Hello, everyone. Thank you for being here for the MP Materials Fourth Quarter 2023 Earnings Call. My name is Sierra, and I will be your moderator. All lines will be muted during the management team's prepared remarks, with a chance for questions and answers at the end. I will now hand over the call to your host, Martin Sheehan.

Thank you, operator, and good afternoon, everyone. Welcome to the MP Materials fourth quarter 2023 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. Finally, the earnings release and slide presentation are available on our website. With that, I'll turn the call over to Jim. Jim?

Thanks, Martin. Good afternoon, everyone. Let me begin with a brief overview of today's call. First, I will discuss the highlights from the fourth quarter and full year 2023, while adding some important context from the first two months of 2024. Ryan will then run through our financials and KPIs, followed by Michael, who will review our operational progress. I will then close with my macro commentary before turning the call over to Q&A. Moving on to Slide 4. Despite facing formidable market headwinds, MP executed diligently throughout 2023 across all three stages of our business. In our upstream concentrate business, we exceeded 40,000 metric tons of REO production for the third consecutive year. The MP team now has over six full years of production under our belt. We continue to learn, increase productivity, and identify new opportunities for value creation. To that end, in November, we announced Upstream 60K, our plan to increase REO production approximately 50% over the next four years with modest incremental spend. This announcement was the culmination of extensive research, development, and piloting activity focused on sustainably unlocking even more value from the Mountain Pass resource. We have already begun some of the physical aspects of this expansion. As many of you have heard me say repeatedly, we believe expansion at Mountain Pass is the quickest, lowest risk, and highest return on capital source of rare earth growth in the western world. Assuming we can achieve our goals, it means that we can generate multiples on our invested capital with this expansion. That is remarkable, especially in this pricing environment. So, for example, where you may see news stories of large rare earth deposits, those are often uneconomic at almost any price. New projects underway now and/or those that are seeking funding will likely end up destroying capital at these or even materially higher prices. And it's hard to imagine any greenfield project right now, even in China, can generate a positive return at today's prices. At MP, though, we are in a unique position as a low-cost producer with a world-class resource and significant assets already in place to economically grow our upstream substantially through the down cycle. Moving on to our midstream business. In 2023, we established and ramped production of separated rare earth products, including NdPr oxide. This represents a huge milestone for MP and our mission. Ryan and Michael will walk you through how we are tactically approaching the coming months financially and operationally in a moment. To expand our customer opportunity set for separated products, we recently began producing NdPr metal in Vietnam. We have also begun trial production of NdPr metal in a North American pilot facility, and we look forward to making metal in Fort Worth this year. During the fourth quarter, we delivered our first batch of NdPr oxide to a customer in South Korea, and we expect more sales across Southeast Asia. Importantly, we now have firm commitments for a significant portion of our NdPr from Japanese customers via our Sumitomo distribution relationship, so look for those sales to be material this year and even higher next year. Lastly, in our downstream magnetics business, we continue to add substantial depth to our team and capability set. Engineering and operations are now situated under one roof in our magnetics headquarters in Fort Worth, and as I said a moment ago, are working diligently towards start of commercial metal production on site. This means we expect Stage III to start producing revenue and modest positive EBITDA later this year, which is very exciting. Ryan will cover more on this later. In summary, while the pricing environment has been very frustrating, our team has executed extraordinarily well. We've made a lot of progress on all fronts. I will have more to say on the macro environment and MP in my closing remarks, but for now, let me turn the call over to Ryan to discuss our KPIs and financial results. Ryan?

