedstock.

So we've talked about a 200 metric ton per annum Dy and Tb capacity at that plant. We think that, that will meet our needs for the magnet business growth plans that we've laid out. And if you think about how we've built the customer base, we've got General Motors as our foundational customer within the Independence facility. We'll be meeting all of the needs of those magnets from a heavy rare earth perspective from the material that's coming out of Mountain Pass directly.

We have Apple slated to come online from a magnet perspective in 2027, mid-2027. That is an engagement that we're tremendously excited about given the technical collaboration and frankly, the business that we've been able to build with them, not just in magnets, but in recycling, where we'll bring recycled feedstock in and we will meet the needs of heavy earth needs for them through that recycling channel. And then for the 10X Facility, we're partnered with the Department of War in that facility. They have been tremendous partners so far in how we've built out the product set that we intend to produce at the beginning as well as sourcing for third-party feedstock to bring into the Mountain Pass refinery. We are in the market buying heavy-rich third-party feedstock as we speak. And so we feel very good about meeting all of the needs of our customers at both magnet plants.

Speaking of magnets, you're due to start delivering commercial scale magnets by year-end. Can you sort of walk us through the work to complete list that's out there to make sure that you can transition?

Sure. Yes. We were really pleased with the team's progress. We talked about in our quarterly report that we had made the first sort of GM specification magnets on commercial equipment here at Independence. It's a huge milestone given where we came from and how quickly we've built this capability from scratch. As you can imagine, we've talked about, for example, second half deliveries of those commercial magnets to our foundational customer. What we need to do between now and then is the pretty typical scaling of a brand-new industrial process.

And so magnet making really is a string of a variety of processes from -- we obviously have electrolysis fully integrated into Independence. So we've been making and delivering, as you've seen from the earnings power of the business in magnetics, NdPr metal out of Independence. We've really scaled the capability and throughput capacity of our integrated alloy flake and strip casting capabilities. And so we feel very good about that. Then it's powder production. So hydrogen decrepitation, jet milling, pressing, sintering, finishing, grain boundary diffusion, all of those various process steps have been commissioned at this point, but just need to ramp to initial steady-state volumes to go through our qualification process with our customer.

That is beginning imminently. And given the engagement we've had with them from the inception of this business, we expect that to go quite well. And once we're through that, we'll begin official commercial deliveries in the second half of the year. And so it's really just scaling the capability that we already have in place here right now.

And how about customer demand? I know you're sold out of your facility. We try to make an estimate once upon a time that you were 50% sold out with Apple and you told me I was wrong, which was great. We spent a lot of time on that. But what about 10X? I mean, how much customer inquiry are you getting to making sure people have slots in that new facility that you're building?

Sure. Yes. I think the great thing about how we've approached this problem is with the agreement with the Department of War, having them as the 100% offtaker for 10X has allowed us to go at warp speed. And so we get a lot of questions about our level of confidence in being able to execute the timelines that we've laid out there. But really work on 10X began July 10. I think we signed the deal July 9, right? We're through a decent amount, a very significant amount actually of our long lead equipment procurement. We've selected our site. We're about to be moving dirt. This is moving really, really quickly. And so that gives customers, obviously, the confidence to really step up and step forward.

I think that when you saw the initial restrictions come into place out of China in April of last year, there was sort of -- everyone was thrown into disarray. Customers that we were talking to were hosting calls with their senior management on a daily basis about where our magnets coming from, what is the status. And so that was sort of a tactical how do we get through the next several months. I think the great thing that we've seen since then is really an increase in a view of how do we strategically tackle this problem and ensure that we have security of supply.

And so the customer engagement and the conversations that we've been having, frankly, are more intense and are more attractive, more long term, more profitable than even what we were talking about in April when everyone was just I need a magnet tomorrow because I don't know if I'm going to get it. And so the way we built this business from the beginning with the foundational customer framework, with GM, with Apple and then with DoW is we have no gun to our head. I can't imagine being in a position where I'm building a 10,000-tonne plant and I don't know that I have a customer on the other end, and I need to be making decisions to ensure that I could bring one customer or the other in.

The way we've designed this is we've agreed with the Department of War on a set of specifications to begin production. Those specifications will allow us to meet the vast majority of commercial and defense needs that we can foresee. And so the customer conversations that we're having, we're already down the pathway of development for a lot of these products. And so we feel extremely confident that, that facility will be significantly more profitable over time than sort of the minimum numbers that we've provided for folks. But the great thing is we are in no rush. And I think that the value that we bring to a customer and the value of our platform that we've built gets more valuable by the day as evidenced by what we saw 2 days ago. There really is no other player in the space that can provide what we do. And so I'm sure you will continue to see us make certain announcements, but we'll do it at the pace that maximizes long-term value. Jim always says, we will be long-term greedy in partnership with our customers where they are getting great value and we are getting great value over time. We're doing this in a way where we're being methodical and really ensuring that we bring the best customers that we can into the facility.

You mentioned something earlier that you're -- I think, if I heard correctly, essentially decontenting some magnets, but segmenting them more. Can 10X facilitate that? I mean how many lines of production do you need to make sure that they can happen?

Well, so the segmentation really is just a matter of how you finish the magnet. At the end of the day, you're making a magnet block and cutting it to shape. And so certainly, we are designing the 10X Facility to have flexibility to meet a variety of customer needs. And so we've seen certain new applications in consumer electronics and data centers and things like that, that have very unique shapes where you need to ensure you've got, for example, the right pressing capability to make the right block to machine the part into some of these more unique shapes.

The segmentation though really is just instead of making a block and cutting it into four individual pieces and bonding it together, you cut it into 8 or 10 or 12. But what that does is it necessitates having the right capacity on the finishing side of the equation. We actually have had finishing capability commissioned and ready and in trial production at Independence for some time now. So we have a lot of experience in that sort of machining side of the business. We have a lot of folks that came to MP where that was actually their specialty. And we actually have certain IP that we partnered for that we have specifically in that space.

And so I think that, that is a unique capability of ours where not only do we have the ability to meet that need from a new product perspective, but you're sort of fighting with one hand tied behind your back if you're trying to add more segments and you don't have an ability to recapture the value of the swarf that you're creating, every incremental cut is an incremental piece of yield loss. And so if you can't address that yield loss and recreate value from recycling, you're in a tough spot. And so that is why, again, we're so focused on looking at this from an integrated value perspective where we can do well, our customers can do well, we can meet those needs in a way that many others can't.

Well, Ryan, that's a great place to stop. I think we'll go on for hours, honestly, I have about 10 more questions. But thank you for your time. Best of luck and we look forward to you bringing magnets back to the United States more. You've already started. Just -- we just need 10,000 more tonnes.

We'll get you more. We'll get you more. Thank you, George. I appreciate it.

Thank you.

Hello and welcome to the MP Materials Q4 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. With that, I would like to turn the call over to Martin Sheehan, Head of Investor Relations. Mr. Sen, you may begin.

Thank you, operator, and good afternoon, everyone. Welcome to the MP Materials Fourth Quarter 2025 Earnings Conference Call. 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.

As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation, earnings release and in our SEC filings.

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 appendix to today's 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 thanks, everyone, for joining this afternoon. 2025 was a landmark year for MP Materials from our transformational partnerships with the Department of War and Apple to accelerating growth across our businesses and producing magnets at Independence on commercial scale equipment, we are hitting our stride as America's champion and a vertically integrated global leader in rare earth magnetics.

Let's turn to Slide 4. I'll start with the Materials segment and production at Mountain Pass. In 2025, we doubled our NdPr oxide output to 2,599 metric tons. Importantly, we exited the year at an annualized run rate of nearly 4,000 metric tons of separated NdPr oxide. Michael will discuss the latest operational achievements and what we are seeing in Q1 in more detail shortly.

As production increased, total oxide sales volumes rose 75% to nearly 2,000 metric tons for the year. This ramp in production in sales comes at an especially favorable time, given that the price protection agreement is now in effect and also that NdPr pricing has climbed significantly over the past several weeks. Customer engagement is strengthening materially, and I will come back to that in a moment.

We also exceeded 50,000 metric tons of REO produced in 2025, another record annual performance. We believe we remain the world's second largest producer of total REO, underscoring the exceptional quality of the Mountain Pass asset. As upstream and midstream production expands, demand for NdPr oxide remains robust. This strength was reinforced by the recent signing of a significant long-term NdPr offtake agreement with a new strategic customer, one of America's leading technology and industrial companies. We now have direct strategic agreements with 4 of the world's leading manufacturers across automotive, consumer electronics and physical AI. These partnerships allow us to scale our NdPr business today with a clear pathway to downstream magnetics growth over time.

We continue to advance our heavy rare earth separation circuit and remain on track to begin commissioning midyear. As a result, we expect to produce separated heavy rare earths, specifically dysprosium and terbium late this year.

Finally, within the Materials segment, higher realized prices, PPA benefits and continued cost reductions drove a strong return to profitability, generating $40.3 million of adjusted segment EBITDA in the quarter.

Turning to Magnetics. We achieved our target of producing our first magnets on commercial scale equipment at our Independence facility late last year and are now optimizing the startup of the production systems.

We are beginning qualification of the commercial processes with our foundational customer and expect initial deliveries and revenue in the second half of the year. At the same time, expansion of both recycling and magnet capacity is underway, which resulted in an additional $32 million prepayment from Apple earned in the fourth quarter and received earlier this month.

Another significant milestone this month was the selection of Northlake, Texas as the site for our new 10X facility. We secured more than $200 million in incentives and grants to support the build-out. We expect to break ground imminently with engineering and long lead equipment procurement already well underway. In alignment with the DOW, we are advancing this project with urgency and disciplined execution. Ryan will outline our expected 2026 investment profile as we accelerate the 10X build-out.

Production of precursor magnetics products, specifically NdPr metal, continued to advance. We set quarterly records for both production and sales volumes while improving yields, enabling us to sustain strong margins. As a result, the Magnetics segment generated $8.4 million of adjusted EBITDA in the quarter, bringing full year Magnetics EBITDA to $26.4 million.

Behind the scenes, our Magnetics team continues to execute at a high level, not only in process optimization but in the development of proprietary intellectual property. As one example, our technical team has materially advanced our grain boundary diffusion capabilities, resulting in a magnet formulation and production process that uses approximately 60% less heavy rare earth content than originally anticipated while still meeting the demanding specifications required for high-performance, high-temperature, EV-grade magnets.

Given that our original assumptions were already at the low end of industry norms, this represents a meaningful technical achievement. Reductions of this magnitude reflect the strength of our engineering bench and the discipline of our execution. They also enhance our competitive position.

Heavy rare earth elements such as dysprosium and terbium primarily enhance coercivity, improving resistance to demagnetization at elevated temperatures. They do not increase magnetic strength or torque density and in higher concentrations, can even reduce energy product. In many physical AI and humanoid robotics applications, operating temperatures are significantly lower than in EV traction motors, meaning performance is driven more by magnet design, light rare earth optimization and motor architecture than by heavy rare earth content.

As magnet technology advances and adoption grows, particularly in physical AI, performance and value creation increasingly centers on NdPr. Accordingly, we expect long-term demand growth and pricing strength for NdPr to far outpace that of dysprosium and terbium.

With that, let me turn it over to Ryan. Ryan?

Thanks, Jim. Turning to Slide 5, we present our consolidated financial results for the year. On the left, revenue increased 10% year-over-year, driven primarily by the ramp-up of oxide sales within the Materials segment as well as initial precursor product sales in the Magnetics segment, which were not present in 2024.

We also highlight the contribution from the Price Protection Agreement or PPA income, which totaled $51 million in the quarter. When combined with reported revenue, this effectively reflects realization of the full $110 per unit purchase price floor for sold products along with a strong contribution from stockpiled inventory given the pricing environment in the quarter.

In the center of the slide, the combination of earned PPA income and profitable magnetic precursor product sales drove a meaningful improvement in adjusted EBITDA relative to 2024. The resulting increase in adjusted EBITDA was the primary contributor to the year-over-year improvement in adjusted diluted earnings per share.

Turning to Slide 6. We present the annual operating metrics for the Materials segment with upstream key performance indicators on the left and midstream KPIs on the right. As Jim noted earlier, upstream performance was particularly strong, with another record year of production of more than 50,000 metric tons of REO in concentrate, a 12% increase compared to 2024.

Please note that following the elimination of third-party concentrate sales in mid-2025, we will no longer report upstream sales volumes or realized pricing in future periods. On the right side of the slide, you can see the continued ramp-up of NdPr oxide production, which more than doubled year-over-year to approximately 2,599 metric tons. This increase in production drove a 75% year-over-year increase in NdPr oxide sales volumes to just under 2,000 metric tons.

With the implementation of the Price Protection Agreement, we view the realized price metric is less meaningful for investors. Note that we provide both NdPr oxide revenue and sales volumes, which allow you to readily calculate an implied realized price by dividing revenue by volume. As a result, we will no longer present realized price as a formal KPI.

And lastly, for the year, turning to Slide 7, we present segment-level financial results, with the Materials segment shown on the left and the Magnetics segment on the right. Within the Materials segment, revenue declined year-over-year, primarily reflecting the cessation of concentrate sales to third parties. This was partially offset by a 75% increase in NdPr oxide sales volumes. Despite the decline in reported revenue, the combination of PPA income and improving unit economics on NdPr oxide sales more than offset the elimination of concentrate sales. As a result, 2025 segment adjusted EBITDA for Materials improved meaningfully year-over-year.

On the right side of the slide, following the commencement of magnetic precursor product sales in early 2025, the Magnetics segment generated $66.9 million of revenue and $26.4 million of adjusted EBITDA for the year.

Turning to Slide 8 and our quarterly consolidated performance. Year-over-year revenue declined modestly, reflecting the cessation of third-party concentrate sales. This was partially offset by continued growth in NdPr oxide sales and the ramp-up of magnetic precursor product sales. As in prior slides, when PPA income is included, the combined figure provides a representative view of revenue that would have been realized at the $110 per kilogram price floor, along with the contribution from stockpiled contained NdPr.

In the center of the slide, adjusted EBITDA improved significantly year-over-year, driven primarily by the improved NdPr economics. The improvement in adjusted EBITDA was also the principal contributor to the increase in adjusted diluted earnings per share for the quarter.

Turning to Slide 9. In the Materials segment operating metrics, concentrate production totaled 12,080 metric tons, approximately 600 metric tons higher than the prior year period. Sequentially, it is important to note that the fourth quarter of both 2024 and 2025 included planned maintenance turnarounds for the plant, and as a result, production in those quarters is typically lower sequentially.

On the right side of the slide, NdPr oxide production increased 74% year-over-year, driven by continued plant optimization and debottlenecking. Volumes were roughly in line with the third quarter, again, reflecting the downtime of the October maintenance shutdown, followed by the acceleration of production volumes as expected. Michael will provide additional color on our quarterly performance along with his expectations for first quarter production and the anticipated timing of achieving our targeted steady-state production rate of approximately 1,500 metric tons per quarter. We are very pleased with the team's progress on these debottlenecking initiatives.

As we discussed last quarter, we have been experiencing a modestly extended lag between production and sales, which generally equates to having approximately 1 quarter of production in the channel. So as our production has grown, we've seen this inventory in the channel also grow in line. This reflects the continued ramp-up of metal production in Southeast Asia, including the deliberate buildup of on-site inventory required to support continuous 24-hour operations at various partners.

As a reminder, the metallization process operates at extremely high temperatures exceeding 1,000 degree Celsius, and maintaining uninterrupted electrolysis is critical to achieving high yields and low unit costs. As a result, building additional inventory is a necessary and intentional step in efficiently scaling production.

However, looking ahead, we expect this lag between production and sales to narrow and improve slightly driven by the ongoing ramp of metallization capacity as well as the incremental demand we have seen for oxide, including significant volumes from the new oxide contract that Jim mentioned earlier. With improving prices and our continued sales and metallization progress, we should see a slightly quicker turn of production levels into sales in Q1. We expect a modest amount of these sales to be intercompany to the Magnetics segment, resulting in some revenue and EBITDA eliminations at the corporate level similar to Q4.

Finally, turning to Slide 10. We present our quarterly segment financial results. On the left, Materials segment revenue declined year-over-year, reflecting the elimination of third-party concentrate sales. This was partially offset by higher sales volumes and stronger pricing for NdPr oxide and metal products. Consistent with the consolidated results, the improved NdPr unit economics underpinned by PPA income was the primary driver of both the year-over-year and sequential improvement in Materials segment adjusted EBITDA.

On the right of the slide, the Magnetics segment delivered record production and sales volumes during the quarter. However, revenue and segment adjusted EBITDA declined slightly sequentially, which actually reflects improved yields and cost efficiencies, as Jim discussed earlier.

Before handing the call off to Michael, I did want to go through a few items with you, starting with pricing. As a reminder, we have several different contract structures, including arrangements that are based on trailing average pricing. As a result, when market pricing increases rapidly, the benefit does not immediately flow through to reported revenue, usually manifesting with about a 1-quarter to a 1.5-quarter lag.

Importantly, for NdPr products that are sold, we generally earn the PPA based on average contract pricing, so we will see the delta between our contract pricing and the price floor generally recognized in the PPA income line in Q1. It is important to highlight, however, that PPA payments for stockpiled NdPr are calculated based on market pricing without a lag. So as we enter the first quarter and market pricing quickly approached the $110 per kilogram level, we will elect not to take PPA payments on certain stockpiles NdPr materials. As a reminder, collecting PPA is at our discretion, so depending on pricing, we will always have the option to hold concentrate and/or refined product inventory and earn PPA payments on those at a later date.

Turning to Magnetics. You will see on the balance sheet that we have approximately $74 million of deferred revenue reported within current liabilities. We expect this deferred revenue to be recognized over the next 4 quarters at EBITDA margins broadly consistent with what you saw in the fourth quarter. As we approach initial magnet deliveries in the second half of the year, we will provide additional details on our expectations for incremental revenue and margin contribution from magnet production. Needless to say, we are incredibly pleased with the progress our Magnetics team has made in meeting our customer obligations.

Turning to the balance sheet. Our significant progress in Q4 resulted in a material expansion of our other receivables balance to over $131 million, reflecting cash that we have received in Q1 or will receive later this year, including over $70 million from the U.S. government from tax credits and PPA payments and the $32 million progress payment related to our engagement with Apple.

As it relates to investment, as we begin construction of the 10X facility and advance the expansion of Independence, recycling initiatives and heavy rare earth separations, we expect total capital expenditures to be in the range of $500 million to $600 million in 2026, the vast majority of which reflects accelerated 10X investment and other growth initiatives. We believe our strong liquidity position with more than $1.8 billion of cash on hand, together with future cash flow from operations, provides ample capital to execute on these initiatives. Operating cash flow growth will be driven by recent improvements in pricing, the downside protection provided by the PPA, continued growth in NdPr oxide sales and ongoing improvements in unit costs. Collectively, this positions us well to fully fund the significant value-enhancing projects while maintaining a strong balance sheet.

Finally, given the additional complexity associated with the Department of War contract, we encourage investors to review our Form 10-K filed today, particularly the financial statement footnotes.

With that, I'll turn it over to Michael. Michael?

Thank you, Ryan. Turning to Slide 11. This shows some of the major intermediate product sets at Mountain Pass and Independence on the way to producing our finished magnets. Moving to our operations. Q4 capped off a monumental year with very satisfying performance as both Mountain Pass and Independence achieved significant production milestones.

At Mountain Pass, we had a solid quarter of concentrate production and another strong quarter of NdPr oxide production. As planned, at Independence, we began producing magnets at commercial scale, starting with raw material that was mined and processed at Mountain Pass and metallized and turned into magnets in Texas.

The planned October outage impacted production in upstream and midstream operations. As I previewed on our last call, certain additional required maintenance and some rework resulted in an extended return to normal production, and more products diverted to concentrate versus the refinery in the second half of October. But Mountain Pass exited the quarter with strong momentum, with December achieving record NdPr oxide production at a nearly 4,000 metric ton annualized run rate.

We continue to see improved uptime in nearly all circuits and are focused on increasing throughput. In the course of this, we have identified and are addressing some expected and some unexpected bottlenecks. There are no showstoppers, and we expect to overcome these issues steadily throughout 2026.

Reiterating what I said last quarter. I expect over 20% sequential production growth in Q1, somewhat slower sequential growth for the subsequent 2 quarters, followed by a reacceleration towards the end of the year, exiting 2026 approaching our target of 500 tons per month of NdPr oxide production or a 6,000 metric ton annualized run rate. As usual, the timing of scheduled maintenance outages, project tie-ins and other upgrades could impact the exact cadence. At the same time, Mountain Pass continues to prepare for future growth. Construction of our heavy rare earth separation circuits dramatically accelerated in the quarter. Remaining work is largely in piping, electrical instrumentation and process automation scopes. We remain on pace to start commissioning and charging the circuits in the middle of the year.

We are also wrapping up restoration and enhancements to our idled chlor-alkali facility with the first train expected to begin commissioning in the second quarter. We have already begun pre-commissioning and checkouts of parts of the brine treatment systems. Since the July 2025 agreement signing, our Mountain Pass team has had a highly productive and interactive engagement with Apple on the recycling effort. We have finalized process design and are excited to start the next stage of engineering.

In the fourth quarter, our team at Independence grew rapidly while materially deepening its technical expertise. We successfully linked the poles of our integrated magnet offering by commissioning the complete oxide to finish magnet production process. We are now producing on-spec, high-grade magnets on commercial scale equipment from oxides produced at Mountain Pass.

To be clear, we have a long and challenging year ahead of us as we work to troubleshoot, optimize, troubleshoot, ramp and expand magnet production. However, we are off to a great start. I am extremely proud of our team. During the fourth quarter, we rapidly advanced procurement and design for the expansion of the Independence facility to support our partnership with Apple.

And as Jim and Ryan mentioned, the capital projects, operations and engineering teams are also pushing forward the 10X development according to the aggressive schedule we outlined. In Q4, alloy flake production volume and quality improved dramatically. We also commissioned additional powder production, pressing, sintering, GBD and finishing equipment. We are completing the commissioning required to commence the formal production part approval process, or PPAP, qualification with GM. We expect this to enable commercial sales of magnets to begin in the second half of this year. While the physical process will be locked, our progress and improvements will continue. At the same time, we are working with an expanding list of potential customers on prototype grades and magnets for both Independence and 10X.

I would like to thank our teams for their hard, unwavering effort over the past year. With the foundation and momentum we have built, I am looking forward to another year of impressive execution and new milestones in 2026.

With that, I will turn it back to Jim.

Thank you, Michael. As we move beyond the quarter, it is worth stepping back to consider the broader environment in which we are operating. Over the past several years, investors have focused on the rapid build-out of AI infrastructure, data centers, GPUs and large language models. That digital infrastructure layer is now scaling rapidly, and competitive intensity across the ecosystem is increasing.

At the same time, across Wall Street, we are beginning to see something new, real concern about disruption. AI is not only a growth driver. It is a deflationary force. Entire categories of software and services are now facing uncertainty around pricing power, competitive moats and ultimately, terminal value. In an AI-accelerated world, many business models are being repriced and in some cases, structurally impaired.

History suggests that foundational technologies create value in layers. The rise of electricity did not simply power existing systems. It reorganized the physical economy and enabled entirely new industries. AI is likely to follow a similar path. The next phase of AI is physical. Intelligence is moving from the data centers to the edge into robotics, advanced manufacturing, autonomous systems, defense platforms and electrified mobility.

When intelligence becomes embodied, it requires actuation and motion. Motion requires magnets. Rare earth magnetics are not an application layer vulnerable to algorithmic substitution. They are physical infrastructure, essential inputs that convert electrical energy into precise, efficient movement. As intelligence scales into the physical economy, magnet intensity per system increases, not decreases because precision, torque density and energy efficiency become more critical as systems become more autonomous.

In this environment, our positioning is fundamentally different from much of the market. While many companies are confronting uncertainty around their long-term economic durability in an AI world, we are building directly into its structural expansion. Our assets are not lines of code subject to rapid substitution. They are scarce, strategic industrial capacity of growing economic and national importance, capacity that becomes more valuable as the physical AI cycle matures.

In moments like this, leadership matters, the countries and companies that control essential industrial capacity shape the trajectory of this new era. We have built MP to be that kind of platform, vertically integrated, technically differentiated, scaled and American. We will remain disciplined and focused on execution. Over time, structural demand paired with thoughtful capital allocation is what drives enduring value. That is the work we are doing deliberately, methodically and with a long-term horizon.

With that, I turn it back to the team for Q&A.

[Operator Instructions] Our first question comes from Lawson Winder with Bank of America.

This has been super helpful, and congratulations on first quarter realizing much higher pricing from your PPA agreement. If I could just ask one and a follow-up, so on the OEM can you tell us whether or not it's a U.S.-based auto OEM? Or is it a foreign OEM?

It's Ryan. I think Jim mentioned in his prepared remarks, while we're not going to get into specific details, this is one of America's leading technology companies. I think what this agreement speaks to broadly is what we've been talking about for a long while, which is accelerating demand for NdPr and the value of the platform that we provide being able to be a solutions provider for these types of companies that are looking to transition their supply chain away from China. Being able to address the various points in the supply chain from raw materials all the way through to magnets, I think is super important.

Okay. No, that's fair. I understand the desire not to give too much detail. And then just on the time line with 10X, I mean, things seem to be moving quickly here. And we originally thought of 2029 as being kind of a target year. I mean is there a possibility to move that forward? Could 10X potentially be developed slightly more quickly than what you guys had originally envisioned?

Well, 10X procurement and long-lead equipment focus and a lot of design and engineering, I mean, that all really started, Lawson, last July. Once we signed the agreement, we got to work building the new team there, coordinating that new team with our existing team and then thinking about all of the equipment and pieces of the process that we could do while we then ran our process for site selection.

