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 continued to scale and execute with discipline. In our materials segment, the team produced a record 917 metric tons of NdPr oxide, up 63% year-over-year and 28% sequentially.

We also began initial shipments to our newest US 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 one 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 continued 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 material 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 Independence, 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 will 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 at Independence drove $21.1 million of magnetic segment revenue and $9.6 million of segment adjusted EBITDA in the quarter.

Overall, we're 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 NdPr oxide sales volumes, higher market prices, and PPA income. These factors also drove adjusted diluted EPS to 3 cents per share, compared to a loss of 12 cents 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 31st, 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 continued to price on approximately a one-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 NdPr 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 four 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 will 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 rolloff 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 acquire the 10x site, broke ground, and are accelerating construction. We continue to expect full-year CapEx of $500 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 semi-annual 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 Q2, followed by significant sequential growth in Q3 as the benefits are fully realized over a full three-month period. Following the commissioning of the remaining commercial-scale processes at Independence 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 earth content. This work is aligned with customer programs, including Apple and the Department of War.

As our magnet recipe roadmap 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 earth 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 rare 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 two intermediate feedstreams: mixed samarium-europium-gadolinium, and holmium to lutetium 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 rare earths.

In addition to breaking ground at 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 on 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, continued 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 five years. During the quarter, we saw the Japanese government and industry secure nearly all of Lynas' NdPr output under long-term arrangements.

As a result, there is very limited uncommitted NdPr supply available to support what Adamas 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 two tons of magnet output requires approximately one ton of NdPr oxide feedstock.

Put differently, bringing online a 10,000-ton magnet facility ultimately requires upstream mining and refining capacity on a scale comparable to Mountain Pass, an industrial capability that would likely require over five 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.

Hi, everyone. Can you hear me?

Yes. Hey, George.

Hey, thank you for taking my questions. Jim, you just sort of addressed this, and I'm sure you noticed, but there's now a lot of momentum outside of MP to build a Western magnetic set of champions.

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 one and three? Specifically, if you were a greenfield competitor today, what are the primary set of barriers to catching up?

Sure. Thanks, George.

As you said, there's a lot out there. I think capital formation is generally helpful.

We want to see more in this supply chain. 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.

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, is ultimately going to come into or very likely come into our refinery.

We don't necessarily need to be involved in those projects to grow our business, but we can certainly benefit from them. 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. The reality 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. 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 theoretical opportunity is not necessarily what the resulting opportunity is.

I think it's a long-winded way of saying that we take a careful view about where we're going to commit capital because you may have heard me say this before, George, but there's that famous Bezos expression, "Your margin is my opportunity." 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. 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.

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, from a financial standpoint, we're completely protected. Then lastly, and sorry for the long-winded answer, but it's such an excellent question just given everything we see out there.

I do want to reiterate, George, the comments I made in the prepared remarks about NdPr oxide being the binding constraint. I really would, not to pitch a competitor, but I would recommend people look at that Adamas Intelligence research.

If you look at the next, call it 18 months to two years, we see, call it roughly 60,000 tons of magnet capacity in sort of the non-China world growing to something like north of 100,000 tons. If you look at the only real scaled material out there is MP and Lynas.

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's going to come from.

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 Adamas. They're great.

Just one quick follow-up. How are you adjusting, if at all, your metallization strategy as you ramp production at magnetics?

Thank you.

Oh, sure. Michael, do you want to cover metallization?

Sure. Yeah.

Thanks, George. Our view is to have a hybrid approach where we continue to operate and expand our capability at Independence.

We will have capability at 10x. We're talking to domestic and international partners on further metallization.

We currently utilize certain toll processors, and we expect to continue to use that while we look at other low-cost metallization options around the world.

Thanks. Thanks.

Hey, guys. How's it going?

Thanks for taking my questions. I guess first question I had was just around the material segment EBITDA margins.

They were pretty healthy here, maybe ahead of expectations. One, would you say that's fair?

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?

Yeah. Hey, 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.

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 three-month period. 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 and stably operating at run-rate volumes.

We still continue to march towards that. We have work to do there, but I think the path is quite clear.

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.

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 the 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?

Thank you.

Sure, Brian. The engagement is very high, and 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.

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. It's 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.

Obviously, Independence is going to be essentially for GM and Apple. 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. I would say there'll be some customers that are extraordinarily sensitive where you certainly won't hear a name or an announcement.

Then there'll be some that want to announce. What I would say is that that discussion continues.

I think it's going to be really attractive for us, and stay tuned obviously for things we announce in time.

All right. Makes sense.

I'll pass it on. Thanks, guys.

Hey, good afternoon, guys. Thank you for taking my question.

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

Thank you.

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 NdPr in the second quarter to be down slightly quarter-over-quarter.

We do expect for the third quarter to show a materially improvements again. Then I expect continued progress towards reaching our 500-ton-per-month run rate by the end of this year.