Thanks, Jim. Let's turn to Slide 6 and review our full-year operational KPIs. Starting on the far left. We produced more than 41,500 tons of REO in concentrate in 2023, exceeding 40,000 tons for the third consecutive year, despite a significant focus on Stage II commissioning and ramp throughout the year. Sales volumes were down around 6,000 tons year-over-year, primarily due to the initial charging of our Stage II circuits with REO, as well as the consumption of REO in concentrate in the downstream circuits to produce NdPr and other separated products in the third and fourth quarters. Lower production volumes in Q4 as well as the timing of sales in 2022 also modestly impacted the comparison. Moving to the middle of the slide, our realized price declined significantly alongside a pullback in the price of NdPr in the market. Moving to the right, production costs increased $330 per ton, driven primarily by Stage II ramp activities, including longer plant turnarounds and the impact of descaling standalone concentrate production. Given a fair amount of our Stage I concentrate production costs are fixed, spreading those costs, as well as plant turnaround and general sitewide costs over smaller sales volumes results in this lower fixed cost absorption. Lastly, on the far right, we produced 200 metric tons of NdPr oxide in 2023, closing our inaugural year of Stage II production with a nice sequential lift in the fourth quarter as we guided to on our last call. Moving to Slide 7 and our full-year financials. Revenue in 2023 was impacted primarily by the decline in realized prices as well as the change in volumes previously discussed, as we ramped Stage II. The flow-through of pricing was the primary driver of the decline in adjusted EBITDA, in addition to the fixed cost absorption just discussed. Lastly, we continued to make certain modest investments in our corporate infrastructure, some of which will continue through the early part of 2024 before declining in the back half of the year, most notably an investment in a new SAP implementation that goes live in Q2. Despite the lower average price during the year, EBITDA margins were still quite robust at 40%. The change in adjusted diluted EPS was primarily impacted by the same drivers just discussed, in addition to higher depreciation brought on by additional assets, namely the rest of the Stage II circuits being placed into service during the year, partially offset by higher interest income on our cash balance and lower income tax expense. Turning to Slide 8 and our fourth quarter results. Concentrate production of 9,257 tons was down year-over-year, primarily due to higher downtime, both planned and unplanned in the quarter. Michael will expand on this in a moment. Concentrate sales volumes fell around 2,000 tons sequentially as we consumed more concentrate in Stage II circuits to produce NdPr and other refined products. Production costs increased $373 per metric ton sequentially from the combination of our longer more detailed plant turnaround, as well as the more pronounced descaling on our Stage I production costs in the quarter. For context on the plant turnaround expenses, we think about Stage I related facilities at Mountain Pass as essentially three interconnected operations with mining and crushing, beneficiation and tailings management, the primary targets along with sitewide infrastructure of our power plant, water treatment plant, and others. With Stage II now in service, these turnarounds now encompass nine additional plants, including our drying and roasting circuits, leech, impurity removal, brine purification, separation circuits, and multiple product finishing circuits, as well as a corresponding increase in sitewide infrastructure and support functions. I cannot emphasize enough how well the maintenance and operations teams performed this quarter with all of these new demands. One further note on the production costs is that the Stage II portion is down sequentially and year-over-year as more of these costs are now building into inventory, following the NdPr product through the midstream refining and metallization processes versus being expensed through the P&L. Note also that some of our costs of goods sold in the quarter was related to our modest NdPr sales as well as other rare earth product sales and were not included in the production cost calculation. When you strip out all of the one-timers and more difficult compares, we see baseline concentrate production costs up low-to-mid single digits year-over-year. Lastly, in