What I would say is I've directed the team to think of this project -- like you've probably heard the term 0-based budgeting. This is a 0-based days project. We are focused on getting this online as quickly as possible. We've said we'll be commissioning that in 2028. We've made a lot of progress. We think it's on track, and we'll just -- we'll keep trying to make up as much time as we can as aggressively as we possibly can, and it's going really well.

Our next question comes from George Gianarikas with Canaccord Genuity.

Wanted to ask about this OEM agreement again. In terms of just how you think about the P&L and the economics behind selling oxide directly versus selling Magnets, how do you think about just the trade-off between the 2?

George, it's Ryan. I think, importantly, the way we're approaching this is effectively Independence at this point is sold out, and I think we've been clear about our strategy around 10X. Given the offtake that's in place there, we have the luxury of continuing to be extremely methodical in how we deliver commercial syndication from that facility. I think importantly, as I mentioned earlier, we are really the only solutions provider to all of these various OEMs that are really accelerating the look at their supply chain and attempting to transition away from China as quickly as possible.

And so the fact that we can play a major role there in providing raw materials into their supply chain immediately and capture that value today while opening up some pretty significant opportunities, I would expect, in the downstream, I think, is hugely value accretive to us. And so as I mentioned in my prepared remarks, having an oxide agreement of this scale certainly does accrue to the benefit of the Materials segment in the near term, both from a working capital perspective, the cadence of sales and of course, the value that we'll realize there from our product given the various stage of development that we're in between scaling Mountain Pass to its ultimate full run rate, while we continue to ramp Independence thoughtfully and get 10X online.

Great. And as a follow-up, I'd love to hear Jim opine on what he thinks is happening to NdPr prices in China.

Well, commodities prices, George, as you know, are always tough. I do think that there's a few things. One, the reaction post our deal, I think the Chinese no longer are going to be as mercantilist because there's no point. And then lastly, I would say -- I would also then say that NdPr is seeing demand from what we're seeing around physical AI and kind of what I said in the prepared remarks around a lot of excitement around everything that's happening with respect to motion and the economy.

And so I think there's -- when you think about critical minerals, there's kind of the scarcity. There's 2 kinds. There's sort of the heavies and some of the other niche metals where they're just scarce, and we need to get more here because the only option is China. But in general, the demand function for those is somewhat consistent or static; whereas with NdPr, especially because of the restrictions around heavies, what we're seeing -- and we're seeing this live. I think we can probably give you a couple of live anecdotes where we've actually seen a major consumer of rare earth magnets completely change their spec overnight to essentially eliminate heavies and focus on shifting towards more NdPr.

So what we're seeing is we're seeing the traction motor, the EV and hybrid makers focus on trying to get -- maximize NdPr, shift away from heavies. And actually, we're seeing, again, real-time action on that front that is material to that as well as then all of the other use cases around -- I think that NdPr will be obviously the key material of physical AI, and so that's the big growth function there.

So when you add it all up, I think, one, it's the market reaction to getting a little bit more of a normalized price in NdPr because we're getting closer to market economics. We're still not there. And then it's a function of some of the existing use cases, where we're seeing real-time substitution towards more NdPr. And then it's a lot of the sort of growth excitement that we're seeing around the board.

And I would say, I mentioned this -- I kind of referenced this in the prepared remarks, but there's sort of a bifurcation happening. I think NdPr is really the growth commodity, and I think we -- again, commodities prices can always do crazy things, but I think we're going to see continued acceleration in NdPr prices. And I would say that the market environment probably currently maybe overweights pricing in the heavies.

I think there's going to end up being a number of sources of heavies globally. We're certainly working on that issue quite a bit. As Michael mentioned, we're going to have our heavy separation online this year. And so I think I wouldn't be surprised if that market actually gets quite saturated over the next few years.

Our next question comes from Brian Lee with Goldman Sachs.

I guess maybe just a follow-up to George's question. There's, in the marketplace, lots of focus and I guess, policy-driven, as well, focus on pricing floors and the like. But Jim, in your prepared remarks, you'd sounded like there's NdPr upside that needs to be better appreciated and more of a focus here, so -- and we have seen some strength here recently. Is there maybe a way to think about what that NdPr pricing level or entitlement could be? You talked about kind of a normalized price. Like what could that be? Or what could that range be over time? And is there a trigger or sort of time frame where you think that could ultimately materialize?

I mean that's such a hard thing. I guess the famous expression predictions tell you more about the prognosticator than the future, but I do think with respect to NdPr, I think I've consistently conveyed the view that I think that if we were actually in sort of a real fair -- free market, so to speak, in NdPr, you would see prices materially higher, way higher than today, for sure, into the hundreds of dollars just because of the -- what is sort of the adequate return on capital required to bring online projects, right?

If we -- if there wasn't a nonmarket geopolitical actor in setting prices and it was just sort of what would incentivize capital, I think prices would be materially higher. But the realities of the market are the realities in the market. We don't have a -- we've made a lot of progress, obviously, given what we've done with DOW and given some of the market developments, but we're not fully there, obviously.

And then I think on the next piece, it actually comes down to sort of the pace of how quickly physical AI matures. I think we -- obviously, you saw our announcement today of an enormous strategic partnership on offtake. I've been actually, I would say, really delightfully surprised at how exciting it has been engagement-wise with various companies, many of which are in the physical AI space or intend to be behind the scenes. And so I do think that, that is actually going to create another leg upward, but it's hard to know kind of how quickly that stuff will come online.

But I would encourage you, you can obviously do the math around do your own curves on what that means for the market and then obviously sort of from a supply chain standpoint, what's going to happen in the West versus what is sort of Chinese supply for China, particularly because I think robotics is something that is really a dual-use technology, so it's going to be really hard for a lot of Western companies to get licenses for rare earth magnets. And we're seeing that in real time, that there's real concern that the biggest, best technology companies in the world that want to compete are concerned that they're not going to get licenses for this. And obviously, that positions us really well.

Yes. Makes a lot of sense. And just a follow-up on some of the policy stuff that's still circling around the space, Project Vault and Section 232 among others. Are there any implications for you? Is it impacting your business discussions with non-DOW offtake parties or maybe even DOW discussions? And would you expect any impact on pricing? I know it's early and uncertain. But maybe any thoughts around how you might stand to benefit there?

Yes. No, it's a good thought. I think first and foremost, obviously, our deal last year kicked off a big change in our industry, and it opened up the capital markets. And it obviously created a bigger window here for us in the West to work on this problem, and it's exciting.

But I think what you're seeing is it's not just the DOW, but there are all aspects of the administration, the main verticals, whether it's state or commerce or treasury or interior or energy. Everybody is focused on this issue. It's a key directive from the President. And so I think when you look through a number of these things, you mentioned Vault and there's FORGE and there's a few others, I would say, they're in various stages of development, each of them. Some require allied nations to kind of come to a view and have a plan. Some are things that are coordination between the private and public sector.

What I would say is most of those things are, I would say, somewhat early or at least not done. We would expect to be a big part of how things might form in some of those categories that you mentioned. And so my guess is that any of those things will be very good for us, but there's nothing really tangible yet that I could guide you to specifically.

Our next question comes from Corinne Blanchard with Deutsche Bank.

Could you just talk maybe about the CapEx cadence we can expect for the year guided of $500 million to $600 million, mostly related to the 10X but just wondering how that maybe breaks for the quarter? And a similar question for the EBITDA cadence.

Yes. Sure, Corinne. It's Ryan. As we think about the cadence, there will be quite a bit of lumpiness throughout the year within that range given the fact that we'll have some initial capital spend probably early in the year, particularly on the land that we've just acquired that was announced this morning for our site in Northlake, Texas. Throughout the course of the year, Obviously, the portion of that CapEx targeted at 10X will start to scale as we begin construction. And then some of the other parts of the business and growth initiatives that we're working on, namely our engagement with Apple, there's capital spend really throughout the year with probably a slight bend towards the tail end of the year as we get that equipment installed and prepared for 2027 commencement of that agreement.

As it relates to the EBITDA cadence, obviously, back to Jim's comment on predicting NdPr prices, I think that's probably going to be the biggest driver here. As you're aware, the upside in NdPr pricing, we maintain all of that ahead of the commissioning of 10X. And so if we see prices continue to performance they have and continue to go up, obviously, that will shift earnings accordingly.

As I talked about in my remarks, obviously, our contracts are all generally priced on approximately a quarter, maybe slightly longer lag, and so this will flow through over time. So you won't see today's spot price hit Q1. You'll see it hit Q2. So I would just keep that in mind as you look at the quarterly cadence.

And if I can for a second question. Can you share like how do you view maybe the best way to access like the heavy needs beyond what you already have? Like are you thinking about more recycling? Are you thinking about mine expansion and you're looking at all the peer, M&A? Just trying to figure out.

I think, sorry, Corinne, is the question how are we going to grow supply? Or you said more recycling. And what was the other one?

Yes, so especially like on the heavy side, like how do you approach it? Would it be through M&A or like recycling -- recycled content?

Thanks, Corinne. This is Michael. We are certainly looking at recycling as an option, and I think as I've said in the past, we think the integrated nature of our site allows us to avail ourselves of a diverse range of feedstocks. With our agreement with the Department of War, we have their support to source feedstocks from around the world. So I think there'll be a mix of perhaps traditional recycling and nontraditional feedstocks. But as Jim mentioned, our progress in reducing our heavy need, that makes us less overall concerned, but we think we will be the largest producer of heavy rare earths in the Western Hemisphere or from now for as long as you can imagine.

Our next question comes from Carlos De Alba with Morgan Stanley.

Congrats on the progress on the different projects. Just on 10X, the -- just a clarification on the CapEx. In the announcement, you had $1.25 billion plus. I mean can you provide maybe a little bit of color on that plus? Maybe dimension that for us. Quantify that for us just on the modeling side.

And then I think there was also a comment that on that release, suggesting that 100% of the 10X and Independence light and heavy rare earth needs will come from the company's Mountain Pass operation. So that means that you will not really depend on third-party heavy rare earths. I just wanted to clarify that given the importance of that aspect.

Yes. Sure, Carlos. I'll start with your last question. We do intend to meet all heavy and light feedstock for both facilities from the Mountain Pass processing facility. As Michael just talked through, we have various initiatives in place in partnership with the department of War, in partnership with Apple from our own sourcing strategies to bring in incremental heavy rare earth feedstock.

I think the thing that's really important to understand there as well is when you think about a business model that is centering on third-party feedstocks as part of a supplement to its ability to produce products, you really have to produce both lights and heavies in order to compete in that market. There is no way you can compete economically without being able to extract the value from all of those. And so we are extremely confident in our ability to continue to source third-party feedstock as we are, frankly, as we speak.

As it relates to your question on 10X and the capital investment there, given the importance of this, the size of it, we are focused on doing the right thing for our core customer, for our future customers and from a return on invested capital perspective. And so the reality is portions of that facility may grow or shrink over time when we get to sort of our final ultimate design. What we have always done and will continue to do is provide guidance to you all on an annual basis to allow you to sort of track our progress there. As we talked about this year being in the $500 million to $600 million range, that obviously reflects a pretty significant initial investment in bringing that facility online as quickly as we can.

Our next question will come from Laurence Alexander with Jefferies.

Just 2 quick ones. First, can you give an update on the progress on the Saudi JV and your bandwidth for a similar [ front ] JV potentially in either Europe or South America? And secondly, can you give an update on your approach to hiring formulation engineers and your strategy towards how many SKUs are you offering to customers? Or are you encouraging them to focus on a narrow number of SKUs?

Sure. Well, on Maaden, there's really 2 tracks. As you know, we signed a binding term sheet late last year. We have to finalize formal documents with our partner in that transaction, the Department of War, and then with Maaden to kind of do the aggregate JV.

Obviously, all of the -- a lot of the final details need to be associated with our final estimation on the cost of the build, the process flow of the facility. There's a number of pieces that we have to work on to get towards completion on that front. And of course, that means that the second work stream is, from an operating standpoint, Michael and his team are working on that -- the process flow, all aspects of how that facility will work.

And so there's sort of 2 main streams there. What I would tell you is, obviously, that is going to be a big, exciting project, but it's going to take some time. I mean, we're going to make sure that, that is built right and we're going to do that cautiously and thoughtfully. So we'll do that methodically, I guess, is the best way to say it, and we're continuing to work on that.

I think the next question was around South America or Europe. I mean, as you know, as an organization, we are opportunistic. If you look at 5 years ago today when -- roughly when we went public, when we were just a concentrate business, we didn't even have an employee in our Magnetics business. And you fast forward to today and you look at the scale and the depth of our organization and what we've built. And so I think we can take on a lot of challenges, particularly because I think we are very execution focused, but we're -- we move quickly and aggressively. So we will be opportunistic and I think, hopefully, would never be in a position where we'd bite off more than we can chew. So I guess that's a long-winded way of saying, sure, we're going to be opportunistic about lots of things.

We certainly have a lot on our plate right now. I think you asked also about recruiting and engineers, and we've certainly built a pretty extraordinary team in our Magnetics business. That team is growing. Getting that project done is no small task. I'm obviously very focused on that. There's a -- we have a whole team that we've built since we signed that deal last July, and that's really going under -- that's underway and going really well. And so we're focused on executing that.

I think the only thing I'd add on that, Laurence, is, in your question about focusing on SKUs, I think -- what's interesting is from a magnet formulation perspective, I think Jim made the point earlier, we've seen a really big push from customers to really narrow their focus on heavy rare earth-free or extremely reduced magnet formulations. I think Jim also spoke about the progress that we've made there even versus our initial formula for EV traction motors, as an example, being 60% lower than where we started out, which was already on the low end of sort of market norms.

I think what we're also working through right now is I think fundamentally in the Magnetics business, the only way to make the economics work in the early days is to have scale and to be able to build the quality and production quality processes that are necessary for a customer like an automaker. That's what enables you to do all the rest and introduce the incremental industrial complexity of the various SKUs. I think the great thing is with the base under us of sort of these very large customer agreements with the GM and Apple, for example, 10X is designed to have a significant amount of incremental flexibility.

If you paid attention to our agreements that were filed with the Department of War, they spoke to a variety of different magnet specifications and grades that we would agree to mutually. We are -- we've already done that with them, and we basically opened up, I think, the vast majority of the market there and what's in our development pipeline. And so we are absolutely building out the capability to take different formulations and different SKUs of various sizes and shapes as we approach 10X.

Our last question comes from Bill Peterson with JPMorgan.

Congrats on the results and all the great information here. Question on, I guess, offtake and further offtake agreements. Do you have -- I guess, you have the desire, the bandwidth or the capacity to support additional offtake agreements. Or will this be limited by expansion such as Upstream 60K or having the 10X facility up and running? I think the question's also related to what Jim was discussing earlier about a clear focus of some of your customers on physical AI versus maybe auto where the volumes could be much larger. So just any sense how should we think about future offtake agreements?

Well, Ryan, why don't you start on offtake and then I'll...

Sure. Yes. I think, Bill, we continue to remain opportunistic. I think certainly, if you think about the scale of demand from automakers, it's almost 30% of magnet content today goes in the automotive supply chain, and nearly 100% of that today is coming out of China.

And so just the slice of the pie there that is available as those customers look to diversify their supply chains in today's market is pretty exceptional. I think to Jim's point, what we are starting to see is a really accelerated focus from a variety of other users. I mean, various pieces of physical AI, whether it be robotics and sort of those types of applications or, frankly, a lot of items that go into data centers even are major magnet users. And so there's a whole host of growth vectors within the segment right now that we are also focused on targeting, but we'll continue to be opportunistic.

I don't know if Jim or Mike might give anything else to add.

I think just to add that our upstream business, hopefully approaching 6,000 tons per annum by the end of this year versus our magnet demand immediately leaves room for additional offtake demand. In addition, as we increase third-party feedstocks and recycling, that can provide additional material to provide -- to continue to provide into the market.

And then I guess the second question is can you just provide us an update on the magnet qualification at your lead auto customer as well as the comments, Michael, you made about the troubleshoot ramp. Like to double click on that. Is there anything to call out there in terms of focus on yields or throughputs? Or I think the technical performance is fine. But just is there anything else you can kind of speak to on that -- on the magnet ramp?

I'll start with the latter part. I'll let Ryan handle the PPAP. On the magnet ramp, I think stepping back, thinking about where we were several years ago, I couldn't be more proud, and I also couldn't be more optimistic that our team will be able to tackle this challenge.

We know that starting a new facility is challenging, but the challenges we've achieved -- overcome so far relative to what we have to do now, I think it's just a focus on execution. And that's what we've done in Mountain Pass, focus on quality and focus on execution for the customer and over time, build the volume. So we'll continue to play that playbook out.

Yes. And on PPAP, Bill, as I said earlier, kind of zooming out, one of the reasons we wanted to start with an automotive customer was our desire to produce magnets at the outset that could withstand some of the highest quality standards that are required for things like EV motors. PPAP is obviously a fairly extensive process. It audits not only the product quality but also the manufacturing processes themselves. You have to demonstrate different run rate scenarios, et cetera. And so frankly, going through that process, we'll continue -- as we launch a facility, we'll hone our processes and capabilities, and it's going to put us in a position to accelerate and bring customers like Apple on even more quickly.

And so we are just beginning that process. But given our significant engagement from day one in building this plant in partnership with GM, we believe it will be a relatively accelerated process compared to sort of a typical auto supplier qualification. And so that's what informs our guidance in view of back half of the year for salable magnets.

That concludes the question-and-answer portion of today's call. I will now hand the call back to Mr. Litinsky for closing remarks.

Thank you. Well, thank you, everyone. It was pretty outstanding quarter to a transformational incredible year of 2025 and '26 is off to a great start. So we will get back to work and see you all soon.

Where you are. It's great to have Ryan Corbett, CFO of MP Materials with us as well as Martin Sheehan to participate in this mining symposium critical minerals and rare earths. We're going to be hosting this session together with Stephen Burt, my colleague that leads the global Automotive Research and sustainability here at Morgan Stanley.

My name is Carlos De Alba, and I lead the Metals and Mining group in the Americas also here in the research department. So we're going to keep it very conversational. We're going to have -- we're going to go straight to Q&A. Please feel free to send your questions -- [ more the Merrier ]. This seminar is basically for you. We have some prepared questions that we're going to start with. But definitely, I encourage the audience to send the questions, and we'll read it out to Ryan.

Before we begin, let me mention some disclosures. For important disclosures, please see Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative.

All right. Well, Ryan, thank you again for joining us. We were just talking before, what a difference 3 years or 2 years make in terms of the interest that we see in the market from investors in rare earths and even in MP Materials for sure. So thank you for spending this hour with us -- these 30 minutes with us.

So why don't we begin with something that definitely is -- has differentiated MP Materials. And that is the deal that you guys reached with the Department of Defense, Department of War. So why don't you maybe tell us a little bit about the background, the history about it, the conception, the negotiation of what it really became a landmark deal and why MP was the chosen one in your mind?

Sure. Yes, happy to. And thanks, Carlos and Stephen, for having us. Happy to be here. I'm actually sitting in my office at the Independence magnetics facility right now, a lot of progress going on here. So it's pretty exciting to see. It's always good to get down to Texas.

So I think fundamentally, what you saw with our transaction and partnership with the Department of War really is an acknowledgment of the vertical integration strategy that we've been pursuing since 2017. We have demonstrated at scale at MP Materials the ability to bring back to the United States scaled mining, concentrate production, refining, metal making, alloy making, powder production, [indiscernible] or finish to a magnet. The thing that is often very underappreciated about this space is the number of process steps that are required. We see a variety of different folks throwing their hat in the ring to do one part or another of the supply chain, which, of course, we will need point solutions in a lot of parts of the supply chain. But what we really need in order to combat the Mercantilist policies of the CCP that has put us in this position of supply chain and security is to have a national champion in the space that is scaled in all of those individual verticals.

And so that's not to say again, that there aren't going to be other players there. But I think what the DOW saw is that MP has been able to demonstrate true production in all of those various verticals that are required to actually get us from rocks in the ground to a magnet in your electric vehicle or your iPhone. And so fundamentally, I think that's really the differentiator.

In terms of how the deal came about, certainly, I think we have been almost yelling into an MP hallway about the risk that the supply chain posed to the U.S. economy for the last several years. And we've kept our heads down and we've executed on bringing this capability back before it was sexy to do so through a lot of blood, sweat and tears. I think we've talked about the fact that we've invested $1 billion of private capital into the supply chain and created a capability that didn't exist before.

I think our engagement with the U.S. government goes back many, many years. We had our first agreement with the then Department of Defense under Trump 1.0. We had a further technology investment agreement with the Department of Defense under the Biden administration. And then certainly, the world changed in April post Liberation Day in the sense that what was always a theoretical risk of the Chinese weaponizing the supply chain became real. And frankly, no matter what everyone is saying about temperatures lowering, rising, lowering, the reality is that they have begun to ahead with the supply chain. And so whether they pull a trigger or not is another story. But I think that the importance of having a scale capability in the West has never been more important. And I think you combine what I just talked about a moment ago about demonstrating the capability at scale across the full vertical supply chain and then the incredible necessity to move at warp speed to drive even further scale is what really brought this deal together.

That makes sense. And you just alluded to obviously all the critical steps and everything that MP is doing and will do along the value chain, all the way downstream. Maybe for the benefit of the audience, can you -- you just had your earnings call last week, but could you refresh what are the critical projects along the different stages and maybe the time line for those projects?

Sure. Yes, happy to do it. At Mountain Pass, we've continued to invest. We've been investing in a heavy rare earth separation capability for many years. I think the new news, if you will, that we provided on the most recent earnings call is that we're targeting commissioning of our heavy rare earth separation circuit that's been under construction for several years in the middle of 2026. And so importantly, we've designed the capacity of the heavy rare earth separation circuit, both to separate our own ore in the SEG+ that we are currently producing and stockpiling as well as bringing in third-party feedstocks to enable sufficient dysprosium terbium production to satisfy our needs in our downstream business.

And so there's always been particularly recently, a lot of focus on the heavy rare earth question. I think for us at MP, what we are focused on is ensuring that we have the heavy rare earth that we need for our own magnet production. And so we've not needed to necessarily pound our chest about this, that and the other thing. The reality is this facility, we put some pictures in the earnings deck is very, very well advanced, will be commissioned in the middle of next year and will support our own internal capability, which we're very pleased about.

In addition to Mountain Pass, we've discussed our investment in our chlor-alkali facility. This is something that if you think about the process of refining rare earth elements at scale, it requires a significant amount of commodity reagents. We have a great asset on our site at chlor-alkali plant that was built in the 2011 time frame. The prior operator of the site, frankly, didn't complete a lot of the brine purification and sort of upstream steps that are necessary in order to feed clean brine to the facility and really create what is a very interesting closed loop that enables regeneration of hydrochloric acid and caustic soda with our own waste brine. And so that's something that we're excited about from both a supply chain security perspective and a cost perspective. It's one of many initiatives that are underway to continue to improve our cost profile on the refining side of the business.

And then we've also announced pretty quickly following our announcement of the DOW transaction, we completed our negotiation with Apple despite what many may think these were totally independent deals. We've been working with Apple for nearly 5 years behind the scenes on magnet recycling technologies to again be able to provide a solution at scale to bring both post-industrial and post-consumer magnet waste to bear to create recycled rare earth products and then turn them into magnets at our Independence facility. And so we are building a dedicated recycling circuit for Apple at Mountain Pass in addition to building out incremental recycling capability, both for our own magnet swarf and kurf as well as the potential for other customer agreements to fill out that facility. And so that is something that we're very, very excited about earlier stage in that build-out at scale given the recent announcement of the Apple transaction, but something that we think we'll be able to bring online relatively rapidly.

So that's sort of the Mountain Pass side of things. On the magnetic side of the world, we are working furiously to complete all the various stages of commissioning of the Independence facility to get into service here on production of magnets of the commercial equipment by the end of the year. We've been producing magnets out of what we call our new product introduction facility where we've built out our various recipes, if you will, for the magnets that will be going into our foundational customer, General Motors. We'll be transitioning those -- that production over to the commercial equipment at the end of the year.

We're also rapidly advancing the expansion of Independence to support first our Apple transaction that we just discussed a moment ago. And then in addition to Independence, what we've talked about is our 10X Facility. And so that is a greenfield facility where we will target production of 7,000 tons of finished magnets. We are in detailed site selection as we speak. We are progressing building the team very, very rapidly to oversee the construction and commissioning of that facility and so we'll continue to provide updates on that facility as we have them.

Great. Before I pass it on to Stephen, let me remind the audience, if you have any questions, please submit them, and we'll be happy to read them and Ryan will respond.

Thanks, Carlos. Ryan, I am really excited about the opportunity for MP, but also, frankly, just from the United States perspective, the steps you're taking to help eventually eliminate dependencies on China. I think you laid it out really well. And before we go into a little bit more on sort of stepping up and going further, I am just curious in terms of your general take from your dialogue in D.C. So for example, we go down to D.C. regularly, we get a sense that there is sort of -- like this is an urgent mission from Team Trump to try to eliminate dependencies of all sorts, not just rare earth, but just more broadly. What is the messaging broadly you're hearing from D.C. these days given your relationships?

Yes. Look, I couldn't agree more. I think the reality is that if you look at what happened in these trade negotiations, it's -- you cannot doubt that the rare earth magnet issue played an absolutely critical role in the negotiation of those agreements and the shape of those agreements. And so it's something that we can solve and we absolutely have to solve given what depends on the supply chain downstream, right? If you think about all of the future excitement in robotics, AI, data centers. So the physical manifestation of all of those depend on the supply chain, let alone the fact that 30% of magnets go into the automotive supply chain in some way, shape or form, which is one of the largest employers in the United States. If you think about the number of different industries that depend on a strong automotive business. I think it's a single largest employer soup to nuts in the United States. And so there are so many reasons why having strength in the supply chain is a total game changer for the United States on the world stage. And so it's something that we've acknowledged at MP. And it has formed a poor part of our mission since we acquired the site in 2017. And so it is very refreshing to see real results in this administration to get this problem solved.