No real change to what we previously discussed. 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.

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. What I would say is, I think that the importance of this supply chain was sort of already widely known, sort of is infinity times two still infinity, kind of thing.

I don't think we necessarily needed those events to remind people of the status quo and sort of the rare earth magnetics for that, as a national security industry needed to change. There's no question that it is just a further recognition, and maybe even pulling that timetable and the scale of that demand forward.

I think that it's very likely that the future of warfare will be around millions, if eventually not billions of robots and drones working in cohesion, and obviously, that is just a huge demand accelerant for rare earth magnetics.

Thank you.

Lawson, please go ahead with your question. Thank you very much, operator.

Good evening, gentlemen. Nice quarter, great update.

With Independence, the ramp-up appears to be going extremely well. At this point, I'd expect you to be somewhat close to knowing a sensible timeline to reaching nameplate capacity of 1,000 tons on the first phase.

Is that something you could start to guide us to now? Then, yeah, I have a follow-up on that one.

Yeah.

Hey, 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've 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.

There are a lot of puts and takes as to how that will look over the next couple of quarters. 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. When you start to layer those volumes on, certainly, the momentum starts to build.

From that perspective, I think we're pleased with our progress.

Follow-up on that would just be thinking about 10x and really the second part of Independence with Apple. 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 Independence?

Yeah.

Look, I think certainly we have learned a lot of lessons from building this business from scratch, right? Our first magnetics employee was in 2021.

It's pretty amazing to see the progress that we've made. There are 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 question, the moat that we've built from this operational know-how in building this business out is tremendously valuable. Each incremental customer, hopefully, is probably easier than the one before it.

We've given rough guidance on where we think 10x will be from a timeline perspective. We are moving with extreme urgency to bring that facility online, in line with our partners at the Department of War.

It's really just all hands on deck from an execution perspective, getting those ramped up as quickly as we can.

Thank you very much.

Hi. Good afternoon, thanks for taking the question, and nice job on the quarterly execution.

Want to ask a few questions, sort of follow-ups but maybe with some more precision on some previously asked questions. Taking the cost side, 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, as well as benefits from the chlor-alkali.

You discussed the chlor-alkali earlier, 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.

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 tons 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 are a lot of moving pieces on investing in this debottlenecking as we speak. Then certainly, I think one 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 rare separation facility, as well as getting ahead of ramping for team and tools for that chlor-alkali plant ahead of it being online.

When you fast-forward over the next several quarters, you combine getting to our targeted throughput and you bring these operations online is when you'll really start to see the leverage flow through.

Thanks for that context. Then maybe following up on Lawson's question.

Like to clarify the magnet revenue trajectory for the balance of the year and into next year, taking into consideration the declining pure precursor sales ahead of the finished magnet ramp for your customer. I guess in essence, do 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 the finished magnets ramp?

Just trying to get a sense for how we should model that business from a revenue side. 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. The reality is we are producing behind the scenes, but we need to get into a saleable PPAP status to start recognizing revenue there.

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. Then we are working as quickly as we can to pick up the delta there on the magnet side.

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.

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. We've proven out at this point that we can take what we've done on smaller scale and scale it up.

It's just a matter of time. We're looking forward obviously to layering in increasing volumes once we're through the PPAP process, bringing in our next set of customers.

Over the next several quarters, that financial model will certainly start to play out.

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

Hey, good evening, guys. Thank you for the time.

I appreciate you taking my questions. I actually wanted to start by going back to one of the parts of Lawson's question as well just on 10x.

Ryan, appreciate you talking about the learnings and wondering if you guys could just expand maybe on how the learnings from Independence might make 10x more efficient on a dollars per capacity basis or timeline 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. Certainly, we learned a huge amount over the last couple of years in designing, building, and then ramping new facilities.

There's a lot of engineering that can be, to some extent, copy and paste. We don't need to re-establish certain vendor relationships.

We've leveraged existing knowledge. The design process will be a lot faster and less prone to mistake, change order, rework, etc.

Certainly the pace of engineering design construction will be a lot faster than expected. We also think the ramp of Independence over, starting last year and through this year and beyond, will give us tremendous insight into our process of producing great magnets, drive costs down so that that will be applied from day one into operation of 10x.

The fact that our teams will be able to travel between the two different sites will enable us to leverage that knowledge without having to rebuild it all. We certainly expect 10x to be significantly smoother in terms of startup than we will look back on for Independence, but of course the scale that we're doing, additional product complexity, there'll be no doubt its share of challenges as well.

Just,

hey, Davis, this is Jim. Just adding on to what Michael said, there's one point he hit that I think's 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 five 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 one is hire a great team, right?