the quarter, we determined that the carrying cost of a portion of our early separated product inventory exceeded its net realizable value based on the recent rapid decline in spot pricing. As we've spoken about in the past, our early cost of production of separated product is higher than our expected costs once we reach our full production levels given we are staffed for higher production rates, and early production often requires additional labor and certain rework that will not recur once operations normalize. This resulted in us taking a write-down of $2.3 million in the quarter, which was included in costs of sales in the P&L and impacted our adjusted EBITDA. More than half of this charge was related to lanthanum products, where our per unit cost of production is particularly sensitive to throughput, but where we aren't yet pushing to maximize volumes as we put the finishing touches on the logistics and supply chain to serve our North American lanthanum customers. These charges are not unexpected as we ramp the plant and may continue into Q1. That said, peeling back the onion and looking at the circuit-by-circuit cost profile gives us further confidence in achieving our expected per unit cost profile as we ramp towards run rate levels. Moving to Slide 9, you can see our revenue and adjusted EBITDA results again impacted mainly by pricing in our concentrate sales volumes as previously discussed. With regards to concentrate pricing specifically, assuming current spot prices hold for the remainder of the current quarter, we would expect a mid-teen sequential decline in first quarter realized concentrate pricing. As for NdPr oxide pricing and oxide equivalent prices for metal sales, we expect prices to reflect a more notable lag with Q1 prices based off of the Q4 average market price. We expect our realizations to be roughly in the middle of the calculated spot market price and the spot price net of Chinese VAT. Moving on to the balance sheet and our CapEx spend in 2023. We ended the year with just under $1 billion of gross cash and over $300 million of net cash each. As for CapEx, we spent $262 million on gross CapEx, or $259 million net of $2.8 million received from the Department of Defense. Net growth CapEx totaled $244 million with roughly $15 million of maintenance CapEx during the year. Regarding cash flow, 2023 was a year of significant investment in working capital, with some amount of permanent increases in work and process inventory from our commissioning and ramp-up of Stage II, as well as spare parts and raw materials as we endeavor to maintain the same world-class uptime levels in Stage II as we've seen in Stage I. Further working capital investment was also required in semi-finished goods to fill certain sales and toll processing channels with separated product inventory to maintain sufficient on-the-ground inventory for continuous metal production. These investments will set us up to meet our growing customer needs, particularly in Japan, and maintain operational flexibility. While some of that investment is therefore semi-permanent, some will indeed convert to revenue and cash flow starting in Q1 as we ramp our sales of NdPr metal to Japan, which I'll talk about in a moment. Further, we invested approximately $10 million in Q4 in VREX holdco, the ultimate owner of our primary toll processing partner in Vietnam. This investment funded the expansion of the VREX metallization facility and gives us a 49% stake in the business. Through this investment, we have secured the ability to ultimately reduce as much as two-thirds of Mountain Pass's target NdPr oxide output into metal, significantly expanding the number of markets and customers we can serve, particularly outside of China. We will recognize our proportional share of VREX financial results as an equity method investment in our financial statements, which will modestly impact our net income and EPS compares beginning in Q1. While we generally did not provide forward-looking guidance, I do want to walk through how we think about 2024 operationally and financially. Firstly, as it relates to separated product sales, depending on the timing of shipping, we expect to book a little more than 100 tons of NdPr sales in the first quarter. Michael will cover our production ramp in more detail in a moment, but given the current pricing environment, I wanted to highlight that we are now tactically responding to this market environment by managing our separations ramp for the remainder of the year. Our goal this year is to maximize