Yes, it's encouraging. It's obviously it's -- it's a long run to get there, but we -- we're going to take that road. And it's remarkable to me that just within the War Department you mentioned earlier, I mean when you look at many of the U.S.'s most important military assets, I mean, this stuff sort of shows up in ways that, frankly, aren't always completely understood, but audits of different programs show that the stuff is probably more prevalent than appreciated. So -- a big issue.

Ryan, I wanted to talk about growth beyond where you are now, I guess, [indiscernible] where investors were greedy...

What have we done for you lately, right?

Exactly. And I guess where I wanted to go is sort of as you deliver on the initiatives that you've laid out, where would the U.S. stand broadly in terms of rare earths and sort of magnet potential. Where do we stand then?

Yes. Look, I think that one of the things that we see a lot is a desire to talk about the issue as a resource issue, right? We need more rare earths. I think the fundamental truth from just a U.S. perspective is Mountain Pass and the ability to expand Mountain Pass is, by far and away, the best source and sufficient to support pretty significant growth on a stand-alone basis. Again, there are other technologies that I think are useful. I think certainly, we believe we'll lead in those. If you think about some of the technologies that we'll use on portions of the heavy rare earth elements that are sort of less scaled chromatography, things like that. We have that technology, we know how to do that. It works at smaller scale. Recycling is another area where, of course, we need more of that. And we think recycling can and should play a very big role. But I think frankly, MP will help lead on that front as well.

And so if you think about it from a resource perspective, today, we're exporting the vast majority of our oxide and metal products overseas. And so as we build up our own magnet capacity, that will become internalized. But I think even if you do the math at a very high level and think about 10,000 tons of magnets, the rough rule of thumb is divide that by 2 to think about the NdPr oxide that will be required to support that NdPr magnet tonnage. So 10,000 tons of magnets is 5,000 tons of oxide. We've already told you we intend to get to a 6,000 run rate at the end of next year. That doesn't include recycling and some of the other Upstream 60K initiatives and other areas for growth. And so the reality is, again, from a resource perspective, we feel very good about being able to supply the United States from a resource perspective.

And then, of course, the question becomes, okay, well, if that's the case, do you guys see the opportunity to grow the magnet business as well to sort of continue to stay matched there. And I think we look at that all the time. Our main focus right now is heads-down execution mode. But undoubtedly, if you think about the incremental material that we'll bring to bear Mountain Pass through recycling through Upstream 60K, through other partnerships that we think about all the time, there is a real opportunity to scale this business very, very significantly over the next 5-plus years.

It's a great overview. We've gotten a number of investor questions, which is great. A lot of engagement here. And I want to go to one of the questions, Ryan, which deals with sort of just managing the technical execution challenges. And so the question is, some of the difficulties that Molycorp faced were technical, trying to do too much at once, having more processing. How would you characterize the technical challenges? And how are you managing these definitely? How are you sort of managing that?

Sure. I think fundamentally, we see the comparison of the prior operator. We see dumping blamed for their failure and the reality is until recently, we had no air cover on pricing either and we thrived as a public company. And so that alone is certainly not the reason that we're in this position. We've seen technical challenges as the blame. The reality is if you step back and look at what really happened, it was a flawed business plan and a flawed flow sheet layered on top of each other, right? And so the reality is that we have approached this from the perspective of, despite doing a lot at once, ensuring that we actually approach it in a step-wise function in perfect or at least have visibility to nearly perfecting the first stage before we move on to the next, right? And so we spent many years focused on ensuring we could produce a very, very high grade and high recovery mineral concentrate that we could generate significant amount of free cash flow. And frankly, within a year, when prices were high in 2022, we generated enough free cash flow basically to cover the entirety of the investment in our Stage 2 operation to then refine that product.

And so I think we were very methodically focused on addressing the issues of the prior operator in building a business that can self-fund in order to move on to the next stage. And so we frankly adopted a lot of the mentality as we move further downstream. And so looking at Stage 2, certainly, we dipped our toe, if you will, into the magnetics business starting in 2021. We built a business, frankly, where we partnered with GM who I think approached this industry very thoughtfully and allowed us to build a business where we took the risks we were comfortable taking. They took on some of the risk profile as well. And so it allowed us to focus on ensuring we were building that business thoughtfully from a risk-adjusted return on capital perspective. And so it really, from our perspective, didn't require us to walk while we chew gum, right? It allowed us to build that capability from scratch, hire a team, foster innovation. We're at nearly 200 employees at Independence now. And that wouldn't have been possible without designing the business plan thoughtfully to be able to adjust for and control for that risk.

And so now we're in a position where we've got clear line of sight on our Stage 2 business. We've got clear line of sight on our Stage 3 business. And so now it's sort of okay, Stage 3.1, if you will, of really going into expansion. And so I think that we feel very, very confident in the technical expertise that we've built over time. We've tried to demonstrate at smaller scale before going full hog into large-scale. Perfect example is this new product introduction facility that we built in the Independence plant. And so it's all about just managing risk, frankly. Technical is always one risk, but that's our job as management is to manage that.

Fantastic. And so far, so good. You really delivered against a lot of people that were maybe skeptical when you first started with the project. We're getting some questions from the audience at different stages. So let me go from upstream to the downstream. The first one is why did you stop concentrate sales in the second quarter?

Yes. I mean the true answer there is we had actually decided to cease shipments following the reciprocal tariffs that started going back and forth and sort of our view that we were at a point where selling that commodity for such a material discount to its intrinsic value didn't make any sense. And so we'd see shipments at that point. And then as part of our framework of agreements with the Department of War, we further agreed at that point that we would no longer sell any of our products into the Chinese market. And so that's the sort of 2 prongs of that approach.

And then moving on to Stage 2. The question is, what would be the absolute maximum capacity in that stage 2?

You'll find out over time. Fundamentally, as a team, we don't like setting new targets before we've got the absolute clear line of sight, at least, on the same assets, right? I told you it's 1,000 tons of Independence on this equipment. I am telling you I'm going to get to 3,000, but it's a new investment. In the Stage 2 refining, we're going to get you to 6,000, and then we're going to tell you what comes next. I think undoubtedly, if you layer in the recycling capabilities, certainly, our ability to produce will be well in excess of 6,000 tons when you bring that capability to bear. But I do think just from a virgin material perspective, our view is there likely is some real headway there on the refining circuits over time as we dial them in.

And then staying in that stage 2, the next question is, can you process heavy rare earths like terbium, dysprosium and samarium? And another question on this area is how will MP secure all the heavy rare earths that is needed -- that are needed to scale up the magnet production?

Sure. Yes. Certainly, we absolutely can process and produce heavy rare earths. We are producing at scale, SEG+ concentrate and have been for the last 2 years. The heavy rare earth refining circuit, as I mentioned, will be commissioned mid next year. The vast majority of that investment, frankly, is complete. And that was actually part of an agreement that predates sort of our larger framework agreement with the Department of War where they were a participant in the heavy rare earth separation capability that we built out at Mountain Pass. As part of the new set of agreements with the Department of War, we are approaching the acquisition of heavy rich rare earth feedstocks as partners. And so frankly, there probably is no more powerful partner in the world than the U.S. Department of War. And so we are very encouraged to buy the interaction and partnership that we've had with them to date on working through the various opportunities for third-party feedstock to feed that refinery above and beyond our own internal feedstock. And so as we talked about, we've sized the refining capacity to be able to serve our downstream needs, and we feel very confident that we'll be able to secure feedstocks over time to feed that.

And then the next question on Stage 3 is how will the company manage the yield loss in magnet making, which is around 25% to 35%?

Sure. Yes, I think that is fundamentally one of the reasons that we so strongly believe in our vertical integration strategy. If you are a stand-alone magnet manufacturer without integrated recycling capability, you sort of forced to sell this product on to the market generally at some significant discount if you can even find the capability in the Western world to process this at scale. And so from our perspective, yield loss in the magnetic business is opportunity in the materials business. And so it's one thing that we are, I think, best positioned to be able to tolerate and create value both for ourselves and for our customers. The great thing about Mountain Pass is having the scale, the virgin feedstock allows us to be able to bring in such a variety of external feedstocks given sort of the base load that we get from the virgin material. One of the things that's difficult about recycling is if you're always bringing in different magnet grades, different magnet types, different compositions, it's hard to get good yields on that product. But given the fact that we've got that base load, it allows us to bring in such a variety of different material and continue to produce quality product and high yields in the Upstream business. And so the way we intend to manage it is to leverage our vertical integration and I think provide a best-in-class solution for the Western world.

That definitely is one of the things that -- one of the many things that sets MP Materials apart, the ability or the presence that you guys have along the supply chain. One last question before we wrap up, I just came up from the audience. The question is about the purity of refined rare earths. It is of critical or is vital, the level of purity for certain -- critical applications and that this is something that maybe others have fallen behind or the U.S. has fallen behind the Chinese due to the years of experience that they have. How are you going to solve this issue?

Well, so I think different applications have different purity requirements, right? Certainly, you can tell that our focus on the NdPr side is certainly, our existing magnetic customers where we are selling into some of the most demanding and scrupulous customers in the world with Japanese magnet supply chain that's selling into the Japanese automotive business. They are some of the most quality-focused individuals that we've ever dealt with. And so we feel very good about our ability to execute on that opportunity. And then, of course, the vast majority of product and growth over time will go into our own magnetics business. It's actually one of the other elements of the vertical integration strategy that we find so interesting, right, is -- you see specifications on the market for certain rare earth, let's say, where there's a very, very tight iron spec. But then, lo and behold, 5 minutes later, you're going to take that material and mix it with iron in a magnet. And so certainly, there are parts of the individual processes where iron could be complexify things. But the reality is that our position on both sides of the coin as producer and consumer, I think over time actually will give us some really interesting competitive advantages to be able to avoid overprocessing to certain purities that aren't actually necessary. And so while the market needs it and demands it, we certainly have the capability to meet market demand. But over time, I actually think it's a source of advantage from a cost savings and complexity perspective to be able to see, do we really need to hit Five 9s on this? Or given the fact that we actually own the downstream piece, we could measure the true implications of changing the specification in a way that the supply chain is not capable of doing right now.

Fantastic. Well, thank you very much, Ryan, for joining Stephen and I. It was great to host you. Fantastic to see all the progress that you are making and all the best as you continue to ramp up the different processes and the projects that you are working on.

Yes. Thank you so much, guys. Good to be here. Appreciate it.

Thank you.

All right. Good morning, everyone. So I'm Ben Kallo. This is my partner, Davis Sunderland. We cover sustainable energy and mobility. Within that, we cover MP Materials. Very happy to have Martin Sheehan here. He's the VP of Investor Relations. Thank you, Martin, for coming.

Maybe because we have a big group here all with different exposure to MP. If you could just maybe give us a 2-, 3-minute overview of who MP is and then we'll start from there.

Yes. Before that, yes, I just want to make [indiscernible] anyone has any questions, small room, please just raise your hand or you can e-mail [email protected] [indiscernible]. Sorry, carry on.

No, no problem. So thanks for having me, Ben and Davis. Unfortunately, our CFO on the name of the sign there couldn't make it today. So I'm -- the B team is substituting. So I apologize about that. I also want to say to everybody in the room, everybody out there listening to the webcast, Happy Veterans Day. At MP, Jim always talks about how we are patriotic capitalists, and we believe in the mission that we're on to bring the rare earth supply chain back to the West in the United States. And so we appreciate all our veterans out there and all the work they put in over their career. So thank you.

With that, MP. So we are the only sort of fully integrated Western rare earth producer and supplier in the United States. We have Mountain Pass, which is a world-class. And when I say world-class, I really mean world-class ore body. It is one of the best 2, 3 ore bodies in the world in terms of producing and concentration of rare earths. The key 2 rare earths being NdPr, neodymium and praseodymium. Those are critical in terms of magnets, NdFeB magnets, neodymium-iron-boron magnets which are very high-powered magnets and they're used in all sorts of applications.

We are now moving downstream where we are actually now refining NdPr oxide at Mountain Pass. And we have built a facility in Fort Worth, Texas. We call it Independence because of what we're -- our mission, but it's also on the corner of Independence Parkway and Victory in Fort Worth, Texas. And we are building magnets for our foundational customer, GM. By the end of this year, we should be in initial production for GM. And also Apple will be taking a significant amount of the capacity of that facility.

So we are building out a complete end-to-end supply chain, whether it's mining, refining, metal making, alloy making everything. I don't think there's another company in the world that does all of the steps. And so again, a truly vertically integrated company. And obviously, we have some big partnerships, which I'm sure we'll talk about a little bit more.

So I make the joke because I covered the previous owner of the Mount Pass Mine, Molycorp that we've heard rare earths more in the last 6 months than the last 15 years. Could you just talk to us about how this bubbled up to such importance and then we'll go from there.

Yes. Again, neodymium magnets are used in so many applications. I think most people think of them as sort of in the EV traction motors, but they're used in your laptops, your iPads, your -- you name it. HVAC systems, any sort of electrified motion is probably using a neodymium magnet in it, particularly if size and power are really, really critical.

So the fact that they're used in such proliferation and the fact that 90% of those magnets today are made in China, 90% of the metal making is done in China, 90% of the refining of neodymium-praseodymium is done in China. Now suddenly, you have a situation where Independence Day came was Independence Day with the tariffs in April. And whether people didn't realize how much NdFeB magnets are used and the proliferation of them or if people didn't realize how tight the supply chains were for those magnets or that would China even use this as a cudgel against the United States, I'm not sure what happened. But in the end, China pulled the trigger, so to speak, and basically, in April stopped or certainly made it extremely difficult to export magnets out of China. And we saw major manufacturers, OEMs have to shut down truck lines because they couldn't get a magnet for a speaker, for example.

So that really kind of really set the wheels in motion for the DOW to kind of come and start talking to us about how do we get a supply chain stood up in the United States much more quickly than the path we were on at the time.

Maybe just to take a step back to, could you just talk about the different stages of the value chain and then how China has the control over the different parts of that?

Sure. So China has something like 60% of the world's reserves of rare earths. They mine about 60% or 70% of the world's rare earths. They refine, like I said before, about 90%. They metallize about 90% of NdPr. And then they produce something like 90% of the world's magnets. So all of the magnets that all these name brand companies are buying, they're basically getting from China, right? So the value chain, obviously, is completely tied into China.

And so -- and now that they have sort of use this lever against the -- not only the United States mind you, but the world, right? There's a lot of reports, India couldn't get magnets, right? Korea couldn't get magnets. And I think even as recent as last week, we were hearing that certain customers or certain customers of China could not get materials out of China. So, yes. So we're just sort of in this unique position of trying to stand this back up in the United States and trying to do it as quickly as possible.

I'm sure we'll spend some time talking about the DOW agreements and transformational benefit for the business. But maybe just to start and level set to you, depending on when you came out the MP story, Stage I, Stage II, Stage III, now materials and magnetics. Wondering if you could just talk about the production of each stage, how you've added value through each one and where things will ultimately be going, maybe, say, middle of next year?

Yes. So it starts with obviously mining and beneficiation where you basically take 6% or 7% ore out of the ground, and we concentrate it up into a 60%-ish concentrate. Historically, we sold all of that to China because it couldn't be refined anywhere. But over the last several years, we actually invested in the facilities that the predecessor company built but changed some of the process steps and didn't have the capacity that was needed. So we spent a couple of years upgrading that facility, optimizing that facility. And then we started actually refining NdPr in late 2023. We're now at about half production, if you will. Our goal is to get to 6,000 tons of NdPr oxide production annually. We're at about half that run rate right now.

So we're making good steady progress. Our goal, again, if we can keep on the current pace would be around the end of 2026, we would get to that full production level. And then, of course, we're also producing now magnets in Independence or we'll soon. We actually are making magnets in that facility in the -- using the prototyping equipment, basically what we call the NPI, New Product Introduction area, where we actually are producing magnets that meet GM spec. The big step now is we're commissioning all the commercial scale equipment right now, and we will be bringing that online at the end of this year, so we can again start making magnets for GM. We actually are already making metal for GM. So we're taking NdPr oxide and turning that into NdPr metal and generating revenue and EBITDA from that. So that's kind of like the near term of where we're at.

I want to get to kind of the most recent summit with the President and she and what's changed. But before we go there, so starting with in April and limiting rare earth's magnets. I think the previous administration wanted to do something in critical materials and rare earths. This administration really did the first kind of big deal with you guys with the DoD. Sorry, I still say Twitter 2, but the Department of War. And could you -- I know it's complicated, but could you kind of provide some framework just around what that deal entails?

Yes. So because we have already invested close to $1 billion or roughly $1 billion between the refining aspect of Mountain Pass plus building this facility in Fort Worth, the Independence facility for GM initially, we were sort of well ahead of the game in terms of having this vertically integrated business. And so I think when China kind of put the hammer down on exports of magnets, the DOW came to us. They did some pretty significant due diligence at both Mountain Pass and at the Independence facility and then went into sort of a deep and very challenging negotiation with Jim and the team to figure out how do we make magnets yesterday, right? So it's sort of an operation warp speed and also making sure that the refining side of the business isn't subject to the mercantilist policies of China in terms of putting pressure on price as opposed to letting the market sort of dictate to itself.

So we had this, again, protracted and challenging negotiation with the government such that we would get a price floor on the NdPr oxide, we produce of $110 a kilogram. At that time, the market was maybe 55.

And just to be clear on that, you get that price guaranteed regardless of what you do with it, if you sell it or...

Or stockpile.

Or stockpile.

Right. To the extent because we're still ramping our refinery, we are stockpiling some level of that concentrate that we produce. And we actually get some payment from the DOW for that stockpiling starting October 1 last month.

In addition, so now in addition to the $110, obviously, they want a magnet facility. So first, they wanted us to fill out the Independence facility because at the time only had GM. It was 1,000 tons to GM. That facility can do about 3,000 tons of magnets. Obviously, we were in pretty deep discussions with Apple at that time. So they wanted us to fill up that facility which we did with Apple eventually maybe a week after the DOW deal. But they also wanted this, what we call the 10X Facility, 10X because it takes us to 10,000 tons of total magnet production. And so they have agreed to buy all of the output of that 7,000 ton facility, right? It's a guaranteed offtake. It's a cost-plus deal with the plus being $140 million of sort of guaranteed EBITDA. Obviously, we can syndicate that to commercial customers, which the DOW is happy for us to do because they share in some of the upside of EBITDA to the extent that we add on profitability from commercial customers versus the DOW deal.

So they also invested $400 million in preferred equity, which can turn into about 13 million shares. And they have a warrant, which if they exercise, would take them to about 15% ownership of the company. So if they will be or they technically are, I guess, or maybe not technically, but they are our largest shareholder. Jim, our CEO, is close behind. So owner-operated, but -- so sort of a really good partnership in terms of helping us support the refining business, making sure we have capital there to an incentive there to keep investing to keep that business going despite no matter what China does, so to speak. And also a magnet business, which hopefully kind of leads the industry and starts helping ancillary industries grow around it.

One question that we Davis and I get very frequently on this is what's the upside, if you have this guarantee and they guarantee this sort on the magnet facility. And maybe just -- there's several different areas I could see, but if you could just kind of give the top 3.

Top 3. Okay. So one would be the fact that the -- we laid out sort of a minimum EBITDA profile of about $650 million and about $400 million round numbers was related to NdPr oxide production in that minimum $110 price point. That was predicated on us producing 6,000 tons of NdPr oxide and selling it. So that was kind of the -- that's our ramp, right? That's what we're trying to get to by the end of next year. But we also have a recycling capability now. Apple is investing with us to build a recycling capability. That will produce NdPr oxide for them and for their magnets. That would get the top-up payment.

Also, our upstream, our concentrate business is heading towards 60,000 tons of concentrate output. That would add another 1,000 or 2,000 tons of NdPr oxide potentially to the extent that we refine it, et cetera. But certainly, if we -- even if we stockpile, we will get some payment for that. So that is upside that's not in that model. And then there's third-party feed from that model. So the $110 is -- price point is certainly one big area where there's additional upside.

And then on the magnetic side, if you -- again, if you think about this minimum floor of $140 million of EBITDA with the DoD buying all of that 7,000 tons of output to the extent that we can sell a lot of that commercially to commercial customers, we believe there's upside there in terms of driving additional EBITDA based on how we negotiate with Apple and GM. Now the DOW would share in that upside, but again, that would be additional upside.

And then lastly, look, we're going to be producing a lot of NdPr oxide over the next several years. Obviously, we'll sell that into the market, so to speak. But also, there's the opportunity to just expand beyond this 10X Facility, right? So -- and then if you really want to look downstream, as Jim likes to say, like 5 years ago, we never would have thought we had a magnet facility built, right? And here we are, we have a magnet already built. We're about to embark on 1,000 tons of production in the coming years just for GM. In 5 years, who knows what opportunities will be out there. Maybe we move even further downstream and vertically integrate even further using that magnet as kind of as the linchpin for what we do next.

So the team is really, really excited about what we're executing on and the opportunities down the road to really expand the business.

Another question we get very frequently is what happens if the geopolitical tension subsides and things go back to normal, if you will. And going back to Ben's point earlier about the recent summit between President Trump and GE, I guess, where do things stand now? And what happens in the event that we can be friends with China and there's some sharing of maybe U.S. producers going back to buying from China? Or I guess, do you expect that to happen?

First, I think today, it's a little unknown what's going on in China in the sense that they agreed to roll back the October restraints, if you will. But the April ones are still out there in theory where you have to get licensing licenses to get NdFeB magnets released out of China. And we just saw an article where they're hiring 60 people to help with that process, which sounds like it's a process that's not going away. Maybe they'll do it faster, but it doesn't sound like that process is going away.

And I think at the end of the day, maybe most importantly, they can just pull the trigger again tomorrow, right? I mean there's nothing that stops them if something else in the world happens that they're not happy about, that they just put those restrictions back on. So most importantly, from our perspective, is our customer discussions have not stopped or nothing has changed from an interest in -- from potential customers in wanting to stand up some level of supply here in the United States and from MP.

So I think not much has changed. I don't think we're ever going back -- look, will companies buy magnets from China? In that world, of course, they will. China dominates that market right now. There's -- we can't pull all of that supply chain back here tomorrow. It's going to take years, right? So I think that's always going to be -- they're always going to be a player in this market. The question is, will -- I think companies now realize you can't have a single source of failure like this.

Sure.

You guys have talked about -- one question we also get a lot is in magnet production. You have the light rare earths, you also need heavy rare earths. You guys have -- could you talk about the projects you have underway to refine heavies. I think you guys address your current needs on the call, but if you can just talk about that because there is some thought out there that you guys are light on heavies and you're short on that, and so that could be a risk to you guys.

Yes. I can't get through a meeting without talking about heavy rare earth, that's for sure. Yes, so understand that Mountain Pass is a -- because it's a bastnäsite ore body like most monazite and bastnäsite ore bodies, like most ore bodies in the world. They're light rare earth rich, if you will. But Mountain Pass is massive, right? We're producing -- we're on the way to producing something like 60,000 tons of concentrate, right? So 60,000 tons of REO in concentrate. So it may be a very small percentage, but it's a small percentage of a very big number, right? So the amount of rare earths -- heavy rare earths, dysprosium and terbium in particular, which are used in these high-end magnets, there's plenty, if you will, in the ore body based on what we're mining today and we'll be processing to take care of GM's needs, their 1,000 tons of magnets.

In addition, right now, we're stockpiling, right? We're obviously mining it right now. We -- our separations facility is under construction for heavies and -- excuse me, dysprosium and terbium. And so we're actually stockpiling that. We have hundreds of tons of what we call SEG+, basically heavy rare earth concentrate sitting on site ready to be produced. So we are now building this heavy separations facility at Mountain Pass so that we can produce about 200 tons of dysprosium and terbium. Apple is going to bring their own feedstock because they want recycled feedstock. So initially, they're going to provide their own feedstock. That feedstock will have dysprosium and terbium in it, right, because it's spent magnet waste.

So in other words, between the ore body and the fact that we're stockpiling SEG and Apple, we have plenty of dysprosium and terbium for the Independence facility, the 3,000-ton facility. What we need is likely more dysprosium and terbium for the 7,000-ton facility, the 10X Facility. Here, we'll probably have -- we believe they'll have multiple opportunities here in terms of both feedstocks as well as more recycled materials. So we're in a sort of a unique position where we can help maybe a on a clay stand up a concentrate type business like a stage -- what we used to call Stage I business, an Upstream business. Where we could be the offtaker. We could JV, we could do -- we could obviously provide a lot of technical support. And so -- and we have a pretty -- because Mountain Pass is so big, the refinery is so big and scaled, we have a lot of leeway in the types of feedstock we can take.

So we feel very good that we'll have multiple providers for that feedstock. And the nice thing is, because we will be, if not the low-cost producer, a low-cost producer like NdPr, for example, and because this feedstock will become with that NdPr. And oh, by the way, we get a $110 top-up on that NdPr we would produce, right? We're in a unique position to be a good partner in terms of getting those offtake agreements done. So maybe with that, I'll leave it there.

One question that I don't think or one area doesn't get a lot of focus is on recycling. Could you talk about maybe first, the Apple relationship? The history of it and then kind of what the recycling facility, how long that takes to stand up and then what kind of benefits that has?

Yes. What's not well understood is that about 30% of the NdPr oxide produced in China comes from what they call swarf or kerf. It's basically waste off the manufacturing line in the magnet facilities. So I mean, think about it, you make a big block and then you have to cut it and shave it. And suddenly, there's all this waste and blocks chip and things like that. And so it's all dysprosium, terbium and NdPr, right? So you want to recycle that. So in China, that all gets recycled back to the refiners. So the beauty of Mount Pass and Independence in this 10X facility is all under one roof now. So when we make this -- when we get this magnet waste out of these facilities, we'll be able to recycle that back and reuse it and obviously, that drives down your cost, if you will, it extends your mine life, all sorts of things that are beneficial to the company and particularly from a cost perspective.