We hired a great leader, and then we started building out a great team there. Number two 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 a non-China supply chain for rare earth magnetics, but then be wholly reliant on Chinese equipment, right? We started, and this probably was, certainly expensive and painful to us over the years, but we really built that facility from day one with the thought in mind that we needed to truly restore this supply chain all the way through the equipment.

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 there, a 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, to speak.

We were very focused on that from the beginning, and I think we've now taken the MP team to the cutting edge. 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 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 leaping ahead technologically.

It's not just about sort of building a giant box and putting equipment in it.

Super helpful. Thank you both.

Maybe just one more, maybe a boring housekeeping question, probably for you, Ryan. I just wonder if you could talk at all about contracted adjusters or any other inflation protection mechanisms you guys might have to, I guess, mitigate the impact of increased shipping and logistics costs, or maybe this will manifest in a longer-than-typical sales lag, or any other considerations there.

Thank you, guys, very much.

Sure. Yeah.

As it relates to the materials segment at least, the shipping and logistics component, at least from sort of a cost-of-fulfillment perspective, is extremely minimal relative to the cost of the product. 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 in materials, certainly, we've heard other producers, particularly those that are reliant 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.

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. Overall there, we feel pretty good.

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.

We feel quite good about how we've contracted around that.

Hi, can you guys hear me okay?

Yes. Hey, Sam.

Hey, 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 tons announced scaling towards 100,000 plus limited feedstock. With Independence 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-dated offtake agreements and also preserving optionality to capture pricing and margin as the supply-demand balance Sure.

Yeah. By the way, Sam, it's 60,000 over sort of the next, call it 18 months, 6-0, which, by the way,

Okay.

imply approximately 30,000 tons of NdPr demand, it's sort of blindingly obvious that NdPr is the binding constraint just over the next year or two. Then, that number 60 is supposed to go to over 100 over the next five years.

Obviously, all of those won't get built. I do scratch my head if you are building a magnet business today without a certain dedicated feedstock at scale, and that's demonstrable.

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 sort of the foundation of the company when we started building this business.

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.

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 magnet 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's some puts and takes on contract structure, but for the most part, the magnet business is getting material at market and then is sort of expecting a very attractive return from there.

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 heavies prices, not the others, just the magnetics ones, Dy, Tb, decline quite substantially from here because they sort of are secondary now to this binding constraint of NdPr. We do expect to benefit from the price of NdPr as well as then the fact that we have this business together, customers are going to want to come to us.

If you were out there and you wanted to buy a magnet, why would you risk a supply chain, even if you're willing to pay more and all 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.

I think we can sit in front of customers, and we have. 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.

To kind of follow up, you've framed the physical AI, drones, robotics, autonomous defense systems, as another step-change demand accelerant for the industry and for MP 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?

How does that reshape how you're thinking about 10x capital allocation and the pace of expansion beyond that?

Yeah. 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 Dy, Tb 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 the vast majority of that are going to be neo heavy-free magnets.

We're pushing the boundaries today. Our ability to produce magnets at the specs that are needed, with very little or no heavies, the advances that we're making are pretty extraordinary.

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 a economic opportunity.

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 an 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 had this technology breakthrough, and we need more of X, and we don't have it. It's so critical to downstream sales and value that the prices go sort of parabolic."

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, rare earth magnetics are the key item, right, along with obviously chips and the ability to figure out how to make and manufacture the product. I do think that there'll be sort of that psychological revisiting of the importance of our product.

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.

Thank you very much. That was extremely helpful.

Thank you very much. Can you hear me?

Yes. Hey, Carlos.

Great. Hey, thanks Jim.

Just one question on given the discrepancy between supply and demand that you alluded to, 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 we see ahead of us?

Yeah. It's a great question.

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 even 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've 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 multi-year period to bring it on.

I think that Lynas took over a decade. We did it much, much faster.

Any of these things, they take time. 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 earths 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?

That's sort of the history of the industry and what you're seeing it today, right, out there. 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'll take you years longer than you think. The cost of capital inevitably does change over time with cycles.

What you find is that these things are just harder to get online and more difficult. Again, I'll say it one 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 fixed.

We're already seeing some of that out there that I think we'll get opportunity from that. I guess to directly answer your question, it's materially higher than sort of people think when you add in all of those things, and it also really depends on the geology, right?

Capital's 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?

When you add up all of those things, you can come to a number, but it's certainly materially higher than today's prices.

That makes sense. It's very clear what you alluded to.

Thank you for that. Maybe, look, it was a very solid quarter, right?

Maybe the only thing that I would say is cash from operations, a surprise a little bit to the downside. Maybe we should have just been smarter given the facing which the company is right now.

How do you see that in the coming quarters so that maybe we fine-tune our model close to reality?

Yeah. Hey, 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.

It's really just a timing issue of working capital.

All right. Fantastic.

Thank you very much, Jim and Ryan. Strong quarter.

Congrats.

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.