our near-term cash flow potential while we position MP for maximum long-term upside. To be clear, we remain extremely confident in our ability to achieve our targeted throughput levels and production costs, but how we get there really matters in a low-price environment. Let me provide an illustrative example. We capture the significant majority of our theoretical gross profit via our concentrate business, but as we move downstream to refining, we capture material incremental profitability. The higher the NdPr price, the greater the incremental profit potential. Because our concentrate product is saleable though, we always want to think about that as an opportunity cost versus a state of the world where our refined product cost structure is not fully optimized. Put simply, every single dollar of incremental variable cost that we can avoid as we optimize our process conditions is weighed against the opportunity cost of selling our upstream product. Ordinarily, we would not think so much about this at say $90 or $150 NdPr; shaving say $2 per kilogram off of production costs is less important relative to maximizing the refining ramp as quickly as possible. But again, illustratively, and not as any kind of guidance, at a $35 per kilogram normalized production cost of refined oxide in a $50 NdPr world, $2 of unnecessary inefficiencies might eat up most or exceed a lot of the incremental benefit net of the opportunity cost when you factor in all of the flow-through impacts. So think of this as mainly just a 2024 model consideration, but MP is uniquely positioned with added downside protection by ramping more methodically in a low-price environment. We will be thoughtful about utilizing that advantage, and Michael will expand on this in more detail in a moment. Turning to our magnetics business, we are thrilled with our early progress and expect early revenue and modest positive EBITDA contributions from Fort Worth metal sales starting later this year. Importantly, as we focus on capital-efficient growth, we expect the cash flow impact of early production of magnetic precursor products in Fort Worth to be much more meaningful than their P&L impact given our current expectation of hitting certain production milestones that will result in material product prepayments, which we expect to be reflected in our financial statements as deferred revenue. While customer discussions are still ongoing and we must continue to execute strongly, we expect that operational success in delivering early American-made NdPr metal to our customers this year should result in our sources and uses of cash in the magnetics business being roughly neutral in 2024. Regarding CapEx, we have consistently guided to a roughly $700 million net growth capital plan for the last couple of years as our total cost to achieve our goals of full rare separations in Mountain Pass and magnet and precursor product production in Fort Worth. Importantly, we remain within the margin of error on that assessment despite enduring inflation since our initial forecast. While we had initially expected slightly higher CapEx than reported in 2023, some of that spend will slip to 2024. So for the full year of '24, we expect to spend between approximately $200 million to $250 million on total CapEx, including maintenance CapEx. Within this capital plan, we expect to continue to make strong progress on our previously disclosed initiatives, as well as further some of the early stages of Upstream 60K and other potential high-return investments in Mountain Pass that will further strengthen and improve our production cost profile. Even with this investment, we expect to maintain a very strong capital position through this pricing down cycle. Taking current spot prices and with all of the caveats that go into forecasting, both regarding pricing expectations as well as regarding our timeline to execution, we expect to end 2024 with at least $200 million to $250 million of net cash on the balance sheet, or greater than $900 million of gross cash. With our strongly cash-generative concentrate business, a thoughtful ramp of Stage II and normalization of the relevant working capital investment, as well as achievement of milestones in Stage III leading to certain product prepayments and the receipt of initial 45X production tax credits, we see strongly positive operating cash flow funding a significant portion of our capital plan. With that expectation set and a lot of execution ahead of us, I will turn it over to Michael to discuss our Q4 operational results.