So we've always known we had to do this. With Apple, the beauty is -- since I think the iPhone 11, they've always used what they say is recycled material, mostly swarf and kerf to recycle magnets to use in their iPhones, et cetera, and their -- all of their products. So they want to use dedicated recycled materials. So they are -- again, they're prefunding us about $200 million of prepayments. That will go to building out the Independence magnet facility for them, but it also will go to building this recycling circuit at Mountain Pass. And so they will have a dedicated circuit so that we can take magnet scrap, whether it's post-industrial waste or post-consumer waste which certainly initially Apple will provide, and we will then refine for them. And so that circuit will come online over the next year or 2, couple of years. I don't think we've given an exact date on that. But again, that will be used to separate dysprosium, terbium NdPr for the Independence facility to make magnets for them.

Maybe if I could ask one going back to magnetics and just looking at the commercial pipeline. If you could talk just a little bit about how the pipeline changed before and after the April export controls, before and after the DOW agreement?

And then I guess part 2 is looking ahead, when we think about you signing offtake agreements, does that come before or after the 10X Facility is built or along the way? Or I guess, just piecing together the time line there?

Okay. A lot of questions there.

Maybe a lot all at once.

Yes. So starting -- where would you like me to start? So the...

Maybe start with how the commercial pipeline has changed year-to-date out of these agreements?

Well, it changed dramatically on April or whatever that was, fourth, fifth, sixth because suddenly, people knew they only had 2 weeks of magnet supply, a week of magnet supply in their manufacturing facility. So the phones immediately rang, can I get a magnet tomorrow? And of course, the answer was no. But we did point a lot of people to our Japanese customers who are buying our NdPr oxide. I'm sure our Japanese customers are happy about that. So maybe they could help them. But that drove the DOW deal ultimately, but it certainly drove a significant amount of phone calls across every single vertical you can think of about when can I get a magnet from MP? If I can't get one tomorrow, can I get one in 2 years, right?

And then in addition, I think when we signed the Apple deal and the DOW deal, I think the same thing happened, I think I don't know if it's a little bit of FOMO or a little bit of like, oh, my gosh, you got 7,000 tons to -- you've already filled out 3 and now there's only 7, I better get some, right? So that also sort of kicked off a wave of discussions. And I think, again, the discussions continue.

As we said on the call, I think Ryan said, well, look, we have the luxury here because the 10X Facility is sold out already to the DOW, we have the luxury to take our time and find the right partners, find the right -- not just customer but what kind of magnets do we want to make? Obviously, low SKU counts, high volumes is better from a cost perspective, probably better from a return perspective. And obviously, we're still arguably getting our feet wet here, right?

So it's certainly -- I don't know if you remember from our Q1 call, we called it a freak out moment, right? We have to listen to our pre-call, our pre-earnings music often always, we'll always have a message, if you will. And so yes, and so again, the great thing is that these discussions continue, and we're optimistic we're going to get additional deals done. And there's no rush, right?

True. And you already started to answer it, I guess, but just to round out that thought, I mean, do we think of these announcements coming between now and when the facility is ultimately commissioned, maybe some before going after?

Yes. For all I know, tomorrow, a deal gets announced, right? So I think I think these deals will come and they'll come when we're -- when both sides come to put pen to paper.

Maybe very quickly last questions. Just the site of the 10X Facility, when should we learn more about that?

Well, obviously, sooner rather than later, right? I don't think we've given a hard time line because there's a lot to go through, right? We're figuring out what are the permitting issues. Obviously, labor is going to be really important, right? We're going to have to hire a lot of people. It's --metal making is a 24/7 operation, right? So you're going to need multiple shifts. Obviously, there's something to be said about being near the Independence facility because that's where all the kind of state-of-the-art equipment is in terms of like testing and that sort of thing.

So we'll see. Obviously, we want to get the best tax deals we can get done, right? So we're going to try to run a competition here. But it is sort of -- I would say that's kind of front and center right now with everything they're doing right now. Getting this facilities, the site selection done is really important.

We've all seen a lot of announcements across the value chain of players that want to get into the business from large players to start-up guy companies. On the magnet side, the question we get a lot is just about oversupply of magnets. If you have several players coming into the U.S., how do you guys think about that?

Yes. I don't think we are all that concerned about additional supply coming online. First of all, we're sold out for the next -- arguably the next decade, right? We have a customer in the DOW is going to take every magnet we can make. And obviously, hopefully, we syndicate a lot of that.

The second issue is there's so many different kind of magnets. Like I said, there's like 70, 80, 90 magnets in an ICE vehicle, right? So there's just -- there's so many opportunities for niche players to specialize in, et cetera. And I think to really build out the industry, there's all these support industries, too. So as what we believe the national champion like we can lead the way and help start to develop these sort of ancillary industries here in the States or in the West.

And then if there's other magnet makers, that's great. Their challenge will be feedstock, right? That will be like where they're getting their alloy from? Where are they getting their metal from? Are they doing it themselves? Where are they getting their NdPr oxide from? Where are they getting their dysprosium and terbium from? So whether that's through recycling or something like that, we'll have to see. But that will be their challenge. Like that's the beauty of us is that we're vertically integrated. We have the feedstock, right? We have the magnet capability now.

In our last roughly minute, I know we're about to run out of time, and thank you very much, Martin. Just wondering if you could talk about the spending that will happen between now and the 10X Facility ramping up Independence. You mentioned prepayments from Apple, which were also a part of the GM deal. So just, I guess, sources of capital and capital needs over the next intermediate term?

Right. We're sitting with about $2 billion of cash on the books. I think we have roughly round numbers, about $1 billion of debt. So we're net cash positive. Obviously, with the new $110 price for our cash from operations starting in Q1 of next year will change dramatically to the positive, if you will. So we believe we're fully funded with that capital plus cash flow profile for the next few years to fund the capital.

I think part of the DOW deal was the fact that we had to be fully funded for this facility, the 10X Facility, not to mention Apple and et cetera. So obviously, we'll start to give a better guide at sort of an annual basis in February. But anyway that $2 billion plus the cash flow from operations puts us in a great shape.

Thank you Martin.

Thank you.

Thank you. Thanks Ben.

Hello, and welcome to the MP Materials Q3 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. 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 Third Quarter 2025 Earnings Conference Call. 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.

As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation, earnings release and in our SEC filings.

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 appendix to today's 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 afternoon, everyone. As most of you know, our third quarter was a game changer, a total acceleration of MP as a vertically integrated national champion with a transformed economic platform for long-term leadership. If you are new to our story, I would encourage you to go to our investor site and listen to our July 10 webcast and announcing the DoW deal as well as our last earnings call, where we went through our DoW and Apple agreements in detail.

It has been an exciting and interesting time to say the least in the rare earths industry. I have a lot of thoughts to share. Let me first cover our execution for the quarter. Ryan and Michael will then cover the financials and operations, respectively; and I will wrap up with my big picture thoughts on recent events and the outlook.

So with that, let's go to Slide 5. In our Materials segment, we delivered another outstanding quarter. NdPr oxide production reached 721 metric tons, a 21% sequential increase and a 51% increase year-over-year. The 721 metric tons of production exceeded the high side of our outlook for the quarter and marks a record. Corresponding sales volumes also set records, showing strong growth in the quarter, both year-over-year and sequentially.

In addition, REO and concentrate production was the second highest in our history. This marks the third quarter in the last 5 that Michael and the team have produced more than 13,000 metric tons of REO. While biannual maintenance outages can create some variability when comparing results sequentially, it is clear that we have made significant progress toward our Upstream 60K target or 60,000 metric tons of annual output.

We are also ramping up the installation of the dozens of mixer-settlers required for heavy separations. Our new heavy circuit will process approximately 3,000 metric tons feedstock and produce more than 200 metric tons of dysprosium and terbium annually. We expect this capability to fully enable our planned production of 10,000 metric tons of high-performance NdFeB magnets each year. And we are on track to start commissioning this circuit in mid-2026, a major milestone in our vertical integration and a historic step toward restoring America's ability to produce magnet grade heavies at scale for the first time in decades.

Our long-term purchase price agreement, or PPA, with the Department of War commenced on October 1. The agreement provides both earnings visibility and a clear and transformed economic foundation to accelerate our build-out of magnetics production. Importantly, we expect to return to profitability in Q4 of this year and beyond. Ryan will provide additional PPA accounting and economic details shortly.

Moving to the Magnetics segment. Pursuant to the terms of our Apple agreement, we received the first $40 million prepayment for the production of magnets from recycled materials. Engineering and equipment purchases for the recycling circuit at Mountain Pass and the expansion of magnetics production at independents are underway. We will receive additional prepayments, $200 million in total, as we make further progress on this build-out for Apple.

The Apple partnership, combined with our steady progress at Independence, reflects the acceleration of our U.S. magnetics platform. Commissioning at Independence continue to advance at a rapid pace throughout the quarter. As with Mountain Pass, starting up new equipment, integrating complex systems and optimizing material handling is a substantial undertaking. Ensuring we bring everything online safely remains our top priority.

Meanwhile, production and sales of magnet precursor products continued throughout the third quarter. Michael will share more detail on that. The pace of commissioning in Independence, combined with steady improvements in metal production, gives us confidence that we remain on track to begin commercial scale magnet production by year-end.

With that, let me hand it over to Ryan to discuss the quarter's financials. Ryan?

Thanks, Jim. Turning to Slide 6 and our consolidated results for the quarter. On the left of the slide, you can see the impact to revenue from the accelerated transition to separated product sales, with concentrate no longer sold externally. The absence of concentrate revenue in the quarter was mostly offset by the continued ramp in separated product sales, primarily NdPr as well as the ramp of magnetic precursor product sales, which began in Q1 of this year.

Adjusted EBITDA was generally unchanged both year-over-year and sequentially. On a sequential basis, the decline in profitable concentrate sales was mostly offset by improving per unit cost of production for NdPr. On a year-over-year basis, the loss of concentrate sales was offset by the ramp in magnetic precursor sales at Independence as well as the per unit cost improvements I just mentioned. Our adjusted diluted EPS generally followed the trend of our adjusted EBITDA results, with further benefits from higher interest income in the quarter primarily from our materially higher cash balance as well as a greater income tax benefit.

Moving to Slide 7 and our operational metrics in the Materials segment. Production of REO remained very strong at 13,254 metric tons, albeit down very slightly from our record-setting quarter in Q3 of last year. In the midstream business, as Jim mentioned, production volumes continued to ramp nicely, achieving approximately 50% of our targeted output.

Michael will provide more details on the ramp-up shortly, but assuming our debottlenecking continues at the same pace we have seen over the last several quarters, we would expect to hit our targeted throughput towards the end of 2026. We expect our per unit production cost profile to decline in line with this ramp with the impacts on the P&L likely visible approximately 1 quarter in arrears as we work through averaging costs and inventory.

Separated product sales volumes followed production closely with nearly 20% sequential growth and 30% year-over-year growth. With much of our separated product sales toll processed into metal across various partners in Southeast Asia, there continues to be a lag between production volume growth and sales as we fill the tolling channel. We expect to continue to scale up metallization to match our growing output with various partners in Southeast Asia and beyond. And with that, we expect to build a bit more inventory at these various facilities. This modest working capital build is a natural function of the growth in our oxide production, which we expect to lap once we are at our targeted output levels.

Looking forward, we will begin to recognize intercompany sales from our Materials segment to the Magnetics segment in the fourth quarter, as we continue to produce precursor products for GM and get ready for commercial scale magnet production at year-end. Note that these intercompany sales, along with the related cost of goods sold, will be recorded at the Materials segment but will be eliminated at the corporate consolidated level. The value of that sale and intersegment profit will remain on the balance sheet at the Magnetics segment until it is sold, at which time it will be reflected within Magnetics segment revenue and cost of goods sold. As we ramp magnet production and then sales later in the year, there will be some lag between the intercompany sale and the eventual realization of value on a consolidated basis via a magnet sale.

Lastly, on this slide, on the far right, you can see that improved market pricing over the last year flowed through to our realized pricing in the quarter. As a reminder, given the dynamics of the tolling channel I just mentioned, combined with the nature of our sales contracts, some of which use moving averages of market prices, the change in our realized pricing generally lags the trend spot prices seen in the market by a quarter or more. Based on our current view of shipment timing and contract mix, we expect next quarter's realized price, excluding the impact of the PPA, to approximate $61 per kilogram.

Moving to Slide 8 and our segment financials. On the left side of the page, you can see the initial impact of eliminating concentrate sales in the quarter on both revenue and adjusted EBITDA. While we had always planned to ramp down sales of concentrate as production and sales of refined products increased, the DoW partnership has accelerated that strategy. While refining operations continue to scale, we expect to collect payments under the PPA for placing concentrate into our strategic stockpile, which I will discuss more in a moment.

Moving to the Magnetics segment. The primary driver is the ramp-up of production and sales of magnet precursor products, which began in Q1 of this year, positively impacting both revenue and adjusted EBITDA.

Before I discuss a handful of housekeeping items for you, I wanted to wrap up with an important reminder on Slide 9. This was the slide we pulled together post our DoW announcement, giving an illustrative example of the minimum annual EBITDA we expect to generate as we execute on our growth plan. Importantly, and I can't stress this enough, this earnings profile is underpinned by firm in-place contracts with much of the cash flow driven by our agreements with the Department of War. As long as we execute across our Materials and Magnetics businesses, we expect to generate very attractive long-term returns. And while the contracted nature of our future cash flows gives us tremendous confidence to continue investing in growing our business, we also expect material upside potential derived through upcoming initiatives, including recycling, appreciating NdPr prices, magnet syndication or other growth opportunities.

As Jim mentioned, the price protection agreement with the Department of War went into effect as of October 1. I'd like to spend some time walking through the GAAP accounting for this contract given the material earnings we expect from this feature of our DoW partnership starting in Q4 with the cash impact following soon thereafter in Q1.

First, from an accounting perspective, we have concluded that the top-up PPA payments will not technically be revenue per U.S. GAAP, as the payments are not directly related to the underlying sales contracts we have with our customers. The cash flow comes from a third party, in this case, the Pentagon, that is not, at least as it relates to the PPA, technically our customer. Given that, in the revenue guidelines under ASC 606, we will be recording the PPA as an operating income line item or expense in the case that market pricing exceeds $110 per kilogram.

Starting in Q4, you will see PPA income or expense as the first line item below revenue in the P&L., with PPA income, therefore, forming a core part of our earnings metrics on a go-forward basis. As it relates to 2026, we expect the PPA payments to be made up of 2 primary levers: first, we expect top-up payments for NdPr oxide produced from the Materials segment and sold either to third parties or internally to our Magnetics segment; and second, we expect payments from the contained NdPr value within the concentrate we are stockpiling as we continue to ramp up our refining operations.

The top-up payments related to NdPr oxide can be approximated as the difference between our average realized sales price and $110 per kilogram with a few gives and takes multiplied by the quantity of NdPr oxides sold in the period. So for example, in a quarter where realized prices are $70 per kilogram, our sold volumes multiplied by 70 would be recognized as revenue, in line with how we report today. And the $40 per kilo top-up payment up to the $110 floor price would be recognized in the PPA income line, with the full impact of both flowing through EBITDA and earnings.

Regarding how to model the PPA payments for stockpiles, particularly concentrate, the per unit payment will approximate the difference between market prices for NdPr in the quarter and the $110 per kilo floor. But in the case of concentrate, the quantities are tethered to the recoverable NdPr within any concentrate we nominate to the stockpile.

For each quarter in 2026, I would expect the difference between our actual NdPr production volume and our quarterly target of 1,500 tons of NdPr to be nominated into the paid stockpile and drive further PPA income. Eventually, this concentrate will be processed and sold at market NdPr prices. Realizing this is complex, we're happy to take further clarifying questions on the PPA and its impact to our financial statements offline following the call.

Moving to the balance sheet. I did want to point out that several of the pieces of the DoW agreement, consisting of the PPA, the samarium loan, the preferred stock and the warrant required us to undertake an analysis of relative fair value in cash versus noncash consideration received in order to properly account for these financial instruments on the balance sheet under GAAP. Note that several of the items are therefore recorded at a value that does not match the cash or other consideration received specifically for that feature. There is significant discussion of our methodologies contained in our Form 10-Q that we intend to file with the SEC tomorrow, but the 2 most notable outcomes of this are: first, the recording of a $221 million asset called the PPA upfront asset that will be amortized on an accelerated basis over the 10-year term of the PPA; and second, the recognition of noncash interest expense in excess of our coupon rate on our samarium loan from the Department of War, given the relative fair value of that portion of the agreement resulted in a deemed debt discount. The PPA amortization will be presented in our depreciation, depletion and amortization line in the P&L.

Lastly, before turning it over to Michael, I wanted to address our year-to-date CapEx and remaining 2025 expectations. Through the end of Q3, capital spending has totaled approximately $110 million on a gross basis and $86 million on a net basis Due to $24 million of progress payments received from the Department of War under our prior HREE investment agreement. As such, we expect gross CapEx for the full year to be closer to the low end of our initial $150 million to $175 million range and to perform better than the range on a net basis. We will discuss 2026 capital forecasts and projects on our Q4 call in early February.

With that, I will now turn it over to Michael. Michael?

Thanks, Ryan. Operationally, we had a strong third quarter with production that came in just above our expectations. In the upstream circuits, we achieved our second highest quarterly result for concentrate production just 4% shy of the all-time record we achieved in last year's third quarter. The gap is largely attributable to several reagents and pre-floatation trials the team executed that had a minor negative impact on stability and production. It was nonetheless one of our best quarters with very good uptime and highest ever concentrate grade exceeding 63%.

Midstream production continues to increase, which led to another sequential quarter of record NdPr oxide production in line with our expectations. We are now processing more and more of our concentrate on-site while simultaneously building up a healthy concentrate stockpile.

The majority of our circuits are performing well, demonstrating higher uptime and throughput capability while sustaining good product quality. As in prior quarters, a few areas experienced temporary disruptions that modestly held back NdPr production. As we address these short-term challenges, we are adding resiliency and stability to our operation that we expect to result in sustainable production increases over time.

In the first half of October, we successfully completed our semi-annual maintenance turnaround, which included several minor debottlenecking efforts and tie-ins for future projects. The outage along with associated de- and re-inventorying, repairs and start-up affected production for approximately 2 weeks depending on the area.

We had one area require rework in late October, and that somewhat impacted October production. As a result, we anticipate fourth quarter concentrate production to be roughly flat relative to Q4 2024 and NdPr oxide production to be flat to slightly up sequentially with strong growth resuming in Q1 2026.

At Mountain Pass, we are accelerating the pace of project execution, particularly on the heavy rare earths circuit. In the third quarter, we completed most engineering and primary equipment procurement for our terbium and dysprosium production capability, which will be the first heavy rare earth products to come online. Construction and installation of equipment began towards the end of the quarter and has accelerated in October.

On Slide 10, we have a picture of some of the work underway. We are pleased with this progress. Importantly, we are targeting the start of commissioning of this circuit in the middle of 2026.

Regarding supply sources, we are actively engaged with a number of different and different types of potential feedstock providers to supplement our own contained HREE content. I am optimistic about having several long-term supply options.

We are also advancing towards completing the restoration of the first train of the chlor-alkali plant and enhanced brine purification capability. The recommissioning of our chlor-alkali plant will add resiliency to the entire Mountain Pass operation by enabling on-site production of key chemical reagents. Pre-commissioning will begin early next year. The plant has 2 additional trains with the first one likely to be ready for service by mid-2026. We then have the flexibility to achieve our full capability in phases over a multiyear period at a pace we determine.

At Independence, we continue to make meaningful progress in expanding our metal production capabilities. We are actively exploring multiple strategies to optimize costs and scale metal production to support future growth, including our 10X expansion.

In August, we began an accelerated trajectory of alloy flake casts at Independence. Meanwhile, installation and pre-commissioning of powder production, pressing, sintering, passivation, machining and grain boundary diffusion, GBD, are all advancing well.

In our new product introduction area, we continue to refine magnet chemistries and production processes to produce higher and higher quality magnets in an expanding range of magnet grades. Engagement with GM for commercial scale production qualification is underway, and we are encouraged by the continued collaboration between our respective teams. We remain on track to meet our goal of producing finished magnets by year-end 2025. This will kick off an accelerated qualification process with GM with magnet revenue expected to begin in the second half of 2026.

In addition to supporting GM, our teams at Mountain Pass and Independence have initiated engineering and procurement to support the Apple recycling partnership and magnet production expansion. This work includes magnet chemistry development at Independence and pilot testing, design development and circuit engineering to support the addition of recycling capabilities at Mountain Pass.

Overall, it was a very busy quarter, and we expect the pace of activity to continue accelerating. Through it all, our team has remained focused, executing safely, efficiently and with a strong sense of mission and urgency. I cannot say enough about the quality of the team and capabilities we have built and are building and the opportunities that lie ahead.

With that, I will turn it back to Jim.

Thank you, Michael. Moving on to Slide 11. You can see the unmatched array of capabilities we have built entirely within MP. This is what true vertical integration looks like, something no other company in the world has achieved in rare earths and magnetics. This quarter was another solid one for MP, and that same execution discipline is now driving progress across our GM, Apple and DoW partnerships, each deepening our integration, broadening our reach and advancing our trajectory for long-term growth.

Since we last spoke, we have witnessed a frenzy of attention and volatility around rare earths in recognition of the necessity that we, like most nations, must move at a warp speed to derisk from reliance on China for the supply chain. The President Trump-Xi Jinping summit in Korea has resulted in a 1-year postponement of China's October 9 rare earth export controls. But the reality is that this pause has only underscored the inextricable link between the world's most advanced semiconductors that America produces in the rare earth supply chain that China dominates, 2 sides of the same coin at the forefront of the strategic contest between our nations that will shape the global economy for decades to come.

We are now locked in a new kind of cold war, a race of mutually assured economic destruction, fought not with weapons but with supply chains. Self-sufficiency, allied resilience and national industrial champions are no longer optional. They are the front lines of security.

In the last cohort, America prevailed through military strength powered by economic might. In Cold War 2.0, the equation has reversed. Economic might itself expressed through control of critical materials, advanced technologies and the supply chains that sustain them has become the decisive measure of national power. Against that backdrop, it is important for investors and policymakers alike to consider with clear eyes the complexity and scale required for success in this supply chain.

It is very often said that rare earths are not rare. That is true. They are literally everywhere. One could take a sizable piece of land, multiply by some amount of rare earth content percentage within, multiply that times a price basket, and then lo and behold, claim a rare earth orebody of some major value.

Unfortunately, it is not that simple. What is underappreciated but far more important is that economic orebodies are extremely rare. The vast majority of projects being promoted today simply will not work at virtually any price. Even deposits labeled heavy rich still contain a vast majority of light rare earths and yttrium. And when grades sit in the hundreds of parts per million, the cost to concentrate, separate and refine becomes uneconomic.

MP's overburden and tailings are quite literally more valuable by many multiples than many of those so-called projects. The structure of the existing industry tells the story. China accounts for roughly 90% of global NdPr production, yet even there, most of that output comes from just 2 hard rock mines and refineries now controlled by 2 entities. Think about that. A country with the world's largest reserves, a national industrial policy dedicated to dominance, generous subsidies and accommodative regulatory practices and still only 2 highly productive, low-cost integrated operations represent the vast majority of their industry. It is not a coincidence that outside of China, the only scaled light rare earth production also comes from 2 mines, Mountain Pass and Mount Weld and their respective refiners, MP Materials and Lynas.

The lesson is clear. Great orebodies and scaled refining capability are the indispensable foundation of this industry. Everything else depends on them. In addition, certain types of mineralization such as allanite, eudialyte and even coal-based deposits have never successfully yielded refined rare earths at scale. The reason is straightforward. Their mineralogy is complex, and the concentrations are extremely low.

Now perhaps there will be breakthrough someday, and based on our own experience, we would never underestimate the power of human ingenuity. But the reality is that even China does not attempt to produce rare earths from those types of deposits today.

Michael has my favorite analogy on this. Controlling a eudialyte rare earth orebody today is like having billions in Bitcoin but without the private key. In theory, you can see it on the screen, but you can't unlock it. And that raises the question what is it really worth. Even with one of the very few economic rare earth feedstocks, building and operating a refinery is capital-intensive and painstaking work. Despite what some promoters might suggest, even the best producers take years to ramp and stabilize output, and economics. Lynas took roughly a decade. MP is on track to reach normalized production in about 3 years from the start of commissioning. That speed, scale and discipline speak to the strength of our people, our orebody, our access to decades of operational history and our platform.

The heavy rare earth market has a somewhat different profile. Heavy elements are largely sourced from numerous small clay mines, but once again, separation is aggregated at a smaller number of scale refineries in China. We do see opportunities for deposits with a much higher proportion of heavy rare earths to support profitable upstream concentrate business.

However, the shortened mine lives and complex mineralogy or environmental considerations of many of those deposits make it uneconomic to build full refining capability around them. That's what makes our scaled heavy rare earth separation circuit truly distinctive. It allows us to leverage our broader infrastructure to produce heavies on a low-cost basis feeding directly into our integrated Magnetics business.

Moving downstream. Even with mined and refined feedstock in hand, the path to a finished magnet is anything but simple. To make a magnet, you must first convert NdPr oxide into metal, then alloy it with iron and boron through strip casting. Each step is technically demanding and essential to performance. Perfecting the precise recipe for automotive-grade EV magnets can take a year or more. And even with an all-out effort, like our partnership with the Department of War, building a scaled facility demands years of work and significant capital.

Tonnage, while often cited as a proxy for scale, says little about capability. The true test lies in mastering the complexity of magnet grades, sizes and chemistries. In today's rush to localize supply chains, we have seen projects promoted that cannot yet perform grain boundary diffusion, the critical process that enables efficient use of heavy rare earths.

Others proclaim full vertical integration while depending on phantom feedstocks or technologies that remain unproven at scale. A business plan that starts with magnets and works backward to mining may sound compelling on paper, but it defies both economic and supply chain reality for the foreseeable future.

Scaled recycling is another underappreciated pillar. In magnet manufacturing, typically 20% to 50% of material ends up as swarf or kerf, magnet scrap. Capturing and reusing those elements, both light and heavy, is essential to a resilient and economic supply chain. All of this reinforces one conclusion. MP Materials with its vertically integrated assets, partnerships and execution track record is uniquely positioned to lead as the western rare earth supply chain takes shape.

Finally, as the global economic realignment continues, I would encourage investors and policymakers to approach the sector's capital allocation with clear eyes.

With that, let's open it up for questions. Operator?

[Operator Instructions]

Our first question will come from Bill Peterson with JPMorgan.

Yes. I'm wondering, I guess, with your current stockpile, SEG+ stockpile, how long could that support your heavy production once fully ramped? And I guess you talked about engaging with other heavy feedstock suppliers. Are these foreign suppliers, domestic suppliers? I guess in the context of -- you're mentioning that there's not a lot of viable options out there in terms of orebodies. I wanted to get some more context on what type of feedstocks you may have or maybe if M&A may come into consideration.

Yes, Bill, it's Ryan. I'll start and let Michael take some of that. In terms of the SEG+ stockpile, we have several hundred tons on an REO basis of SEG stockpiled. Obviously, we are producing SEG every single day, and so from that perspective, we feel good about our inventory at this time to be available for us to commission that circuit and charge that circuit. And certainly, as we've discussed, we believe, with our own internal feedstock, we will be able to satisfy the demands of the Independence facility with that.

I'll turn it over to Michael for the rest of the question.

In terms of feedstocks, I think one thing we're very excited about is how our fully integrated site with both ore-based processing as well as light and heavy separation gives us -- and recycling gives us like very unique capability in terms of processing different types of feedstocks. So we are in touch with both domestic suppliers, suppliers of recycling material, recycled material, along with some foreign suppliers. Obviously, you see, as much as we do, all of the announcements from various players around the world where we have our opinion on some and are in discussions with many. But I guess we're confident that we will find several different options.

Great. And then on the magnet business, I guess, how is the customer engagement going beyond Apple and GM? I guess what -- I guess there are people trying to test some of your samples. What's going on with the business for the further offtakes in Independence and then ultimately 10X?

Sure. It's Ryan again. I think, certainly, since Liberation Day the supply chain mindset across the space has changed very meaningfully. There's a tremendous amount of engagement across really every vertical that consumes magnets, automotive, aerospace and defense, consumer electronics, robotics, you name it. I think, fundamentally, we are focused on executing first for our foundational customers. And from a 10X perspective, we have the luxury of continuing to operate in the same fashion that we have for the last several years given the fact that we have 100% offtake secured for 10X. As we've talked about, our Apple agreement anchors the vast majority of the expansion that we've planned for Independence, and so it puts us in a position where we can continue to be very selective with our customers. But the engagement is quite significant and broadly very exciting.

Your next question will come from Lawson Winder with Bank of America.

Nice quarter and once again, a very interesting and fascinating update. May I ask about the -- a couple of things? So just on the heavy rare earths, there's the dysprosium and terbium, 200 kilotons annually. How is that roughly split?

And then secondly, on the heavies, there's the samarium loan. As the name implies, there are other rare earths that the DOE would like to access. What's the time line to producing some of those other rare earth metals that are particularly of interest in the DoD. And has the DoD set any deadlines?

This is Michael. Thanks for the question. In our orebody, the general ratio of dysprosium to terbium is about 3:1, so that would be kind of the approximate mix. Some of the other third-party feedstocks and recycled material may have slightly different mix, so ultimate production may differ from that to some extent.

In terms of other heavy rare earth production, we have made a commitment to produce samarium in 2028, so samarium oxide, and we feel very comfortable with that type of time frame. We have made no sort of public commitments to produce any other heavy rare earth, although gadolinium would be a logical next one to produce probably around the same time frame. As for the others, I think we are eager and in discussions with various other parties domestically and in allied countries about offtake of our other materials for them to process into other rare earths. But to the extent there's strong demand or need, we're capable of doing further separations.

Okay. That's very fascinating. And then can I ask about the Apple $200 million prepayment? I had not expected $40 million to be paid in Q3 so quickly. Can you help us understand a time line under which the remaining $160 million would be prepaid?

Sure. It's Ryan. We are thrilled to surprise you to the upside. We can't get into contract specifics, but certainly, the way this was designed was to continue to provide capital for this build-out as we hit certain operational milestones. We actually expect a next payment of relative scale coming up in Q4. And I think that, over time, as we execute on this plan, we've laid out initial magnet volumes targeting mid-'27 and recycling close behind, you'll continue to see those prepayments on that schedule.

Your next question will come from Matt Summerville with D.A. Davidson. Matt, I can see I've unmuted, please go ahead. Unfortunately, we're not able to hear you, Matt. I'll just go to our next analyst, and we'll come back around to you.

Our next question will come from David Deckelbaum with TD Cowen.

Jim, Ryan, and Michael, appreciate the time. Ryan, I think you probably astutely pointed out that the key risk here for MP with incentive prices now is execution. And if I heard right, it looks like -- it sounds like you're targeting the end of '26 for operating NdPr separation nameplate.

Michael, I guess you alluded to some things around just NdPr separation, I guess, kinks that you're ironing out now. So I guess is it fair to say as the contract becomes live now with the Department of War at $110 a kilo, should we think about you guys ramping as quickly as possible in the '26 calendar year? Or can you provide any color around what we should expect in any ensuing quarters from incremental throughput tonnage?

David, I'll start. It's Ryan. I think the important thing to keep in mind from an economic perspective here is we've talked about our concentrate stockpile, and frankly, for a variety of reasons and now economic reasons, that actually has a lot of value to us. And so certainly, we are focused on ramping as quickly and as smartly as possible to serve the market and to prove out this capability, but it's important to remember that under the PPA, we still are paid for the NdPr content within the concentrate that we stockpile.

Of course, we don't get paid twice. We get paid when we put it into the stockpile, and then once we refine that material, we'll sell it at market prices. But it's a very important value driver for us, and we can continue to look at our view of the market and nominate volumes into that stockpile as we produce them and as we see fit. So that gives us a lot of operational and economic flexibility in 2026 and beyond.

Appreciate that. And then just as a follow-up, I think, Jim, you talked about really the availability of swarfs, end-of-life magnetic products. You guys talked about third-party feed, and I know others have asked you about those questions. But I guess as you think about really addressing the supply chain going forward for your own needs and really internally in this country and for allied nations, where do you prioritize looking at your own capabilities around recycling with obviously the start-up of the Apple facility over the next few years? How do you think about focusing on swarfs and the ability to source that versus looking at third-party feed from orebodies?

I mean I think it's an all-of-the-above approach. Obviously, over the next couple of years, we're maniacally -- we have a number of projects, right? We are scaling Independence. We are getting 10X underway and quickly and then doing the multiple pieces of recycling in Mountain Pass.

As you know, David, this management team is pretty opportunistic, so we will try to take advantage of opportunities out there. I would say that, again, over the next couple of years, it's just executing all of this, and I'd remind you that we have the feedstock to serve our entire 10,000 tons of magnet capacity currently with -- certainly with the Apple piece being part of the deal that they're helping provide feedstock. So we have the, I guess, to use Ryan's words from earlier, the luxury of being methodical about how we think about incremental feedstocks.

Yes. One important point also, David, to think about -- this is Ryan -- is as we look at sourcing third-party feedstocks, so we look at sourcing magnet material and end-of-life material, I think despite all the focus on price floors, at the end of the day, the economics of this business depend on your cost structure. And so as you see some of these other things announced out there, what you should keep in mind is we will be one of the lowest cost producers of these products, whether refined or from mined material, and that also gives us the opportunity to be thoughtful in the acquisition of third-party feedstock. And so with the platform that we've built, we think we are in pole position to be able to acquire most thoughtfully the best potential feedstocks for the business given the fact that our cost structure will be best in class.

For our next question, we'll return to Matt Summerville with D.A. Davidson. Matt, I can see that you've unmuted. We're not able to hear you. You may need to select a different microphone input next to your audio button.

Okay. We'll move to our next -- for our next question, we'll hear from Carlos De Alba with Morgan Stanley.

Can you hear me?

Yes.

Great. Congrats on the strong performance this quarter. Just maybe on the prior response, Jim, can you clarify -- maybe I misunderstood. But are you going to be able to supply recycled material or have capacity in the recycle line above and beyond the 2,000 tons that you have under contract with Apple?

Are you referring to -- actually, Michael, why don't you take that and comment?

Carlos, if I understand the question, we are building a dedicated line for Apple to manage material and feedback that they are responsible for providing to us. We also will have the capability to process our own swarf, and we'll build that modularly to process as that market grows, which we're very optimistic about additional feedstocks as well over time.

All right. Good. Yes. Okay. And it will be a separated line from the one that you were working watching or building on for Apple, right?

So the Apple line will be largely separate from our existing line, but the other feedstocks we will -- we are evaluating and will leverage our existing infrastructure and capability in light and heavy rare earth separation in the most thoughtful way possible depending on the nature of the feedstock and customer requirements.

All right. Okay. And then, Michael, maybe you can help us understand what is the thoughts about the ramp-up of the Dy and Tb output post-commissioning?

Our focus initially is obviously on meeting the needs of our customers and Independence for GM. And because we have this stockpile, we'll be able to produce amounts greater than our initial ore-based material we'd supply on a yearly basis. And then we'll look at what third-party feedstocks we have and what preprocessing is required. But the volumes are obviously relatively modest, so I think the ability to ramp will depend on how quickly we feel comfortable pushing those volumes. Obviously, we have very high quality requirements and need to make sure we perform.

Our next question will come from Ben Kallo with Baird.

I was wondering how you think about the price floors for heavies as you advise the administration and if you've given any weight to that. I have a follow-up too.

Ben, you mean what do we think of them intellectually or -- I would just -- I guess when it comes to heavies, I would -- the one thing -- I think this kind of comes at your question another way. But if we reference back to kind of the overall point that I was trying to make in the prepared remarks, is that when you look at the supply chain in our space and the various areas of it, the heavies area is one where, typically, you have deposits where it makes sense that there are economics where that could be a concentrate or a -- make a concentrate or make a feedstock that can go to a refinery like ours, like we've built.

But typically, at least we haven't seen those sites, the various ones around the world of varying degrees of value where it would make sense economically to build refining capability around that, and so we are really well positioned to accept those feedstocks. And so that's obviously the work that we are doing with DoW to make sure that we have the material for our business through 10X. And so obviously, there are a variety of ways that you can incentivize that upstream production and get economics to those parties to encourage that production. But I do think it is important to think of those as sort of part of a broader supply chain, and there are not necessarily independent, stand-alone economics for sites like that to be a full vertically integrated participant.

So just a follow-on because you guys have, I guess, everyone's ear, so what is the advice to get the heavies to the admin?

Well, I'd like to -- obviously, the detailed advice that we would give to the government, I think we would try to keep that in confidence, and -- but I think I can speak in general terms, which is what I was hinting at, Ben, in my remarks is that when you -- if you look at the structure of this industry and just look at how China has formed, now obviously, a lot of that is state-driven, but a lot of it is sort of structural, is you should think of this industry as closer to a global structural oligopoly rather than just, oh, if we throw a bunch of money at dozens of sites and businesses, we can form a supply chain.

Because the reality is that to have the geology -- we talk through the geology and the differences between lights and heavies and then the complexity of the magnet business. And when you add all of that up, I mean, the best analogies are if you were going into the aircraft production industry or the smartphone industry, would -- think of our great companies like Apple and Boeing right? You wouldn't necessarily say -- if, let's say, it was reversed and you were trying to create those and the Chinese have the competitor, you wouldn't necessarily say let's spread money around to 30 different things.

So I think the way to think about it, though, is we view MP as America's national champion. We have structural advantage because we're fully vertically integrated. We're years and billions ahead of others. And what I would say is if you -- there's various projects out there, both public and private. If you took anything that I'm aware of -- now there may be a bunch of stuff I'm not aware of, but anything I'm aware of, if you gave whatever that was, the deal that MP had, I don't see anywhere where there is any equity value for any of them, public or private.

Now that -- so I think that's a very interesting thing. Now that doesn't mean that the government shouldn't catalyze a lot because I think the government is doing an outstanding job catalyzing private capital to come in. And so to the extent that the government can make investments, whether it's loans or other forms of support and grants, if X dollars of capital can stimulate 2x or 3x in private capital, they should be doing that as much as possible.

So I think we've seen some really great action out of the administration, and so my advice would be to keep going. Keep doing what you're doing. I think they're really thinking about it a thoughtful way. I would just also say that the message of today is for private investors because, obviously, we don't want people to get burned. We want people to think that this is a good space, is to just be very clear eyed about what the actual structural economics are in -- amidst all the excitement.

Your next question will come from Max Yerrill with BMO Capital Markets.

My question is around the ramp-up of the heavy rare earth separation facility. And I was just wondering if the ramp-up time there affects your ability to deliver certain higher-grade magnets to General Motors. And then I guess the second part is when we look at the universe of potential feedstocks for that heavy rare earth separation, are there types of concentrates that you cannot process? And which ones are the most ideal to the circuit that you envision?

Yes. Sure, Max. It's Ryan. I'll start. In terms of how we're positioned from a supply chain and inventory perspective to support our ramp-up of magnetics, I think we've discussed over the last several quarters that we had anticipated some of the restrictions that had been put in place and have built a stockpile of products to allow us to commission and ramp Independence facility. We've timed the construction and commissioning of the heavy rare earth separation circuit to come online to support further growth as we work that inventory position down.

I'll let Michael take the second part.

Just to be clear, the question was on whether types of feedstocks for the heavy rare earth circuit are preferred?

Exactly.

Certainly, to the extent we got an SEG+, that would be easier than processing a full mixed rare earth carbonate with lights and heavies. But our circuit can handle because we have all of the capabilities of either one of those. So we will look at the economics and the distribution and compare those to other alternatives.

Our final question will come from Laurence Alexander with Jefferies.

I appreciate kind of the analogies you've tossed out, and I guess what I want to tease out as you talk about your opportunistic approach to creating value, is the cold war would have gone very differently if the nuclear missiles had a 10-year expiry date? And so when you think about the incentives that a 10-year support program from the DoD -- DoW gives you and also the way the capital markets might perceive that as setting you up for some severe kind of cyclical risk if there's a recession or otherwise, a glut at the end of the 10-year period and what that does to your cost of capital and how you think about your balance sheet, is the strategy here to double down on the Fortress balance sheet, vertical integration and just ride through that transition? Or do you feel either the government needs to make a decision soon about extending the support or you need to make a decision arguably sooner rather than later about adding a second plank to sort of smooth out volatility once you make the transition back into a fully unsupported entity?

So Laurence, I think it's actually the opposite. There's probably -- I don't know how many listeners we have today because there's another exciting call happening where there's a $1 trillion pay plan being proved because we're going to have humanoid robots whether it's Musk or Jensen talking about that. I mean if we look out, and I don't know if it's 5, 10 years, whatever it is, but there's no question that physical AI is going to just create explosive growth in rare earth magnetics. The issue is that, in the very short term, we can't be leveraged by the Chinese from a supply chain standpoint, we've got to have an industry that is here and thriving.

And actually, if you take my remarks, I want to be clear that when I talk about the structural realities, it's not because that is a forever condition. I do think that there's room for a lot of other players and a lot of other supply, but I think that the point is that to get to that 5 or 10 years, you're going to need materially higher prices. So the sort of the MP deal, if you will, I just don't think that's enough. And so I think that what you're really going to see is that, in the very short term, the administration has made sure that we have a successful national champion in MP. We've got to execute, but we are going to sort of open the -- pave the path, if you will, to then figure out how there's much broader supply coming online.

So obviously, 10 years is a long enough time to, not in the short term, think about kind of what that role looks like. We'll think about the next couple of years of getting things online. But I think if we don't have some development in physical AI by then, these -- the markets -- I would be least worried about MP relative to pretty much many other places in the market.

So I don't lose any sleep over what demand is going to look like in 10 years and what NdPr prices and magnetics prices are going to be. I think it's going to be amazing for us. My bigger guess is that we'll have grown our business and move downstream. Just as if you think about us 5 years ago versus where we are today, I think on that roll date, it will not be as material portion of our business remotely compared to what it is today.

That concludes the question-and-answer portion of today's call. I'll now hand the back -- call back for closing remarks.

All right. Well, thank you, everyone. We think it was a great quarter of execution. We are going to get back to work, and I look forward to talking to you all next quarter.

Terrific. As I mentioned, it's going to be a great day. We're starting with a company that I've known for several years, started out looking at MP Materials when they first re-SPACed about 5 years ago. And a little did I know at the time that the company would soon be on CNBC every single day as a company at the epicenter of -- and on the right side of trade as it relates to the U.S. and other companies.

But anyway, MP Materials is the owner and operator of the Mountain Pass rare earth mining and processing facility. It's the only integrated site of its kind in the Western Hemisphere.

The company is also in the process of a 3-stage transformation whereby they will take the rare earth materials that they're able to mine at Mountain Pass, refine it and become a supplier of permanent magnets for a host of industries, not only auto, but those that are clearly incredibly important for national security.

The company has been in the news for its investment and backing by the Department of Defense, and so we'll get into that. But the company is about a $16 billion equity cap company, about $14 or $15 billion or so total enterprise value, and we're delighted to have Ryan Corbett. It's also the only company that we have here that's a Las Vegas company. So the commute was relatively easy.

Ryan Corbett is here, is the company's Chief Financial Officer. And I don't know how Vegas traffic is, but I appreciate that you're here, Ryan. So please join us. Thank you.

Good morning, everyone. Thanks so much for having me. Thanks, Brian, for the introduction and Mario for having me again. Happy to be here. Get into it.

I always -- timing of this conference is always interesting. We do have our earnings call coming up here in a couple of days. So we will be sure to stay away from any quarterly related commentary. And of course, regardless, I will make forward-looking statements. Please refer to our SEC filings, and we'll refer to non-GAAP measures that are reconciled extensively in those filings.

As Brian did a good job of laying out, certainly, the rare earth topic has become very, very newsworthy of late. MP Materials sits at the forefront of leading the U.S. and North American industry in rare earths. We are the only fully integrated producer of rare earth products globally, in fact. We do have scaled mining and refining capability in Mountain Pass that's about 45 minutes from here. We have North Texas. There, we do all of the major process steps from rare earths to finished magnets.

One of the things that's generally underappreciated about this space is the complexity of going from rock in the ground to a finished magnet and the scale and capability that is needed to actually perform all of those process steps for a secure supply chain.

MP Materials is the only producer that does all of those at scale today. We are embarking on our journey to scale magnet manufacturing with this audience, in particular, of relevance with our foundational customer for our magnet business, General Motors. We'll begin commercial production at the end of this year for magnets out of that facility for General Motors. One of the things that's been very transformational for the business, as Brian referenced, is our transformational public-private partnership with the U.S. Department of War that we announced. I'm still getting used to saying that instead of Department of Defense, but you will see we have updated all of our materials to the new name. That really is such a unique transaction for the United States, for our company and for national security at large and really the security of the supply chain for the companies that all of you here at this automotive conference are most focused on.

What we were able to structure with the U.S. government is truly a win-win-win for the company, for the taxpayer and for the supply chain, where we have partnered to really combat the nonmarket forces that have been consistently present in this space over the last many decades from a very long-term and thoughtful industrial policy from the Chinese to take over this space.

We have one of the world's absolute best assets and have built some of the most incredible capabilities to secure the supply chain in the United States. With this transaction, we removed the nonmarket forces effectively that have impacted the industry and set up a transformational economic platform for us to continue to invest to ensure that we are able to meet the significantly growing need for rare earth magnets in the Western world.

This is just a quick view of some of our assets. Certainly, it all begins with scaled mining and refining capabilities, which you see the Mountain Pass rare earth mine on the left here and our separations facilities or at least a snapshot of a few of them in the middle.

On the right-hand side is the initial magnet manufacturing facility that I mentioned, which we refer to, I think, fairly aptly as independence. That also happens to be the street name that it's on, which was a very, very good coincidence. It certainly, from our perspective is what this symbolizes from a magnet manufacturing capability perspective.

I touched on this in my opening, but I think the thing that's really critical to understand about MP vis-a-vis the pretty significant attention that's been paid to various players in the market and start-ups in the space is that this is a highly complex process where you need to be able to demonstrate economic viability and technical capability at each step of the process, both mining, refining, metal making and the various process steps that go into magnet manufacturing.

We have been on a multiyear journey. As Brian mentioned, we're about to celebrate our fifth year of being a public company. Mountain Pass has a multi-decade history. It was discovered in the late '40s. There was the beginning of mining and refining capabilities there in the early 50s. And so we've been able to leverage a tremendous amount of historical technical depth and operational data to transform the Mountain Pass site into the world's leading producer of rare earth materials for the Western world.

In terms of the transaction with the Department of War that certainly, as I mentioned, is transformational for us, and I think critically important to understand from the perspective of supply chains large, but certainly automotive supply chains is what this has enabled us to do is meaningfully accelerate our build-out of magnet manufacturing capability that is critical for not just automotive, certainly, but everything that we hear in the news, data centers, physical AI, every single robot actuator has many, many rare earth permanent magnets that enable the translation of energy into motion.

The same way that, that is sort of the linchpin going from battery technology to motion in an automobile. Similarly, you have that critical connective tissue, if you will, from a robotic standpoint and given the number of automotive companies that are also robotics companies these days, it's particularly relevant. As I mentioned, the way that we've structured this deal is the Department of War is providing a price floor for all of the material that we produce at Mountain Pass, the NdPr content within it. And so that allows us to continue to generate very attractive returns on our upstream business, which we have been reinvesting into the downstream business to scale magnet manufacturing in the U.S.

To give a sense of the scale of what this has enabled, the independence facility that I showed a bit ago was initially specced out to be 1,000 metric tons of capacity. That was targeted for General Motors primarily and following very quickly behind our DOW transaction announcement, completely unrelated. In fact, we've had an ongoing relationship and technical collaboration with Apple for almost 5 years now, but we were able to seal a very exciting deal with Apple as well to expand that facility where they will anchor an expansion of independence from 1,000 tons of magnet manufacturing to 3,000.

The new facility that we are bringing online in partnership with the Department of War is an incremental 7,000 ton magnet manufacturing facility, which is by far the largest of its kind in the Western world, would be among one of the largest globally. And that takes our total capacity for magnet manufacturing from 1,000 tons to 10,000 tons.

We devised this in a way where the Department of War and the U.S. government is able to ensure that they have visibility and security of supply for their magnet needs, but also sets us up in an interesting upside sharing arrangement where we are able to go out and commercially syndicate a significant portion of those volumes for this new facility and share in the upside from an earnings perspective with the Department of War.

In order to build this facility out at the scale and capability that we believe the U.S. needs, they've provided a minimum guaranteed EBITDA for this facility. So the 4 walls of this facility has a guaranteed $140 million of EBITDA. We believe as we go out and commercially syndicate significant portions of that volume, the earnings power of that facility is well in excess of that minimum guarantee, but the way this was structured was to enable us to move with a warp speed mentality to bring this capacity to bear with much of the risk controlled for while still building out very thoughtfully our customer and commercial relationships while also ensuring the U.S. government has the needs met that they are focused on.

When you put all this together from an investment perspective into MP Materials, I think the thing that is completely unique in the space is the fact that we have contracted cash flow visibility across all of our segments, which enables us to continue to invest to lead this space for many decades to come.

If you look at our current production profile at Mountain Pass, we're producing approximately 3,000 tons on a run rate basis of NdPr oxide. We will be scaling that to 6,000 tons. If you take our price floor agreement with the U.S. Department of War, which guarantees us $110 per kilogram for our sold or stockpiled products and you add on to that, the guaranteed minimum EBITDA from the 10X facility, the new magnet manufacturing facility I mentioned, as well as our expectations for the initial magnet manufacturing facility, we have visibility to a minimum of $650 million of run rate EBITDA. That does not include several very material potential upside levers over time.

While we do have a price floor, we continue to benefit from upside in commodity pricing as well. We maintain 70% of the upside above our floor price to the extent the market moves in that direction. We have various other initiatives, including further magnetics growth. And when we put this sort of package of guidance together, we had not yet actually announced our transformational partnership with Apple as well, which is allowing us to build out a scaled recycling capability.

One of the things that often is not well understood about magnet manufacturing is up to 40% of the material when producing a magnet can be lost from cutting, slicing and grinding the magnet to its final shape. So having a scaled capability to take that product back and turn it into its original constituent parts to then go through the magnet manufacturing process again is absolutely critical from an economic perspective and a security of supply perspective to really create a closed loop.

The ability for us to be able to do that and take in third-party end-of-life, both post-consumer and post-industrial feedstocks is another really exciting growth opportunity where despite often being labeled as a mining business, we believe that, in fact, we are and will lead in the rare earth recycling space in the Western world.

Some quick facts about that Apple partnership that I mentioned. I talked about a moment ago that, that expansion will anchor our independence capacity expansion. The recycling capabilities that we will build out will be co-located with our Mountain Pass refining facility. And so with many billions of dollars already invested in Mountain Pass, the ability to be able to build a scaled recycling capability that is economic is really hinging on the fact that we have incredible amounts of shared infrastructure that we can leverage at Mountain Pass.