Thanks, Ryan. The fourth quarter was an exciting but challenging quarter for the Mountain Pass operation. In our upstream business, concentrate production per operating hour was up year-over-year. However, several factors combined for lower operating hours and therefore concentrate production. As Ryan just discussed, in October, we had our first sitewide scheduled outage that included all of the Stage II operations. The outage was well executed and completed on schedule. Upon restart in early November, we returned to solid performance with less rework required than is often the case. However, several events in December collectively cost us approximately six days of production in the mill. Approximately four of these were the result of unexpected power plant outages. On two consecutive weekends, two ancillary instruments in our power plant failed approximately four months prior to their planned replacement. Instrument life was somewhat skewed from the several years of powered-up but nonoperating status of the plants. And while the cause was promptly identified and we had parts available, service was not immediately available locally. It was an important lesson learned and we are confident that our current preventative maintenance scheduling procedures will prevent an issue like this from ever reoccurring. Also in December, we pulled forward certain grinding circuit maintenance that we had expected to not need until our next outage. This cost us another day and a half of production, but it has released additional grinding circuit capacity and improved grind stability into 2024. In all, our upstream operations had another solid year with over 92% uptime. In addition, 2023 resulted in our highest level of REO production per hour of uptime, demonstrating our continued efforts to improve efficiency and productivity. We expect renewed growth in 2024. As previously mentioned, the Stage II midstream circuits had their inaugural scheduled outage, providing us with the opportunity to conduct a thorough inspection of the new equipment after three to nine months of service. On a positive note, there were few serious mechanical discoveries or surprises. However, we identified more rubber wear than expected in certain rubber-lined vessels and agitators. After a thorough review, we attribute the issue to subpar installation workmanship rather than to inappropriate materials of construction for the service. Unfortunately, addressing these issues required a comprehensive process of de-inventorying, repairing, curing, and re-inventorying circuits, which led to a slower recovery from the outage than planned. Part of the Stage II optimization project included the installation of a new cerium extraction section in our existing separation circuit that separates NdPr from lanthanum and cerium. In the fourth quarter, we identified an excursion in the new section that impacted the NdPr production quality. We took appropriate action to restore stability, though this resulted in several weeks of lost output. Recognizing this new risk, we have adjusted our monitoring and models and are confident we have put this issue behind us for good. During this incident, we took the opportunity to implement certain changes that significantly increased concentration in the circuit and is expected to result in higher throughput capability and stability going forward. Despite all these challenges, we produced 150 tons of NdPr oxide in the quarter, three times that of the previous period. In summary, after several quarters with all Stage II circuits in operation, we have reached a significant turning point. We can feel that most circuits, particularly those that were commissioned earlier in 2023, as well as our operations teams are starting to come together. The core chemistry and technology continue to perform. This progress bolsters my confidence that production volumes and quality will continue to improve. Importantly, in the last two quarters, we have qualified our NdPr oxide and NdPr metal with many of our major customers and target customers. So going forward, we will more quickly convert production into revenue. However, in the current pricing environment, we are even more focused on extracting operational efficiencies and reducing the variable cost of production as we increase NdPr production volumes. Where yields have room for improvement, we are focusing on optimization before pushing volume for volume's sake. Our existing low-cost concentrate operation affords us the flexibility to take this prudent approach that maximizes profits and cash generation while ensuring we drive towards our integrated model and market-leading cost structure for separated products. For the latter, we continue to make important progress. To this end, I'd like to reiterate that all circuits are running at commercial volumes, sufficient to evaluate capability and chemistry. But we continue to run at relatively lower uptime in certain circuits. To some extent, this creates higher costs in the near term when viewed solely from the lens of Stage II operations. In the short term, we are incurring incremental variable costs from certain inefficiencies, bottlenecks, and admittedly, areas where we must improve our execution. We're working furiously to address these and week after week we see progress, though sometimes progress in one area reveals additional opportunities for improvement elsewhere. I'd like to provide a few examples of the types of improvements we are making at this stage so you can understand our philosophy. In our leach circuit, we have been working towards achieving and consistently maintaining our target 85% cerium rejection with very high NdPr recovery. This will reduce reagent consumption per ton of NdPr produced and other variable costs. Recently, we've made several key breakthroughs with NdPr yield increasing more than 5% while at the same time driving a 5% plus absolute improvement in cerium rejection. There is still opportunity to improve further, but we believe the gains to date to be sustainable and will be more evident in our Q2 production and financial results. Next, the first step of our separations process involves the bulk separation of light rare earths from heavy rare earths, or SEG+. Our primary focus here is on the efficiency and effectiveness of this separation, limiting the amount of light rare earths in our SEG+ and vice versa. We had initially assumed greater than 5% of the SEG+ fraction would be Nd and Pr. This is now down to less than 0.5% over 90% of the time. At the same time, we remain focused on 100% on spec for cerium in the light rare earth fraction. These improvements benefit NdPr production volume per ton of concentrate produced. And with greater stability, we have achieved a 25% reduction in reagent usage per ton of feed in this particular circuit, down to our target levels, with additional opportunity to improve from here. Lastly, lanthanum production, which represents the largest volume of our production but only a single-digit percentage of target revenue. We've recently seen a one-third increase in per-shift production capability. However, this is an area where we have significant room for operational and mechanical debottlenecking to reduce our cost of production. We will look to implement several low-cost upgrades in Q2 that will help reduce the burden on our operators and maintenance teams. We expect to achieve a return on investment for these upgrades in under a year. As for Q1, we expect that concentrate production will return to normal run rates, and the power plant will operate at greater than 99.9% reliability that we've experienced for the first two years of operation. Given our commitment to ramping as efficiently as possible in the current environment, we have spent much of January and February extracting operational efficiencies and reducing variable costs through focused attention on the above projects. Therefore in Q1 we do not expect significant growth in NdPr production relative to Q4. The difference will be made up for by higher concentrate production, but from Q2 on, we expect the volume of un-spec oxide we produce will grow materially, which will also result in more obvious improvements in our cost of production. And with that, I'll turn it back over to Jim.