There are a lot of potential point solutions out there that are just focused on magnet recycling or just focused on metallization. It really is difficult to make the economics work with a point solution. We believe having a scaled capability across all of these various process steps is an incredible differentiator from an economic perspective and a security of supply perspective. This relationship with Apple, frankly, we had always viewed recycling as a real opportunity for us, given what I mentioned about magnet manufacturing a moment ago. It was certainly a strategic imperative for us.

But having a scaled customer to bring post-consumer and post-industrial feedstock to bear in this facility allows us to go much faster and much bigger in order to really establish that lead in this space.

I think the other thing that we're very excited about, which is relevant across all disciplines, consumer electronics, automotive, defense, aerospace is a technical collaboration that will be part of this agreement with Apple, where we will continue to bring to bear our best-in-class technical capabilities, but certainly leverage a much larger scaled and very talented team at Apple to work together to bring increasing magnet technology to the space in the U.S. We can move into Q&A.

That's terrific. Just as a reminder, anyone in the audience who has a question, please don't hesitate to raise your hand. We will have a microphone around. I want to start with just the environment in general. How much of what you believe or what you see MP is going to be providing is coming from just organic growth for the industry? Or is it actually conquest business from other sources?

Sure. Given what we see in the market, I'm sure there's a lot of focus on EV penetration here in particular and sort of what that means for various commodities, various things throughout the supply chain. I think the interesting thing to keep in mind is, today, if you look at the spread of what makes up magnet demand, less than 1/3 is automotive and a much bigger portion of that is actually internal combustion and general use magnets used within the automotive supply chain.

I think for context, when we saw these initial export restrictions put in place from China in the April time frame, within weeks, we saw the first automotive plant shutdown in the United States, which was a Ford Explorer plant that was not able to get magnets for their speakers. And so that just gives you a sense of how ubiquitous rare earth magnets are throughout the automobile. And so looking today, just shy of 10% of the market is magnets going into some sort of EV powertrain, including hybrid, plug-in hybrid, et cetera. So traction motors were large, teens percentage up to maybe about 20% is broader automotive, internal combustion speakers, et cetera, et cetera.

And so regardless of your view of the pace of penetration growth, that certainly continues to be a growth story. On top of that, what we're seeing from physical manifestations of AI, so robotics, data centers, et cetera, that has been a tremendous pull from a demand perspective as well. And you look at the market broadly, magnet manufacturing is roughly a 250,000 ton market today.

The third-party research has that reaching nearly 900,000 tons by 2040. So the scale of growth is pretty astronomical. And so new capacity is absolutely needed. The reality of how this industry has shaped up over the last several months, in particular, is China dominates this space. They have 60% share of rare earth reserves. They have roughly 70-plus percent share of mining. They have a 90% share in refining, and they have 95% share in magnet manufacturing. And so you have U.S. and Western customers that certainly have been buying all of their magnets from China, at least 95% of them and are really focused on ensuring they have visibility and security of supply. And so I think the answer to your question is it's both.

There are certainly customers that are focused on their existing applications and ensuring that they have visibility and security of securing that magnet capacity. But undoubtedly, we are seeing really tremendous market growth as well.

We've seen some other companies pop up as far as potential other sources of NdPr. Talk about any other potential areas? And could those be effectively acquired by the company to help accelerate this [ movement ].

Yes. Look, I think from an upstream perspective, this is kind of what makes a cycle, right? You see a tremendous amount of excitement in the space. The reality for those that understand the economics of rare earth mining and refining, our tailings are likely a more valuable and lower cost source of rare earth products than almost any of these new upstarts that you're starting to see crop up. And so the bar for us is extremely high in looking at M&A from an upstream perspective.

The other thing that is relevant is having scaled capabilities in each of the process steps, as I mentioned. I think what is unique about the transaction that we entered into with the Department of War is it allows us to emerge as a scaled national champion, which in certain instances, will allow us to bring along some of these other point solutions.

But in reality, if you look at the structure of this industry, you need scale to be able to compete. And I think fortunately, the Mountain Pass resource is absolutely one of the world's best. I mean there's always this view of we need more mining, we need more mining, we need more mining. We don't. In fact, we are exporting the vast, vast majority of our current production of NdPr oxide to Japanese magnet makers and Korean magnet makers. And obviously, over time, we'll fully vertically integrate. But from that perspective, the growth trajectory that we have organically is pretty exciting.

When you get to that point where you have the manufacturing capacity in place, do you plan on still selling NdPr oxide to third parties to -- once you're fine?

Yes. If you do the math roughly, the rule of thumb for magnet manufacturing is take a magnet ton and divide it by 2 to get to the amount of NdPr oxide you need, including all the process losses, et cetera. So 10,000 tons of magnets is 5,000 tons of NdPr oxide requirement.

We are targeting producing 6,000 tons of NdPr oxide at Mountain Pass, and that's before layering in opportunities for recycling, third-party feedstocks, et cetera. And so there is absolutely an opportunity for us to continue to supply the market with commodity products or further grow our magnet business or a combination of the 2.

Do you foresee talk, I guess, blue sky scenarios, a scenario where you go beyond the 10,000 metric tons of annual magnet production?

We're certainly focused on executing what's ahead of us at the moment. But to my point a moment ago, we certainly have the depth on the upstream and midstream side to support a broader business over time. And I think as recycling scales up, that provides -- and bringing third-party feedstock into the facility as well, which we've talked about over time, that will allow us to continue to grow the business. And so we are very much in heads-down execution mode, ensuring that we meet our obligations to our stakeholders.

The Department of War is now the largest shareholder in MP Materials. We certainly want to make them happy and continue to foster the partnership that we've built with them. And so the focus for the moment is executing on what we've laid out. And then certainly, I'm sure we'll see opportunity over time.

I have one from Brian over there.

I'm just curious, you mentioned a lot the new relationship we have with the Department of War. Just mechanically, I mean, how much communication is there? I mean are they a strategic adviser now for the company given the stake they own the company?

I think importantly, our transaction documents with the Department of War were filed publicly. You can sort of see the shape of that relationship. I won't go into specific details of our back and forth with them. But I would say the way this was structured is certainly a partnership, right? They are an economic stakeholder, not just in the form of being a shareholder, but also sharing in the upside, both of commodity price upside on our upstream business and in earnings upside for the magnet manufacturing facility that we're intending to build called 10X. And so without a doubt that this is sort of set up like any good partnership is with good collaboration and a very good relationship.

Just a quick one here right in front of you. Basically, at 5,000, how many years of capacity can the mine generate? What's the life expectancy?

So the mine life is just shy of 30 years with current drilling campaigns, which admittedly those drilling campaigns were primarily done 10-plus years ago. The mine is so rich that it has not been a necessity for us to further define the ore body at this point, just given how much mine life we have. It is something that we are looking at. And frankly, as we look at bringing in other feedstocks, including what we call alternative feedstocks of our own tailings, things like that, that will get better defined over time. But this is one of those things where you look at it and it's...

We haven't done the -- stated it, but has anyone in the past 20 years ever said the life of the mine at [ 10X ] is 20 years of reserve, 10 years, 30 years?

Yes. So no, we followed the reserve statement. So it is just shy of 30 years from a resource and reserve perspective. I think my point was really just that this is one of those things where what happens is it's 30 years, it ticks down to 25 as time elapses as you do more drilling, you find another 5 years or so...

It's typical [ struggle]. So then the next question is, if you take constant volume, constant mix of cars in the United States for the next 10 years, what's the -- how many -- what's the consumption just for that market narrowly defined as you define as the automobile industry?

It's probably -- if it's a 250,000 ton magnet market right now, about 1/3 of that is going into the automotive space. That's globally. I think the thing that is interesting to see, though, is the vast majority of that magnet demand is being served out of China right now.

And so from the U.S. perspective, as evidenced by our relationship with General Motors and obviously, ongoing conversations we have with tons of different OEMs, there's pretty significant demand. And I think a lot of that demand will find its way into Western supply chains, whereas right now, they're almost exclusively sourced out of China.

Okay. And the CapEx that you laid out is about $2 billion and it bubbles down, everything constant?

Rough order of magnitude. We laid out that our initial budget for the new magnet manufacturing facility is $1.25 billion. We have a few other projects that are ongoing. And so pro forma for the DOW transactions, we have nearly $2 billion of cash on the balance sheet. And so we're very well funded to execute on our program.

As it relates to growth beyond stated. So I mean, I guess I'm getting even more optimistic here. All subsequent production facilities, those are essentially yours, correct? There's no tie-in for -- once your obligation to the Department of War is satisfied, if you start expanding your customer base, they're just effectively an equity holder. They have no claim on.

Yes, that's right. And our existing Magnet facility, obviously, is not part of the upside sharing mechanism that the 10X facility is. And so it's really focused on that initial new build of 10X, where there's upside sharing.

And so I think one of the important things about our relationship and transaction is DOW saw our strategy. They saw our capabilities. They did a tremendous amount of due diligence. And I think what they saw gave them the confidence to partner with us. They do not have special governance. There's no golden share concept. In fact, other than items of critical national security, they've given proxy to our Board.

And so governance really is something where I think they see confidence in the team and the business that's in front of them. And so we have complete flexibility to be able to pursue whatever we see fit to create shareholder value and build out the supply chain.

Last one for me, just biggest operational execution risks in as you ramp these facilities.

Sure. I think the exciting thing that we've been able to do over the last several quarters is within the independence facility, this was a first of its kind fully integrated facility going from taking oxides in, doing metal making, alloy production, powder production, press, sinter, finish, coat, slice, grind, all of it in one facility. It's really the first of its kind that's doing all that under one roof.

What we've been able to do is when we built that facility, we decided to build almost a factory within a factory that we call new product introduction, NPI. And so that is all of the same production equipment, but just smaller scale, not pilot or lab scale, but smaller scale, so we can iterate, build out our capabilities. It's where we've built out a significant amount of intellectual property.

And so the thing that's been very exciting is our ability to produce automotive-grade magnets, which a lot of you -- if you know magnets at all, you probably know the EV traction motors are some of the most difficult specifications to meet. The heat tolerance is very significant. The power requirements are very significant. And so we wanted to start with the hardest quadrant, if you will, to be able to then build a business around that. If we've accomplished EVs, we can accomplish a lot.

Within new product introduction, we have been producing NdFeB magnets from Mountain Pass feedstock to specifications for our customers for the EV supply chain. And so we've got a lot of confidence in our technical capability. What we have to do is translate that to commercial production.

The Independence facility is in various stages of commissioning of all of the commercial scale equipment. And so we'll talk a bit more about this coming up. But it's really just about getting that commercial equipment running at rate over the next little bit here.

Well, we're up on time. Ryan, thank you very much for being here.

Thank you.

Great presentation and great Q&A. Appreciate it. Thank you very much.

Thank you for joining us for day 2 of the Jefferies Industrials Conference. Laurence Alexander with the Jefferies Chemicals team. It's my pleasure to introduce Ryan Corbett, who is the CFO of MP Materials. And without any further ado, we're just going to get started.

And given that the heart of the DoD investment was to spur creation of magnet production. Can you first walk us through how we should think about the time line or what types of announcements we should expect in terms of winning new customers?

Sure. Yes, I think one of the fundamental pieces of our agreements with the Department of Defense was obviously to move at warp-speed mentality to bring the needed magnet capacity back to the United States. With our Independence facility in Fort Worth, Texas. Obviously, our foundational customers, General Motors, we announced pretty quickly after our announcement of our DoD transactions. It was more of a coincidence than anything else from a timing perspective. But that Apple would be the next customer to take the majority of the expansion capacity of that facility. The “10X facility, which sometimes is accused to being a misnomer since it's really a 7,000-ton facility. I'll preface that 7,000 tons of finished magnets is often 10,000 tons of block. So it makes some sense. The way the contract is structured is DoD has a 100% offtake with a minimum guaranteed EBITDA for the company.

And there is the opportunity for us to commercially syndicate that volume. The stage that we're in right now is for in detailed site selection conversations, we are moving as quickly as we can with a target of being in production in this facility at the end of 2028. Given that time frame, given the contract structure that we have and given obviously that Independence is pretty well spoken for, we have no gun to our head here from a customer announcement perspective. We get a lot of questions though about if relations cool or they are cooling between China and the U.S. and if things get easier, how is that impacting customer conversations?

And I think Jim, our CEO, put it really well actually in the Q1 call, which was the rare earth humpty-dumpty is not getting put back together. What we saw in April was what had been always a theoretical threat from access to magnets from the Chinese market became real. And you almost have to act as a supply chain manager, you have to act to be able to bring at least some of your capacity into friendlier nations.

And I think we see absolutely no slowdown in the pace of conversations over the last several months. And so I think we have shown that we will be thorough and opportunistic, and we won't announce deals just to announce deals. And so I can't put an exact time line on it. When we announce something, you'll know that it was done and approached from the same perspective that we've approached all of our major customer announcements from a partnership perspective where we can have a win-win and that it's the right deal, most importantly for our stakeholders.

And so can you also walk through the types of end market applications you want to target? And why -- specifically think about the some markets you have more reformulation, you have shorter SKU life, there is proliferation of SKUs, that means proliferation of scientists. Can you just walk through a little bit the gives and takes there and how you're prioritizing?

Yes. I think what you've seen from us so far, obviously, a major automotive OEM and then the consumer electronics company. I think both of those markets continue to have a significant amount of growth within them. And then when you think about what I just mentioned a moment ago in terms of reevaluation of supply chains, I think, certainly, the pace of growth and the opportunity set for us in the United States is far greater than what the overall market growth would be. I think there are a lot of opportunities also in sort of growth in physical AI. I mean we lose 0 sleep on size of the market and market growth just given everything that we've seen. Whether it's humanoid robotics, general industrial, eVTOL, drones, et cetera.

You think about what we're seeing in the market today, the Ukraine conflict is think about the number of drones there and the scary part for them is that supply chain runs predominantly through China today. I think part of the reason the Department of Defense was willing to lean forward and ensure that the supply chain is secure is the future of warfare really depends on the magnet supply chain. And so the whole host of really exciting market opportunities for us. You mentioned proliferation of SKUs, proliferation of scientists, things like that. Certainly, the way we've -- and like to my earlier point on choosing our customers, we've tried to choose customers to ensure the lowest risk and highest likelihood of rapid success in how we've developed our customer contracts to date.

And so General Motors has done an excellent job of standardizing their magnet SKUs across their electric vehicle supply chain. I think a lot of companies are looking at that type of standardization and you've seen them do it in batteries and other things as well in order to drive cost down in their bill of materials. And so that accrues to us as well. It makes it much simpler. There are other end uses that have a proliferation of different part numbers and specs and things like that. But what we're starting to see, actually, and this is I think a really interesting trend and something that I think really has the opportunity to change the magnet industry positively and is a huge opportunity for us is as companies are reevaluating the location of their supply chain, they're also trying to understand and are doing a much better job of understanding where the magnets are in their products, where they've left that issue to Tier 1s, 2s, 3s and then what types of magnets and why are they spec-ed the way that they are.

We've seen OEMs, not just automotive but A&D give us a list and say, okay, here's all my magnet specifications or is this magnet in this part, and we'll look at it and say, okay, this one is 3% heavies and it has spec to do 200 -- max operating temperature of 200 c. Like does it ever actually see 200 c? Most of the time the answer is no. Never goes above 110. Okay. Why is it spec-ed that way? Well, it's always been done that way because it's been freely available in China and sold at less than the cost of goods. And now that, that paradigm is shifting. It's a huge opportunity for OEMs and then for magnet manufacturers to simplify the magnet space. And I think that is the trend that we're seeing. And so even in industries where historically, it's a lot more difficult, I think it's getting easier, actually.

And then actually, on the issue of building out the scientific talent or the R&D side of the expense, does the DoD contract basically give you a cost pass-through on that. So the profit -- the EBITDA is guaranteed or is EBITDA before those research costs?

No. The minimum EBITDA is guaranteed and there's a lot of detail that was filed publicly with our transaction agreements, but in the framework of qualifying costs, certainly, all of the R&D work that would be done to bring those magnets to bear are eligible costs from a cost-plus perspective.

And then lastly, when you think about the commercialization hurdles remaining at Independence, and it's always hard when you have a limited number of customers, every question becomes about a customer. But how much more do you have in terms of qualification trials, points of failure in the ramp?

Yes. I would say, without getting into a ton of specifics to your point on our customer interactions, we have been progressing qualification of magnets from our new product introduction line, which is sort of like our factory within a factory, which has enabled us to do very rapid prototyping and sort of scale our product and process development in a way that is much more efficient. And so we are really pleased with the engagement that we have with our customers on that, and we're really pleased with the progress that we've made from a product quality perspective in terms of hitting specifications, hitting EV traction motor specifications to our customer specs. Our target for production is to have the commercial facilities online at the end of this year. With any automotive PPAP process, generally, you have to qualify the actual machines that you are producing the product on.

But the great part of the way we've set this up is various steps of the production process are in various stages of commissioning as we speak. So obviously, we're in production on metal making. We're selling that product. From a strip cast perspective, our strip casters are in service. They're making flake. Our powder production facilities are in various stages of making powder, of course, and fine powder, presses are in place, the sintering furnaces are in place. And so we're able to really spend the rest of the year on those major pieces dialing in the process to get it to specification so that the qualification should be smooth, right? If the magnet coming off the commercial line looks pretty much the same as the magnet coming off the NPI line then our job is done.

And so if we're in production at the very end of this year, we'll start to sell product at the beginning of next year. There will be a process over several month time frame, but this is not a long drawn out process given all of the work that we've put in already. And the engagement has been excellent. There's a dedicated greenfield facility team from our customer that spends a significant amount of time in the plant already. And so we're well on our way.

And both the partnership agreements have been unusual in the sense of on one, you got repaid early for the CapEx and on the other, you're getting prepaid for the CapEx ahead of production. Given your balance sheet and the funding you have in place, is it fair to expect that going forward, you won't need similar terms on other contracts?

Well, I'm certainly not going to negotiate against myself in a public forum on prepayments with customers. But look, I think the fundamental thing that we think about from bringing new customers onto the platform, is thinking about it from a partnership perspective, right? I think there are a whole host of things that certain companies can bring to the table that look different than what we bring to the table. With the Apple agreement, obviously, I was thinking about what is the total risk-adjusted return on invested capital. And certainly, timing of cash flows can play a real role in looking at cash-on-cash returns.

And so from our perspective, I think we would think about that in any deal regardless of what our balance sheet looks like is what are the cash-on-cash returns of doing this versus doing something else. And so I wouldn't rule out certainly structures like that. Is it an absolute necessity? It depends on the rest of the deal. But I think fundamentally, the great part about the way we've positioned the business is we've also positioned the balance sheet in a very strong place, as you mentioned. And so we've got the flexibility to entertain all sorts of different arrangements and just pick the one that makes the most sense for all of our stakeholders.

And so can you lay out your strategy on recycling? Is it fit to use? Or do you want to have excess supply on recycling. So as material comes available, you can then arbitrage, the recycling market against the virgin market?

Yes. Look, I think for us, one of the very exciting aspects of the Apple agreement was having them as the foundational customer in the recycling business for us, which I think to your question, should scale well beyond just Apple over time. There are certain customers that are focused on pure segregated, never commingles with mined materials. And there are some customers that are perfectly happy to have a mix of primary and recycled feedstock. And so that tolerance will certainly impact how we look at the business over time. But I think recycling will end up being a very significant component of the business over time. It's something that's not built into sort of the high-level guidance that we provided after the DoD arrangement, mostly because Apple hasn't been announced yet.

But I think that if you think about the benefits of vertical integration, this is one of the things that just sticks out so clearly that gives us so much confidence in the strategy that we've pursued is -- we worked with Apple behind the scenes on magnet recycling for over 5 years. So this is borne out of a great technical collaboration with them and allows us to do things that if you're a stand-alone magnet manufacturer, you can't do, you're subject to buying products at market spec and then selling or disposing of your swarf or figuring out a way to have a third-party deal with it. And this allows us to really close that loop and benefit from the vertical integration that we've built out. And so we're very excited about the recycling business.

And then so switching over to the NdPr side. Can you just give an update on progress ramping and NdPr production and what do you see as the reasonable time frame for getting now to getting to the 6,000 ton target?

Sure. We talked about in our last quarterly call, running at roughly 50% of targeted throughput and Michael gave guidance for, I believe, about 20% sequential growth. What you've seen historically from us is since entering production -- commercial production on the refining facilities, if you just sort of average out a -- I keep calling it a CAGR, it's a compound quarterly growth rate, not annual growth rate, you look at sort of how we've compounded. It's basically been not in a straight line, but the average is about 20%. And so you see 20% again this coming quarter from our guidance on the last call. If you just run that math out, you get to where you need to get in 4 to 6 quarters. Anything more precise than that, I'd be lying to you, right? The way -- the nature of debottlenecking is actually, at the point that we're at right now, we have a very good sense of the items that need to be addressed to do debottlenecking.

But the nature of debottlenecking is you find things that you weren't exactly sure how it was going to shake out, but you had a decent idea. The great thing about where we sit right now is these are imminently solvable things, switching out pump sizes, switching out heat exchangers, things that are relatively easy to do. The process itself, the chemistry, the yields, the potential throughput as we dial in all the ancillary support infrastructure gives us a significant amount of confidence in hitting that target.

And so can you also then characterize what that translates into where you are on your production cost compared to the roughly $40 per kilo target what you need to do to get there?

They are inextricably linked, really. And so the good part from my perspective about where we are on the cost curve of bringing down costs is the vast majority of the move from where we are in the 60s range to the 40s range is fixed cost absorption. If you think about the overall staffing levels, the overall maintenance costs, frankly, is probably elevated right now given a lot of the fixes that we're doing require supplemental labor support or items that we're replacing that don't meet the capitalization threshold and running through the P&L. Those things will taper off while the denominator is going to double.

And so you run that math out, and we actually put a slide together in our Q1 call that sort of showed that walk of fixed versus variable and how much volume really matters to that calculation. And so I think we'll get the vast, vast, vast majority of the way they're purely on driving volume. So that is the focus for us.

And if you think about the progress on debottlenecking since you bought Mountain Pass, all the process changes you've done, how much more is there to do? And will you have the bandwidth to do it while doing everything on the magnet side?

Sure. Yes. I think all of the work that we've done, and obviously, we've approached this from a methodical perspective of dialing in the Stage 1 business, the concentrate production. And as you know, with Upstream 60K and some of the other initiatives, we still have a lot of focus on that business, but it's to a point where it's very mature and some of the improvements that we're doing there, we have a dedicated team that's focused just on improving mill performance, improving grind size, things like that. And so that's a dedicated team that continues to do their work there.

Similar situation on Stage 2 and ramping refining, we have a dedicated team that is focused on the debottlenecking initiative. And so that bandwidth is not being stolen to do recycling or something like that. And so particularly given how much we've progressed in that debottlenecking initiative and given the visibility we have to what the bottlenecks are going to be when we go from 50 to 75, like at this point, we have a very good idea on what the bottleneck will be at 75 where maybe when we were at 25, we weren't exactly sure what the bottleneck was going to be at 50. And so it's sort of a different paradigm for us that gives us the level of confidence that we have in eventually hitting that number. And so while eventually at the end of the day, we have a lot of things to execute. We have built a team and continue to build out a really robust team to support each of these initiatives.

So is there enough obvious debottlenecks or obvious bottlenecks to fix, however you want to look at it, to double capacity again over 7, 10 years? Or is that sort of -- at some point, you have to start thinking about a much more dramatic investment to increase the size of Mountain Pass?

Yes, it's a great question, and it's one that we've been getting a lot lately, given the progress that we've made it sort of how big can this get? And we've been very careful not to promise you more than 6,000 tons of NdPr despite promising you 60,000 tons of concentrate, which when you do that math, certainly, we could refine that delta. You probably need 45-ish thousand tons of REO to get to 6,000. So that delta is available. What I would tell you is that certainly, Michael addressed this on the last call, he said it's not unlimited, right? Flat land is at a premium in the Mountain range where we are in the middle of Mojave.

However, there are a tremendous number of very clear and relatively near-term upside levers to that 6,000 tons that we're not going to give you a date and a number. But if you think about the recycling initiative, right, that is independent in some portions of the value chain and will drive incremental volume above and beyond what we're targeting in the main plant. There's also the concept of the third-party feedstock that we will bring in to supplement our heavy rare earth feed stream for our heavy rare separation capacity.

The target had always been to bring in third-party feedstock. And as part of the DoD arrangements, we have them as our partner in targeting bringing generally mixed rare earth carbonate, mixed rare earth oxide, other products where third-party plants probably don't have the economics or the scale to justify their own refinery. And so they would lean on us as a refinery of choice in the Western world. As we bring in those feedstocks, despite a lot of junior miners liking to put on like, oh I'm a heavy rare earth deposit, like that doesn't exist. There is no such thing as a heavy rare earth deposit.

Anytime you find heavy rare earths, you always will find more lights than you will heavies in that deposit. And so from our perspective, it's great because we bring in a feedstock that's 3% or 4% heavies or whatever it is, it's probably 18% to 25% NdPr. And that NdPr will get refined at Mountain Pass and will be beyond what we're talking about from our own feed streams. So there are lots of levers in the relatively near and medium term to drive volume. And so we'll see where that takes us.

So if you wanted to take your REO capacity up by 50% or double from your target or if you wanted to take the NdPr up to 10,000 tons or 15,000 tons, does the capital intensity of those steps come in lower than what you've already seen? Or is it going to be higher because it's different configurations of facilities, new complexities?

Yes. I mean without commenting on those specific numbers, I think like in general, what you would see with Mountain Pass, one of the reasons we're able to be very capital efficient in the recycling initiative for example, is the significant amount of shared infrastructure, right? We have our own power plant. We have our own water treatment plants. We are -- we can operate as an island without the grid and we do operate without the grid. And we, of course, could bring the grid back on for expanding other potential power users and things like that. So undoubtedly, when you've got a brownfield site, there are always economies of scale when you're building new capacity.

And then do you expect the recycled material to be lower or higher cost than the mined capacity at Mountain Pass?

At the end of the day, it really depends on what you pay for the feedstock, right? And so a lot of the process steps of going from a mixed product or a feedstock, whether it's end-of-life magnet or crushed ore, like the downstream of that is very similar. And so at the end of the day, it really depends on what you pay for the feedstock. But I think in certain instances, there will be opportunities where recycling will be lower cost if there are areas where we really need to -- there's a specific type of feedstock that we want, we have to pay up for whatever, maybe it's slightly different, but that's really where we end up being the driver.

Okay. Can you talk a little bit about kind of the broader vision that MP has? I think kind of the phrase you used at one point was viewing yourselves as a national champion. We touched on the last earnings call a little bit about the Saudi negotiation. Can you unpack that? Was the Saudi negotiation done in the context of the DoD negotiation? Or does one basically scotch the other?

Yes. They were completely independent and one doesn't necessarily change the other. I think Maaden has been pretty open about the process that they ran, given they do have an initial resource base. I think they're very interested in growing as a refining hub globally, arguably beyond their existing resource. And I think given the nature of the market in Saudi Arabia, that makes a lot of sense. And so they ran a competitive process to speak to everyone in the industry and ultimately decided to work with us given our technical capabilities across all pieces of the value chain. Be able to help them on the upstream, on the refining, on magnet making as well. They have a real pointed initiative on EV manufacturing and things like that.

And so a lot of users of permanent magnets are starting to bring manufacturing into the Kingdom. And so I think that's where their focus is. I think undoubtedly, our DoD agreements have us very focused from a capital perspective on investing capital in the United States. We have an important job to do, and we are focused on doing that. And so I think primarily from a capital perspective, I would expect our approach to international to be more capital light until we are finished growing our platform in the United States. It doesn't necessarily mean we won't continue to pursue other opportunities globally. I think there are very, very few people. I mean, even in the Chinese market, there is not a single entity that does all pieces of the value chain. They're generally split amongst various entities and they may all have cross shareholdings, as you know how it works over there.

But really, I think we bring something very, very unique to the table for global industry. Your comment on our positioning as a national champion, I think the reality of this industry is if you look at the unequal playing field that we were forced to compete on for a very long time versus China, where they have their own national champions that they have subsidized and that they are forced to consolidate over time. When you have a mercantilist approach and you're trying to combat it from a purely capitalist perspective without some way to level the playing field, it ends up with the results that had happened in the past. I think what has changed now is given the requirement for scale, in order for this industry to grow, we are in a position to be able to support some of these point solutions that are out there now that we've been able to really drive the scale.

And so if you're just a metal maker or you're just a refiner or just a recycler, like you had no chance of survival under the old paradigm. I think the great thing is the way we're approaching this is like a more vibrant industry with a lot of players in it is good for them. It's good for us. And so as we grow the business, there are going to be parts of the supply chain that we say, hey, we should bring a partner in to do X, Y and Z. And so I think really the only way you allow them to have the scale is by having a true scaled national champion that can compete on the global stage.

And when you look at, again, bandwidth or interest, if there are projects elsewhere in Latin America or in Europe, I think there's a maintenance capacity coming on stream in Europe currently or there's various magnet projects in Southeast Asia. If there are partnerships available, should we expect you to be engaging in bidding because you have a unique position and you have some things you can bring that other people can't. Or should we expect you have a lot on your plate, and that is just not a priority?

Yes. Look, I think you've always seen us be very opportunistic, and we've always kind of had a lot on our plate, right? We started the magnet business before we were done with building out Stage 2 CapEx, right? So I think we've always been thoughtful about making sure we don't bite off more than we can chew, but really wanting to push the strategy forward as rapidly as possible. I think given the criticality of our industry, which was laid bare in April, we're going to continue to invest in the business, invest in our capabilities. And so I think it's hard to sort of have a blanket statement of we will or we won't. I think we -- I spent a lot of time evaluating lots of opportunities. And so we'll never -- what's the phrase, you stop looking when you're dead.

Well, I think that's also a lot of companies that are in kind of mining particular minerals, the kind of they focus on the mineral. You moved quickly downstream. Have you moved far enough downstream? I mean are you interested in engaging finding some other related adjacencies downstream that might be more capital-light, higher -- faster payback periods, give you a bit of visibility on the end market?

It's a great question. We've seen opportunity sets where we work with customers where we see a significant amount of benefit of being able to implement a rotor design with thoughtfulness around the magnet design in that rotor. We've seen bottlenecks for our customers where if we could give them a time line for magnet manufacturing, they couldn't get a time line out of an actuator manufacturer. And so it's sort of like, okay, I've got the pick and the shovel, but I don't have the other thing. So it's something that we -- again, never say never. We, again, will pursue that from a purely opportunistic perspective. But there are -- when you look at some of these things from a systems level perspective, there are efficiencies that we're starting to see even without going further downstream. But I think the efficiencies that we see that we've been able to bring to bear going vertical so far, very likely would extend further downstream.

And then taking that a step further, do you see pockets of skill sets, process know-how that are currently in the hands of customers, potential partners downstream where it would make sense to consolidate that and have that all be under one roof, like build on actual magnet processing know-how in one place.

Yes. I mean I think from a magnet processing perspective, I think we are already really building kind of the center of excellence in the United States. I mean one of the major benefits, obviously, in working with a company like Apple is their material science group is extraordinary. And so being able to have a technical collaboration with them and pursue things on sort of a different time scale, it's like #1 focus is make the magnets. But a separate project of really thinking much longer term on does this metal need to be melted and then cooled off again into solid form and then molted again? Like things like that, that you can really rethink the overall process. And so I think there are -- we already -- we are building that capability. And I think we are working with one of the most sophisticated magnet consumers in the world to help us along the way. And so I think we're really laying the foundation of domestic magnet IP in a big way already.

And just lastly, could you give us any perspective on the margin that is embedded in the DoD contract? How you see that benchmarking against a stand-alone magnet business? What normalized economic should be?

Sure. Yes. What we laid out when we announced this transaction is there's obviously a lot of puts and takes in the DoD agreement. With the 10X facility, our ability to have full visibility into 100% offtake with a minimum guaranteed EBITDA for 10 years from SOP was pretty powerful for us to be able to go and invest that capital at a rapid pace. The reality though is if you look at that minimum guaranteed EBITDA, that $140 million that compounds at the 2%, that is not, I think, the ultimate opportunity, to your point, of what the economics would support in a facility of that scale. And so we did lay out on the transaction documents and the slides that we announced the deal with, we laid out, here's the minimum. And to the right of that, what could sort of the 4-wall EBITDA look like and then what would that mean for us?

And I think if you look at the pricing out in the market for certain types of magnets, it's going to make a lot of assumptions on what type of magnet we're talking about, et cetera, et cetera. But it's much closer to high 300s of EBITDA, nearly $400 million of EBITDA, where our share, given we have an upside sharing mechanism with DoD, would be north of $100 million higher than that minimum guarantee. And so I think there is a pretty significant amount

of upside embedded within that contract. And given the way we structured it, there are incentives on both sides to go and chase that.

Okay. Great. And I think we're just about out of time. So thank you very much for the discussion today.

Sure. Thank you. Appreciate it.

Hello, everyone. I'm George Gianarikas, one of Canaccord Genuity's sustainability analysts. Thank you for coming to our 45th Annual Growth Conference. And I think we're maybe -- or the market is most excited about having MP with us today. Thank you so much for joining Ryan Corbett, CFO of the company; Martin Sheehan from Investor Relations.

You've been up to a lot recently, been very, very busy. Maybe very quickly just to focus on the 3 stages of the business, Stages I, Stages II, Stages III. We won't get into the deals that you've announced maybe until later, but -- the Stage I of your business is getting to 40,000 tons a year, which you've done -- Upstream 60K eventually, getting to 40,000, eventually to 60,000. Maybe walk us through -- Sorry, I was having a technical issue.

You got to turn it on.

Good. 40 to 60. So can you just talk us through the path in getting to 60 level of confidence time frame, et cetera?

Yes, no problem. Thanks for having us. Happy to be here.

Right now, we're actually producing our LTM is just north of 50. So we've made some pretty big strides there. I think in the quarter we just reported last week, we had an outstanding quarter north of 13,000 tons of production. The team has done a really unbelievable job focusing on some of the lower capital intensity, more optimization pieces of Upstream 60K in the last several quarters. And so we've been able to make a lot of progress there.

Interestingly, we've continued to drive incremental production out of Stage I, while we've shifted our focus really more towards focusing on concentrate quality more than just quantity. We've pushed in the last quarter, while production was really excellent, our highest overall average grade of concentrate that we've ever produced. And that, I think, over time, will have positive implications for the midstream section of the business as well. And so Upstream 60K is one where, as we've laid out, as you mentioned, some of the deals that we've recently done, we laid out sort of a framework of what we think our baseline earnings power is of the business at $650 million pro forma for a lot of these deals that we've recently announced. One thing that is very clear upside to that is Upstream 60K. We didn't include any of the potential earnings power in that baseline number. And so it's something that we continue to execute on. But for the short term, we're really focused on quality. But I think over time, there's a lot of upside.

What does that do to your mine life as you move to 60K of production?

Well, the great thing about what the team has been able to achieve is really it's neutral to positive despite the incremental production because the vast majority of what we've been able to achieve is from recovery. So we're feeding the same amount of material from the mine into the concentrator. This has really almost all been driven on overall recoveries. And so as we look out and we've planned the mine for our 60,000 tonnes of oxide production, we don't need to increase feed rates and aren't planning to increase feed rate to get there.

Maybe focusing now on Stage II, is getting to the refined NdPr, you have the stated goal of 6,075. I still remember that number.

I don't know why we didn't just round down to 6,000, but that 6,075 is the target.

We still use it in our model. So can you just talk about progress there, time line of maybe getting to that 6,000? Any -- what bottlenecks, if any, you're seeing at this point in the?

Sure. Yes. So Michael guided the Street in the last call to 10% to 20% sequential growth, which if you sort of zoom out and look at what we've done, we really started the refining operation at the very end of 2023. And if you look at sequential growth and sort of average it out, and as those of you that follow the story know, we have semiannual plant shutdowns. And so it's not a straight line. There's usually progress and a slight step back or leveling off and then forward progress. But if you average out our sequential growth since we started, we've averaged at about 25% sequential growth.

So if you just play that out and compound that, if all we do is continue to execute on the trajectory that we've been executing on, we'll be there in the pretty near term. We'll be there by the end of next year. Of course, in any plant is really a brownfield certainly more than a greenfield. And so we had a great head start, if you will. But with any plant of this complexity and scale, there's always 2 steps forward, one step back as you dial in recovery, throughput and uptime and get all of those levers right in order to maximize production. And so with the 10% to 20% that we expect next quarter, that's with taking some of the incremental downtime that Michael talked about in July in order to dial in some of these improvements to the NdPr finishing circuit that you talked about on the call. And those are the types of things that you sort of don't see under the hood when all you report is a headline number, right?

If you take a couple of weeks of downtime or a week of downtime to achieve and implement some of these improvements, you don't necessarily see exactly where we're run rating after that. And so there's always that 2 steps forward, 1 step back. And so to your question on what are the bottlenecks that we're seeing, I think fundamentally, at this point, given what we've been able to execute and now feeding north of 50% of our upstream feedstock into the refining circuits, there's no doubt about our ability to produce at scale at this point. It's really just a matter of when exactly do we get to 6,075. And what we are seeing in terms of the issues that we are tackling at this point is it's mostly materials handling. If you think about our operation, it's a highly complex operation, 24/7, 365, and you're dealing with solids, solutions, slurries, wet solids, dry solids, you name it.

And so it's almost a good thing that the type of issues that we're dealing with at this point are mostly interprocess material handling and things where we need to drive better mechanical reliability in those areas. And there are very clear pathways to do that. And Michael and his team have been doing an excellent job, and we've got a lot of confidence in the team to get there.

So it's not a science problem.

That's exactly right. And what we see -- there's always room to improve. But in terms of what we see of feeding the refining circuits versus what we're getting out the other end, the yields and the ability to produce at scale absolutely are working how we intended them to and are aligned with all of the underlying assumptions that set us on that 6,000 target.

Is there -- let's just say a pipe breaks somewhere. Is there any supply chain issue? Does any stuff come from China, for example, that's hard to get?

It's a good question. At this point, we have been anticipating the shift in our business away from the Chinese market for some time. And so we have absolutely controlled for any of the supply chain challenges or any material coming out of China. As it relates to a pipe breaking and having supply chain issues, it's not normally exactly that. But there are challenges that -- talking about these implementation of upgrades, right? Some of those upgrades, once we identify them, we have to go through the process of a short engineering cycle, production, et cetera. And that's generally done in the U.S. but some of that has some time attached to it.

One of the great things about our recent agreement with the Department of Defense is given the criticality of what we do and the criticality of magnets going into the vast end uses that they do go into and the fact that we are vertically integrated, our business now has what's called a DX rating, something called The Defense Priorities & Allocations System, where it's something that a lot of businesses don't really even know about. But any private business, public business, operating in the United States is subject to this. It's run by actually the Department of Commerce in partnership with the Department of Defense, but it requires the businesses prioritize production of products used in the defense industrial base. And so we now have the highest rating that's possible amongst the various ratings.

And so we use this as a tool and work with our vendors to be able to accelerate time lines for any potential things that we need. And so particularly as we think about the downstream growth that we see in building out our 10x facility, it's a really important tool to be able to prioritize our products to be able to get things moving as quickly as possible.

Now the 6,075 tons was based on 40,000 of concentrate. If you get to -- when you get to 60,000, does that, over time, translate into 9,000 tons of NdPr?

So -- and we got this question in a lot of different ways on the last earnings call. And I think the way Michael described it is the capacity of Mountain Pass is not unlimited. But like your math is right. If we're doing 60,000 tonnes of REO and concentrate, in theory, we could do 9,000 tons of NdPr oxide. I think the thing that's fascinating about the place that we're at in this business is with the 40s of upstream product, we absolutely are going to get to that 6,000 tons over time. We've got that increment from Upstream 60K that can generate a lot of value. And as we talked about, that is not captured in sort of our baseline earnings framework.

The other piece that's really exciting from a production standpoint is our announcement on scaled recycling. And so that's another opportunity for us to grow NdPr oxide production. And so we recently announced Apple as our foundational recycling customer. And so that's another lever for us over time. That facility will get built out in the not-too-distant future to be able to satisfy the requirements for NdPr and heavies for Apple at our Independence facility to make them their magnets completely from recycled feedstock, which we think is a really awesome addition to the business. And so there are a lot of levers over time for us to be able to grow production.

So to put you on the spot, but in theory, over 10, 15 years, give you a lot of time to figure this out. You can get from 6, maybe to 9 and then maybe on top of that, you have this recycling business that can bring you even beyond those levels.

Yes, I think that's right. And look, if you think about the opportunity set in front of us, we've talked about 10,000 tons of magnets, which in theory, depending on the type of magnet, making gross over generalizations, 10,000 tons of magnets is 5,000 tons of oxide. So what that tells you is we've still got a pretty significant midstream business that can support the market, can support our external customers that are super important to us. Japanese, South Korean markets are our largest markets right now, and we'll continue selling into those markets. But what it does spell is an ability to grow midstream and an ability to grow downstream over and so we certainly have our plate full executing on the items that we've laid out and getting to 10,000 tons of magnets and executing on all of our agreements with DoD and Apple and first and foremost, General Motors, which is coming into production at the end of this year. But we are -- we have established what we feel is a very strong and exciting platform for us to really accelerate growth even beyond what we've laid out.

And so as you know, as a management team, we are execution focused. We want to execute first and then explain the upside later. And so our view is that we need to continue to make great forward progress on all of these initiatives that we've laid out. But as we move forward on those, I think there are great opportunities for us to grow even further. We're at the growth conference, so...

You're. You're building an enormous magnetics facility, multiple ones, one in Fort Worth, one at a location that I think hasn't been disclosed yet.

Correct. Okay.

You're going from 1,000 to 3,000 at Independent.

That's right.

And then an additional 7,000 at this location. What I found incredibly fascinating about the deal that you struck with the DoD is that they're basically committed to buying the 7,000 tons unless you find another commercial partner. That's right. And our math, not yours, would suggest that independence is already -- about 50% plus, this is our math again, has already been allocated to GM and Apple, which leaves a lot of room to negotiate contracts with others, but not too much, right, because capacity is quickly filling up. So how do you approach new commercial agreements, whether -- this is our, whether it's Tesla, GE, Lockheed, et cetera. Like what kind of expectation should we think just in terms of margin profile, commercial agreement, et cetera?

Sure. So one clarification. On Independence, the first 1,000 tons is committed to GM. What we've said is we're going to get that facility to 3,000 tons. And with the Apple agreement, the vast majority of that expansion is already contracted. So I would say your 50% is low. So the great thing about Independence also is it's modular. And so we view that facility as effectively sold out. And so at this point, of course, you can always increase volumes one way or the other. But in general, from the major capital investment that needs to go into it versus the returns we're going to get on the other side, we feel great about independence. And then to your point, on 10x, we have a 100% offtake.

And so we are not in a rush to announce more headlines on customers unless and until we have the deals that we think are right. An example is with Apple, we've been working quietly behind the scenes with Apple for 5 years on optimizing recycling technology in order to bring us to this point. And if we had signed a deal in 2020, it might have looked a lot different than the deal we just signed. And so we have always been methodical in approaching customer relationships from a win-win perspective. We think that there is tons of opportunity for us to announce more over time. But from a fundamental business perspective, we've got visibility into our returns at this point. And so I think kind of what you're getting at is anything incremental will be better than the baseline economics that we've laid out.

What I think despite all the attention that some of the recent deals have gotten, I still think it's underappreciated, frankly, writ large how critical the magnet supply chain is and how close the U.S. industrial economy came to really -- like I don't want to blow out a proportion, but near collapse. I mean we had auto factories actually shut, and there were a lot more that were very, very close to shutting from the export restrictions from China. And so undoubtedly, with a new 7,000-ton plant coming online, there are tons of customers that want to secure their supply chain. And I think the great thing about what we did with the Department of Defense is their focus is, first and foremost, on ensuring the defense industrial base is taken care of.

But you can imagine that one of the reasons we decided to go all the way to 10,000 tons as soon as possible is a focus on ensuring economic national security as opposed to pure defense. It's really being able to play offense. And so I think absolutely, there is a lot of opportunity for the names that you mentioned to be a part of our story in the not-too-distant future. And so at this point, we're really heads down in execution mode. And the pipeline of customer interactions is absolutely gigantic given all the things that I talked about. I mean you had businesses that designed their supply chains around assuming that magnets would flow freely forever despite knowing for a very long time that there's a single point of failure in China, and that game is over. And so I think from that perspective, there's a lot of opportunity for us over time.

I find it fascinating that you think it's underappreciated. In other words, this was a come to Jesus moment for many companies that realized that they couldn't operate without...

Unquestionably. And I think the thing that's so interesting about it, too, is what we ended up trading here in this daytone with China is China sending us magnets, which again, with all due respect to us, it's not AI chips, right? And we're sending them AI chips in exchange, right? And so we can never let the country be in that position again. And I think that we are leading the charge to make sure that never happens again. And so in addition to having our shareholders as our major stakeholder here, our country and our government, we cannot let that be the case again. And it really was at that point. I mean, you had major industrial manufacturers, automotive, A&D, consumer electronics, I think making very clear to this administration, if we continue on this track without some sort of daytime, we're in deep trouble.

And so I think we are a major solution to that problem over time. You saw auto factories shut in May. And these restrictions went in place in April, which tells you how tightly the supply chain was running from a just-in-time perspective. And I think the thing that I've started to see that I find so fascinating too, is OEMs from all industries not having realized even that certain parts had magnets in them. We had one OEM come to us and say, "I didn't know this piece had a Samarium– Cobalt magnet in it at all." And so it's one of those things where when the product is freely available, subsidized, you didn't have to pay that close of attention. And I think, again, the game has totally changed. And it actually presents some really unique opportunities, not just from contracting and establishing long-term relationships with some of these really important American and global companies, but it's an opportunity for us to change the way magnets are made, sourced, specced, et cetera. What we've seen, in particular, is as some of these OEMs have gotten smarter about what has magnets in them and what exactly do the magnets look like that are in these various parts of their products, it's really then taking another layer deeper and saying, why is the magnet to perform at 200 degrees C when this application never sees over 120. And that is an opportunity for us to really drive more standardization in the magnet market.

And frankly, it's one of the reasons that one thing I'm sure we'll talk about that we haven't yet is the heavy rare earth content. It allows us to have great visibility into significantly reducing that. And so overall, it makes me extremely bullish on NdPr, it makes me realize that we will be in a great position to be able to grow our magnet business while lowering the heavy rare earth content purely from dialing in specifications, let alone a lot of the R&D that's going on that has allowed us already within our existing spec to pull heavies out of the mix.

That was my next question about heavies.

I know you well and I found out.

We get it all the time. People want to know how you're going to solve that riddle, so to speak. I mean you were already starting to build refining capacity in Mountain Pass the time I was there. Feedstock, refining capacity, how confident are you can ramp that up?

Sure. Yes. And so for some of the reasons that I just laid out, we don't view that as a bottleneck over the medium and long term. In the immediate short term, we've obviously prepared for this moment for a long time. We have stockpiles of the materials that we need for the immediate launch of production at Independence. And so we're well covered from the immediate-term perspective. And then in 2026, we will have our refining capacity come online. You hear lots of people out there say like, oh, we're a light rare earth deposit and then there are heavy earth deposits. I hate to break it to them, heavy rare earth deposits don't exist. Every single deposit that has rare earths in them generally has more lights and heavies, always. And we say generally, it's always.

And so for example, we have 15.7% NdPr in our elemental distribution. We still have 1.7% heavy rare earths and 1.7% of a really big number is a much bigger number than 3% of a really small number. And so that is sort of the misunderstanding about heavy rare earths and their -- where they're sourced. I think fundamentally, what we see is we are covered from our own production from Mountain Pass or for the launch of independents and covering the GM agreements as they grow. With Apple, we also have this recycling capability and the feedstock that we'll be bringing in also is another source of heavy rare earth content. And so that agreement is also well covered.

So independence from a heavy earth perspective is well covered. You probably also saw in our transaction agreements with the Department of Defense that were filed when we announced them, we are approaching this together with DoD as our partner in sourcing more heavy rare earth rich feedstock to feed into Mountain Pass to serve the 10x facility. And so there really are no major ex-China sphere of influence. Actually, there are no ex-China sphere of influence producers of heavy rare earths out there, refiners. We will have the only refinery outside of that sphere of influence and it will be online in the short term in 2026. And so that puts us in a great position to be able to be the refiner of choice for projects out there that do have potential heavy-rich feedstocks, but that don't have the mine life or the economics to support building out a full refining capability.

In the same way that you saw us in the early days start with an upstream product that was sent overseas for refining. That is probably the most thoughtful way to bring some of these projects to bear over time. And so we expect to see a lot of opportunities to bring heavy rare earth-rich feedstocks into the Fold of Mountain Pass and use that to satisfy 10x demands. And that's on top of some of the items I mentioned before, which is if you think about the biggest use cases of magnets as we look forward. Jim mentioned on the earnings call, we're sitting here at the precipice of the next big thing, which is the physical manifestation of AI, robotics, et cetera. And you actually heard Elon Musk talk about on his earnings call a couple of calls ago, I think the Q1 call that the ramp in Optimus was interrupted because of an inability to source rare earth magnets.

So it tells you how important these things are to robotics and some of these future-facing industries. The great thing about some of these applications is some of them have no heavies in them. And so I actually think the overall mix of heavies as a proportion of the [ build ] materials in magnets writ large is actually declining. And so it's something that a lot of people like to talk about. But from our perspective, between R&D, mix and the refining capacity that we're bringing to bear, we think this is well covered for us.

It's a great place to stop. Congratulations on all your success, and have a great day.

Thanks.

Hello, and welcome to the MP Materials Second Quarter 2025 Earnings Call. [Operator Instructions] Also, as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time.

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 Second Quarter 2025 Earnings Conference Call. 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.

As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation, earnings release and in our SEC filings.

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 appendix of today's 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 afternoon, everyone. When we gathered on the first quarter call in May, I said we had reached an inflection point. The rare earth supply chain long built on a single point of failure had cracked. I said that Humpty-Dumpty was not getting put back together again and that this moment would be transformational and remembered. Today, it is clear that it has emerged in its place is something fundamentally new and MP is squarely at the center of it.

The strategic partnerships we announced with the Department of Defense and Apple building on our foundational relationship with General Motors have fundamentally transformed MP. These agreements validate the mission we have pursued since day 1 and mark a new chapter, not only for our company but for the country. This is a moment of strength for all our stakeholders, our shareholders, our customers, our employees and the United States of America. And with the nonmarket externalities that were once outside of our control now largely addressed, our focus is firmly on execution.

Let me briefly walk through the DoD and Apple agreements, and then I will turn to some operational highlights from the second quarter, beginning on Slide 4. I will not rehash every detail of the DoD agreement. You can find our July webcast on our website and YouTube, and the agreements are filed with the SEC. But I want to emphasize that we view this partnership as a win-win-win. A win for MP shareholders, a win for U.S. commercial and national security interests and a win for taxpayers.

The DoD partnership rests on 3 pillars. First, DoD made a transformational investment in MP consisting of $400 million in converted equity along with a $150 million low interest loan to fund the build-out and expansion of our heavy rare earth separation circuit. The DoD also received a warrant which when exercised and combined with the preferred equity post conversion, we make them our largest shareholder, positioned to benefit from the upside they helped enable through an incredibly well-structured partnership. Second, a $110 per kilogram price floor for all products containing NdPr.