Thanks, Michael. As you just heard from Michael, the team at Mountain Pass is doing an excellent job. We are executing on a lot of levels, whether it be on production efficiencies, the refining ramp, or the upstream expansion. The same can be said for the magnetics team. A lot of progress has been made, and they are working strenuously toward first revenue while being mindful of capital spent. Unfortunately, the market has not been kind, to say the least. The price of NdPr has collapsed nearly 70% from its peak in 2022. The decline has been particularly steep over the past year, beginning essentially just as we were about to commission Stage II. I know we have discussed on recent calls the demand impacts from the macro factors in basic industries in China, but I think it is obvious to state that something bigger and more dramatic has happened in recent months. The pendulum has officially swung. Wall Street has decided it is Armageddon for electric vehicles right now. We have all seen the press reports around the disappointing EV sales versus expectations and the rising inventories. This was followed by announcements from a number of major OEMs around increased capital discipline and slowing down electrification timelines. One bright spot has been the dramatic acceleration in hybrid sales, which is bullish for NdPr demand relative to existing ICE penetration levels. In any case, for a variety of reasons, the timeline to electrification has been extended, and therefore the near-term prospects for critical materials are now worse versus recent prior expectations. The cost of capital is now higher. We are seeing some stress, and my guess is we will see some distress out there. Some materials projects have been canceled, and I assume more will be. That said, it is not economically rational to paint that broad brush equally across the material space. In rare earths, China controls in excess of 80% of the market via two super majors, and then the remaining almost 20% is MP and Lynas. Whatever Western EV reset is happening now, the Chinese OEMs are not stopping their downstream expansion. The strategic value of what we have remains. That said, the pricing environment is not something we can control, neither is the pace of EV penetration, nor the geopolitical landscape. Those will be what they will be. What we can control is our operational execution and our financial and corporate management. Not so long ago, when our share price and NdPr prices were much higher, a number of aggressive investors pushed us to extend our balance sheet and buy back a significant amount of stock. We made clear then that although we firmly believe in our execution capabilities and the long-term value of our assets, we are in a cyclical sector where we have to think about a variety of long-term scenarios. There is a lot of inherent leverage in commodities prices, so we have to proceed accordingly. Our decision to maintain a prudent balance sheet was the right decision. Now, though, it seems like the market pendulum has swung too far given the uniquely strategic nature, low-cost position, and replacement cost value of our assets. I think it is fair to say, given some recent press reports, that there are others who really understand our assets and appreciate this. So I wanted to mention this to lay the groundwork that I'm not going to comment on M&A speculation at this time. If asked, I will just keep referring you back to this section in the transcript. So I hope you are enjoying it live right now. However, I want to be crystal clear. I'm the largest shareholder. Our management team and our employees are large shareholders. We take our fiduciary duties extremely seriously. To the extent something makes sense to do in the future, we will do it. You can count on us to be opportunistic and thoughtful. In the meantime, all aspects of our organization will continue to execute with a somewhat new playbook. In the down cycle, the cost of capital is higher. That adds risk, and it means timing and payback matter more than achieving manufactured deadlines. Having the intellectual fortitude to throw out prior plans or assumptions to be critical and to remain unemotional is paramount. It also means there are more home-run opportunities. MP exists now as a result of one of those periods so I do think patience with us will be rewarded. With that, operator?