This mechanism counters nonmarket forces that have historically suppressed the development of a secure domestic supply chain. It ensures our shareholders earn a fair return on our past investments as well as the significant investments we will make to scale this mission and bring the supply chain home for good. Included in this commitment is some upside sharing with DoD if as we suspect to occur over time, prices go materially above 1.

Third, we are accelerating the build-out of independents and constructing a new 10X facility, which together will expand our U.S. magnet manufacturing capacity from 1,000 to 10,000 metric tons annually. Given the work speed of the build-out and the mission we have been tasked with, the DoD has committed to purchase 100% of the output from the new facility on a cost-plus basis including a $140 million minimum EBITDA guaranteed. We expect to syndicate a large portion of this output to commercial customers at improved economics creating meaningful upside potential, some of which we will share with DoD.

On the heels of the DoD announcement, we signed a land agreement with Apple. While the timing may make these 2 agreements appear related, that was really a coincidence. This partnership is the result of 5 years of quiet technical collaboration with Apple and reflects our methodical approach to building win-win customer relationships. Apple is one of the world's most sophisticated supply chain managers and one of the largest and most experienced users of rare earth magnets, making it an ideal customer and a powerful validation of MP's capabilities.

Apple embodies everything we hoped for in a flagship commercial partner to follow GM. They will be the foundational customer for our commercial recycling business, anchored by the construction of a dedicated recycling circuit at Mountain Pass and the expansion of independents. This long-term contract will result in over $500 million in contracted magnet purchases beginning in 2027. We expect the economics to reflect attractive returns on our capital and significant commitments to this partnership. Apple will also provide $200 million in milestone-based prepayments over the coming years, supporting the build-out of both the recycling circuit and independence.

Importantly, Apple will leverage its global supply chain to provide post-consumer and post-industrial magnet feedstock. This significantly accelerates MP Material into recycling at scale with substantial potential upside. Recycled feedstock should reduce unit production costs and over time, the ability to recover more material at Mountain Pass could expand our production profile beyond current targets.

I want to recognize the extraordinary efforts of our team whose execution over the past several years has earned us the right to enter into these transformative partnerships. I also want to acknowledge General Motors whose early commitment to our mission helped catalyze this moment.

Turning to operations. Our Materials and Magnetic segments continued to deliver strong execution. In our Materials segment, we achieved 6% sequential growth in NdPr oxide production despite a planned biannual plant shutdown in April. This result was consistent with our expectations and more than double last year's output. Our upstream operations also delivered the second highest quarterly REO production in the history of Mountain Pass with record recoveries driven by ongoing optimization work.

In our Magnetic segment, we expanded both NdPr metal production and sales volumes, which led to significant revenue growth and EBITDA generation. At independence, we are now consistently producing magnets that meet our customers demanding specifications for EV traction motors, a critical milestone. The next step is transferring this capability from trial production to scale production. Commissioning at the factory is accelerating, momentum is building as we progress toward commercial magnet production later this year.

Michael will provide a detailed operational update in a few minutes after Ryan covers our second quarter results. Ryan?

Thanks, Jim. Turning to Slide 5 and our consolidated results. Second quarter revenue increased 84% compared to last year, driven by the ramp-up in sales of magnet precursor products as well as the record production of NdPr oxide at Mountain Pass. The sequential comparison was impacted by our strategic decision to end sales of concentrate to external customers in the quarter. With the new DoD agreement, I would point out that for the foreseeable future, we will no longer sell concentrate to third parties but stockpile any excess production until we further ramp NdPr oxide output from our midstream assets.

Importantly, beginning in Q4, we will begin benefiting from the DoD price floor agreement, with first cash payments likely to be received in Q1. I would also add that we continue to work through all of the accounting mechanics of the various features of the DoD contract. For example, how the top-up payments for stockpiled products will be recognized. We will call out the major conclusions in our Q3 or Q4 call.

Moving to the middle of the slide, you'll see adjusted EBITDA also improved year-over-year, driven by the higher sales of Magnet precursor products as well as continued improvements in per unit NdPr oxide production costs, including $8.3 million in lower reserves on work in process and finished good inventories at Mountain Pass, which at this point is mainly related to early production of lanthanum products. Sequentially, adjusted EBITDA declined primarily due to the lower sales of REO in concentrate. And moving to the far right, adjusted diluted EPS improved compared to the second quarter of last year, mainly due to the improved adjusted EBITDA, partially offset by lower interest income and income tax benefit as well as higher depreciation, depletion and amortization compared to last year.

Moving to Slide 6 and the Materials segment KPIs and starting on the left with the Upstream. You can see the world-class performance by the Mountain Pass team as we produced 3,145 metric tons of REO in the quarter, 45% above last year. Recall, last year, we had unplanned downtime that interrupted production for roughly 3 weeks. This quarter's 13,000-plus metric tons was our second best quarterly volume ever, which is even more impressive given the 2-week planned maintenance shutdown we took at the beginning of the quarter. You can see the impact of our decision to hold sales of concentrate in the middle left of the slide, with the realized pricing on the product we did sell waning in the mid 4000s, which included the impact of a 10% tariff applied during the quarter on our final Chinese sales.

Moving to the Midstream on the right side of the slide, we had a modest increase in sequential production of NdPr oxide, approximately 6% to 597 metric tons, in line with our discussion last quarter, with material improvements in throughput offset in the reported metrics by the planned downtime from our maintenance turnaround at the beginning of April. Importantly, we set a monthly record for production in May, followed by another record in June. As we stated, we were generally at about the 50% mark of our targeted total throughput in May and June. Michael will provide more insights on our refining progress shortly, including his thoughts on targeted production for Q3.

In the middle right, you can see NdPr sales volumes continue to be strong year-over-year, up 226%, generally following the ramp in production. Timing of shipments is always a factor in our results, particularly as a significant amount of our production continues to go through Southeast Asia, be told into metal before being sold to our end customers. These volumes remain on our balance sheet and are not recognized as revenue until passed along to the final customer.

We continue to expect sales volumes to follow production on roughly a 1 quarter lag with some amount of lumpiness I've seen this quarter as we continue to rapidly fill the tolling channel with growing oxide production. Moving to the far right of the slide, you can see that the market price for NPR did experience solid lift both sequentially, up about 10% and year-over-year up roughly 19%, slightly better than our expectations in early May.

Flipping to Slide 7 and our segment financials. On the left, you can see our Materials segment revenues increased nearly 20% year-over-year due to the strong NdPr sales volume growth, combined with the improved pricing environment. The sequential decline was solely due to the reduced sales volumes of concentrate compared to Q1. Segment adjusted EBITDA also improved, as mentioned earlier, due to the improving per unit costs of NPR production as well as the lower inventory reserves as well as last year's higher maintenance costs from the thickener repairs. Sequential results similar to revenues were driven by the decline in concentrate sales.

Moving to the right in our Magnetic segment. The team at Independents ramped production nicely, thanks to completing the commissioning of our second electrolysis cell though now without the usual growing pains. And while we continue to work at improving all aspects of the metalization process, our team has done a terrific job bringing these assets online and working through the inevitable start-up challenges. The growth in production led to strong sequential increases in revenue as well as adjusted EBITDA.

In closing, the last month has been truly a transformation company, reinforcing our role as a national champion with scale, durability and economic firepower to lead this reindustrialization effort in the United States. Following the Department of Defense and Apple agreements, we have a clear pathway to continued shareholder value creation as we transform the business into the vertically integrated magnetic solution provider that we have been building towards since day 1.

With the investment in convertible preferred stock and the recent funding of the heavy rare earth loan by the DoD as well as our recent equity offering Today, we have nearly $2 billion of cash on the balance sheet to execute on our plan. This is before $200 million of prepayments we expect from Apple as we hit certain milestones on our path to expanding independence and building out our leading recycling platform at Mountain Pass. Regarding CapEx, our year-to-date investment has been $47.3 million, which includes the impact of $12.2 million of reimbursement from the Department of Defense from our earlier heavy rare earth-related brand. We continue expect to spend between $150 million and $175 million in 2025, unchanged from the beginning of the year, assuming we are executing on the same project pipeline announced at that time, which included the completion of independence to its initial 1,000 ton capacity, continued progress on heavy rare eart separation and other investments, including chlor alkali at Mountain Pass.

Following the agreements with DoD and Apple, we are in detailed planning on the time lines for our further capital investments, including the expansion of our heavy separation circuits to accommodate samarium separation, the expansion of independence the construction of dedicated recycling capabilities at Mountain Pass and the development and construction of the 10X Facility. As you can appreciate, we have spent significant time and resources planning for these projects but as we have only just recently agreed to the specifics with our 2 new stakeholders, we will provide relevant updates on timing and budgets as we progress in our engagement with them.

But to provide some high-level guidance, I would note that we expect the prepayments from Apple to cover the vast majority of the capital investments required to expand independence and to build out our scaled recycling capabilities. Further, we expect the heavy rare earth loan, DoD's preferred investment in our recent capital raise, combined with our remaining financing commitment to fund the projects we will undertake as part of our partnership with DoD. We believe we are extremely well positioned with a fortress balance sheet and will remain opportunistic as ever in balancing risk and reward to deliver durable shareholder value over the long term.

With that, let me turn it over to Michael to go through our operations. Michael?

Thanks, Ryan. Moving to operations. We are seeing excellent progress across our upstream, midstream and downstream operations. This quarter [indiscernible] our improving execution capability and the momentum building across the business. We had an outstanding quarter in our upstream operation, which benefited from extremely hot time, record high recovery and optimization work that is now bearing fruit.

As previously mentioned, we have been increasingly focused on improving concentrate quality other than simply maximizing volume. And our teams responded by delivering our highest ever concentrate grade this quarter. We believe this is contributing to improved performance in the midstream circuits. While I would caution against annualizing this quarter's concentrate numbers, the results clearly demonstrate our ability to optimize our process and the tremendous long-term potential of the Mountain Pass resource.

Progress in the midstream circuits continue to pace. We reported a 6% sequential increase in NdPr oxide production in line with expectations. But that figure alone does not fully capture the underlying progress. There are meaningful operational improvements occurring across many midstream circuits, particularly in purification, separation and our brine treatment areas. These improvements help to unlock greater throughput and reliability even as we work through some lingering first quarter challenges in leach and purification. The positive trajectory is clear and we are encouraged by the foundational progress being made.

Product finishing also improved during the quarter. Although short stents of unplanned downtime impacted operating costs, and, to a lesser extent, production volumes. In late July, we implemented several upgrades that have immediately improved operability. These upgrades should also meaningfully enhance throughput capability and reduce operating and maintenance burden starting later this quarter.

Looking ahead, executing our midstream production ramp remains our top priority. We are steadily increasing throughput while maintaining consistently strong quality. Most areas are now demonstrating higher [indiscernible] and higher throughputs. Our separation circuits are performing quite well and are outpacing the rest of the process. This gives us confidence in our ability to steadily increase production while focusing on the most impactful opportunity areas to achieve our near-term target of a 6,000 ton per annum and NdPr oxide run rate.

At independence, our teams continue to gain valuable experience in metal reduction furnace operations. We can now say with growing conviction that we understand the conditions required to consistently produce world-class quality NdPr metal. Commissioning activities beyond metalization expanded rapidly in the second quarter to include strip casting, powder production, pressing and centering with site acceptance testing for parts of machining also underway. The team has done an outstanding job staying on schedule to commence commercial production by year-end. While we know that there will be a tremendous challenges in starting commercial production our production plans and customer commitments are grounded in realistic assumptions, enduring team are coming together impressively.

As part of our Department of Defense and Apple agreements, we have committed to completing several projects across the Mountain Pass operations. Jim has addressed most of the key details. but I will add a brief update on heavy rare earth separation. Preconstruction work within legacy buildings has accelerated. All key separation equipment is on site and procurement of other major equipment is nearly complete. We expect to begin major equipment installation by the fourth quarter.

We remain confident that our terbium and dysprosium production schedule aligns with the needs of independents as it ramps up commercial magnet production, and our vertically integrated platform provides unique flexibility regarding the type of and purity of feedstocks that we can accept. And this will give us the opportunity to secure additional feedstocks. I will continue to provide updates on this and other projects in the coming quarters.

In terms of production outlook, we expect to achieve a 10% to 20% sequential increase in NdPr oxide production and stronger product sell-through in the third quarter despite taking some extra time to implement the upgrades to product finishing I mentioned earlier. Relative to last year's very strong third quarter results, concentrate production will likely be down slightly year-over-year as we execute a full planned trial of a potential pre-flotation process. This trial may modestly impact near-term recovery but is designed to drive long-term improvement in midstream performance.

With that, I will turn the call back to Jim.

Thanks, Michael. As I close today's prepared remarks, I want to take a moment to reflect on the MP journey. Many of you know the history, but we introduced MP to the public markets in July 2020, almost exactly 5 years ago. At the time, MP was a rare earth concentrate business with a bold and important vision to restore the full rare earth supply chain to the United States of America. We laid out a road map, first to build refining capacity and eventually, one day to enter the magnetics business.

We were clear eyed about the scale of the challenge. In fact, we told investors back then that magnets were a 2025 plus opportunity, a long-term ambition that would take time, capital and conviction. Well, it is now 2025, and here we are. Through years of relentless execution, this team has transformed a bankrupted and abandoned mine site into a vertically integrated American National Champion with a strategic and economic platform that matters. Not only for national security, but for the most promising business of our time, the rise of physical AI.

There have been ups and downs along the way. And yes, plenty of skeptics critics and naysayers. But if you ignore the noise and stayed with us from the beginning, you have compounded at over 43% annually. It was not a straight line and the path has been quite unconventional to say the least, but here we are. Now as we look ahead to the next 5 years, I see a film set up, a bold vision, a clear strategy and obsessive focus on execution and a platform with the potential to evolve far beyond what most can imagine today.

Back in 2020, if you could have foreseen just how far MP would come. Today, I believe we are once again at the beginning of something extraordinary. We have the platform the partners and the perspective to seize another enormous runway of opportunity. And it does not hurt that we have a front row seat and an important role in what may well become the most significant business transformation of our generation, the era of physical AI. None of this would be possible without the extraordinary people of MP. Our team on the ground, in the plants and across the company. Their dedication, talent and belief in our mission are what turned vision into reality. To all of you, thank you. We are just getting started.

With that, let's open it up for questions. Operator?

[Operator Instructions] Our first question comes from George Gianarikas from Canaccord Genuity.

So I just had a question about magnetics margins, which were pretty impressive this quarter. Can you just help us understand if the broad strokes of what you just reported in that segment could be used to sort of think about the magnetics margins when you build 10,000 tons in the future?

George, it's Ryan. Obviously, with the state of maturity of the magnetics business at this point, we're obviously very pleased and impressed with the result. I think at this time, given we're in the stage of producing magnetic precursor products and delivering those to our foundational customer, it's not necessarily a perfect proxy for how the revenue and cost structure will look once we are in full production of finished magnets.

However, I think that this level of earnings is something that likely can be expected for the next several quarters until we're in production with magnets. And then once that is ramped, certainly, we expect a nice step change up as we begin delivering magnets from a total EBITDA perspective. We won't get into specific details on margin and cost structure, particularly given the chunky nature of our existing customer relationships.

And certainly, when you think about 10X, there's a wide variety of product types and customer contract types that we expect within that facility. I think the great thing, of course, about our contract with the Department of Defense is we do have the guaranteed minimum earnings level. And then certainly, if you extrapolate what you see at independence to the 10X Facility from an overall pricing perspective, I think that paints some pretty significant upside to the potential earnings power of 10X versus that minimum level.

And just as a follow-up, different question. But first, congratulations on all the incredible deals you've been able to put together over the last month. But along with that, got a lot of work to do over the next few years. How comfortable do you feel with building out the ecosystem required, getting the equipment in place, hiring the right people, all the grind work that you have to do to build out the additional facilities in time to kind of hit the contract time lines that you articulated to us?

Thanks, George. We are hiring, so send us your resumes. I mean, obviously, we have a lot of execution to do. And I think we've been an execution culture since day 1. So we certainly understand the scale of the challenge that's ahead of us, and we're confident that we'll get it done. These things are never perfectly in a straight line. But we are already maniacally at work at the various pieces that we have to put together, and we've been planning for this for quite some time.

But Michael, do you want to add a little bit from your perspective?

Yes. Thanks, Jim. On top of that, we have a core team with experience, having built similar assets over the last several years. And of course, now we're growing the team, as Jim referenced. And we think we can scale that ability over the next several months and year to help us execute better. In addition, we've built vendor relationships. We have engineering drawings. We have plans. We have a lot more data than we did several years ago. So our ability to execute these projects now versus where we were 2 years ago was significantly improved.

On top of that, we have a [ DPaaS DX ] rating to help us engage with vendors and service providers to help accelerate progress there. So we're very confident we can meet both the DoD's aggressive schedule as well as the complementary and projects at Mountain Pass and for Apple.

Our next question comes from Benjamin Kallo with Baird.

First, could you talk to us about the separation of facilities, capacity or your thoughts around increasing capacity. From what I understand, there's no ceiling on how much concentrate you process. So could you be a processor for third parties? And just maybe any kind of color around that?

Thanks, Ben. I guess I wish it was the case that there's no ceiling, but I think there is some ceiling. But I think importantly, we have a lot of flexibility because we have a fully vertically integrated site. We have flexibility as to what kinds of feedstocks we can process and what kinds of impurities we can handle, which I think is unique versus most sort of separation facilities that may be standalone that don't have that ability. So that will be very helpful as we look at more heavy rich feedstocks to add as a complement to our concentrate business. So we expect our existing concentrate business to ramp up to the 6,000 tons per annum of NdPr oxide that we've talked about and then hope to build, particularly in regards to heavy, the additional separation for those heavy rare earths.

And my follow-up is just on signing new agreements for 10X. How do you guys think about just the cadence of both you and your customers wanting to enter a deal? But do you want your customers wanted to be more derisked and the facility be closer to completion? Or are they clamoring to the side deal now? And how do you guys approach that?

Ben, am I already getting the "what have you done for me lately" question?

I was going to go much bigger than that, but I thought I'd hold off until next quarter.

I mean, obviously, we're still having a ton of conversations and so that continues. But I'd just remind you that 10X is 100% sold out. And so we have -- what really our entire magnetics business for the next decade is 100% sold out. Obviously, we're going to syndicate commercially the vast majority of 10X. But I think we have the ability to be very thoughtful about how we do that. And I think, hopefully, we have a good track record at this point in being patient and methodical and selecting the right sequencing of customers and making sure that we do so in a way that is frankly attractive for our business but also create win-win partnerships for us and the customer. And I think our expectation is we'll continue to do that as we build out 10X.

Our next question comes from Lawson Winder with Bank of America.

Congratulations on everything you've achieved over the last quarter. Also wanted to ask about the assumptions around the $650 million minimum guidance for materials plus 10X magnets plus independence magnets. What does that include in terms of assumption around oxide sales to third parties? And is there an assumption baked in there that some oxides will be sold to China?

Lawson, it's Ryan. Sure. I'll take that. We are under the DoD agreements no longer selling any of our products into the Chinese market. So it does not assume any oxide sales into the Chinese market. I would say though, if you do the math, depending on the type of magnet that you're talking about, certainly, bringing our total capacity to a finished magnet equivalent of 10,000 tons, that does leave room for external sales.

And so I think the good thing about these agreements is the way the price protection works is that's really a payment stream directly into the material side of the business. That makes us, in many ways, indifferent between selling to a third party or selling internally, where the Magnet business will maintain the market-based approach to pricing based on market levels of oxide pricing. And so the overall assumption there is that we get to our targeted throughput and cost structure for the Materials segment from a separated product perspective, but just at that 6,000 tons, it does not embed upside from recycling or upside from further products including NdPr products that could come from heavy rich feedstocks. And so that's the big portion of the material side of that assumption.

And then on the magnetic side, that $650 million just assumes the minimum contracted EBITDA from the Department of Defense for the 10X Facility, which, as I laid out, I think, has some very significant upside, some of which, of course, we share with our partner in DoD as that facility scales into producing for commercial customers as well. And it assumes relatively conservative assumptions as to our build-out and ramp of independence. And so in the slide deck that we provided in the prior conference call, you can sort of see the relative sizes of all of those pieces, but that's the underlying overall set of assumptions.

That's great. Can I ask about another investment related to the agreement with the Department of Defense. And that is the hydrochloric acid facility at Mountain Pass. Is that in addition to the chlor-alkali facility? And then should we expect that investment to further reduce your cost of that very critical input of hydrochloric acid to your separation process? And then just drawing that to the final conclusion, I mean, could we see an improvement in the low $40 per kilogram market cost assumption that you guys have made for a fully ramped up separation facility?

Sure. Lawson, your stop with me again on that one. I wouldn't say that it necessarily spells a change in our overall cost structure target. I think we actually had a slide in last quarter's earnings deck that had a very strategically shaded area that spoke to potential upside from lower overall production costs from the chlor-alkali facility. The HCL facility that you see in the transaction agreement is the same thing as the chlor alkali facility to be clear. And from our perspective, we think that this investment is not just one in cost savings but redundancy and resiliency. We believe that we will always have some level of external hydrochloric acid and caustic soda production for our business. We are a very large consumer of both of those products.

And so having the flexibility both to pull from the outside market as well as produce internally in a full closed loop, we think is important. We strategically launched our separations facilities by breaking that closed loop and building out the infrastructure and supply chain that's required to support our levels of production and then we believe bringing portions of that HCL facility or chlor-alkali facility online modically in continuing to support our external supply chain will be the best way forward both from a cost and redundancy perspective.

Our next question comes from David Deckelbaum from TD Cowen.

I wanted to just follow up on just the -- some of the record set at Mountain Pass this quarter on the concentrate side. Are those initiatives incremental to Upstream 60K? Or are they part of it? I guess I'm just thinking about as we progress the Upstream 60K, it seems like some of the tweaks are perhaps happening sooner than anticipated, but kind of curious if this is viewed as a recovery tweak on top of that just with having a higher grade.

Thanks for the question. I'd say these are parts of Upstream 60K. I think Upstream 60K included categories of optimization. And I'd say our metallurgy team and operations teams have done an incredible job of implementing and executing changes. And I think we continue to be impressed that our ore body is able to support higher grade concentrate as we focus on that in order to help the midstream business. So I wouldn't say it's incremental, but we are hopeful that we can achieve the same goals with less capital and more optimization.

Appreciate that. And then just as a follow-up, just on NdPr oxide. You all guided obviously, you'll be stockpiling concentrated at this point. The DoD agreement goes into place in the fourth quarter. From an NdPr oxide production perspective, should we anticipate that you'll continue ramping production throughout the year, but stockpiling the product for sales once the DoD agreement is in place. I guess I'm just wondering the -- as we assess the ramp of the Stage 2 facility, was that going to be more evidential into '26? Or should we be able to track those KPIs throughout the year?

David, I'll start and I'll flip some of the production specific portions to Michael. But as it relates to sales, we continue to have a really robust order backlog and sales pipeline for third-party customers for NdPr oxide. And so we're continuing as we ramp production to expect to sell the vast majority of NdPr oxide out into third parties. Of course, as our metal production and magnet production at independence ramps, we will become a larger internal customer of our own oxide. But we do expect to continue to, for the most part, focus on our strategic customers, particularly in the Japanese market, the South Korean market and broader Southeast Asia.

Mike, I'll flip it to you on your thoughts on production.

As you referenced, we planned for 10% to 20% increase over the next quarter, and that's largely consistent with the sort of progressive growth that we've seen over the last year and a half, and we would expect that sort of pace to continue, not in a linear basis, but just generally speaking, step-by-step improvement, getting better every day.

Our next question comes from Laurence Alexander with Jefferies.

Just I want to tease out how you relate the onset about being kind of the branding as a national U.S. national champion and the bandwidth and the [indiscernible] degree of visibility on returns, I mean over the next decade. So can you tease out first, are you allowed to sell into European or other countries? Can you expand the number of countries you sell product into or just the DoD [indiscernible] restrict that?

Secondly, can you achieve or lay out sort of the ramifications for the MOU we saw for the potential project in Saudi Arabia? Do you have the bandwidth to continue exploring that? And then third, I appreciate that there will be announcements just filling in the capacity that the DoD is underwriting. But if you -- but given you have such a strong visibility on the returns on that, what would be your return on capital hurdle to look at any other uses of capital or uses of NdPr?

Thanks, Laurence. Well, first off, there's nothing that restricts us from selling into Europe. Obviously, as part of DoD, we just won't be selling to hostile states. And then as far as you mentioned Saudi modern, I think if you look at the vertically integrated player that we've built. I mean we are the only company in the world, and that includes China that has all aspects of this business, which I believe is -- and as we've said from the beginning is sort of the right structure to really scale and be low cost, accelerate at an astonishing pace, so to speak, in doing all of these pieces.

And obviously, that relationship speaks to us as being the right partner around the world to add to this supply chain, particularly as America's National Champion. I would tell you that as far as bandwidth and capital certainly from a capital standpoint. And frankly, from a focus standpoint, we are maniacally focused on investing and executing in the United States of America. We need to deliver for GM, Apple and DoD. And so our focus is on delivering on our domestic investments. That said, I do think we're going to continue to grow the business. And so the modern opportunity is very exciting. We're focused on that as well.

But I think you'll -- you should expect to see that and others that could come like that as more capital-light opportunities I think you're going to see our investment is in the U.S. And then I think you're going to see that and others over time. And obviously, from a return, you mentioned returns from a return on capital standpoint, for MP, I think it's actually an accelerant for our shareholders in the sense that because we have this capability and position, which brings a number of attributes that we're going to be able to continue to grow the business again, in a more capital-light way, but potentially having some of the same economics, which mathematically means higher returns on capital.