Our first question today comes from David Deckelbaum with TD Cowen. Please proceed.

Thank you, Jim, Ryan, and Michael, for taking my questions today. I wanted to clarify something. Ryan, you mentioned that with NdPr pricing around $55 a kilo, there is an efficiency loss when compared to selling concentrate. I also want to connect that to Michael's comments about making operational enhancements at the separation facility this year. Considering all of this, has the organization updated its thoughts on the maximum or target rate for NdPr production? Is it still in the approximately 500 tons per month range, or are we looking at a more balanced long-term approach regardless of price movements, assuming we return to a $70 to $90 incentive level?

Sure. Hey, David, it's Ryan. I'll start. I might have some reservations about the $70 to $90 incentive level, but that’s a separate discussion. To address your main question, our long-term target production and cost structure outlook remain unchanged. We're very confident in our early results that indicate we can be a low-cost producer globally, and our confidence in achieving our target production continues to grow. What we want to emphasize is that in these initial production phases, there are natural inefficiencies; at a $70 to $90 price point, those added variable costs may not be as significant when considering the additional profit potential from moving from concentrate to oxide. However, at a $50 price point, that profit potential is much less. Essentially, we are closely evaluating that added profit potential against inefficiencies and the opportunity cost of selling some of that upstream product as concentrate in the meantime. The crucial point is that we want to be ready for the upcycle but we won’t prioritize volume just for the sake of it. What matters is how we reach our target in this pricing environment. That’s the key message. I’m not sure, Michael, if you have anything else to add from an operational standpoint.

Not too much to add there. I think we're very comfortable with the ability to meet those production volumes that we had targeted. And as Ryan said, we're going to work through that in the most efficient way as possible.

Appreciate it. And I was hoping that you could give a little bit of color on just the 45X. I think you mentioned it as a source of funds this year. Could you just refresh us on the timing? And is that something that you've already applied for? And I guess just what's the expectation when we might have some more visibility around that?

Sure. The 45X refers to the production tax credit for the critical mineral NdPr oxide. In the press release, you will notice that we have almost a $20 million government grant receivable. This calculation involves a lot of intricacies, and we are currently in discussions with the treasury regarding the various cost definitions involved. Our existing receivable reflects a cautious estimate of around $19 million in funding for 2024, based on proposed regulations. One unique aspect of our situation is that we activated hundreds of millions of dollars in Stage II assets this year to support our NdPr production and make certain sales. This allows us to claim an initial credit in 2024, and we anticipate ongoing production tax credits moving forward, aimed at 10% of the production cost. The ongoing conversation with the treasury is focused on defining production costs accurately. We will provide updates as needed, but we are confident that our figures are a very conservative interpretation.

Thanks, Ryan. Thanks, guys.

Our next question today comes from George Gianarikas with Canaccord. Please proceed.

Hey, everyone, good afternoon. Thanks for taking my questions. I'd like to ask Jim about your assessments on the pricing environment. We've had this discussion on conference calls past, and we've broken through that $60 level at which you thought that China Inc. was relatively unprofitable. I'm curious as to whether that's still your current thinking, and if that's so, how long do you expect us to be at this level given that it's hard to make money at $50? Thank you.

Sure, George. Pricing can be quite unpredictable, and I'm not someone who can accurately forecast commodity prices. However, I can share some insights. Looking at the electric vehicle (EV) market, there are many variables at play, including interest rates, differing expectations, and concerns about range anxiety. It's important to remember that 75% of demand still comes from basic industries in China, and those macroeconomic effects are still evolving. This makes it challenging to pinpoint the factors influencing this quarter. Long term, I reiterate that current levels make new projects unfeasible. Recently, we saw reports of a major project in Australia facing significant cost overruns and potentially becoming unviable, with some analysts suggesting that prices near $90 for NdPr might not be economically feasible. In this environment, we are witnessing both supply and demand destruction. There are many factors at play, but I emphasize that at these levels, macroeconomic challenges tied to basic industries, like HVAC or consumer electronics, and some downturns in China, along with a disappointing 25% demand in EVs compared to earlier expectations, contribute to demand destruction. However, this is paired with supply issues. On the demand side, I view this situation as a temporary setback. If we observe the current trends, there is increasing interest in hybrids, which are seeing sales increase significantly. Hybrids typically consume a substantial amount of NdPr, similar to what traditional internal combustion engines would use. If hybrids are going to become a major segment of the electric and plug-in hybrid markets, I believe the 25% demand growth can return to expected levels more quickly than anticipated. Overall, while we cannot predict commodity prices with certainty, I am confident that demand will rebound, and the supply disruptions we are experiencing are noteworthy. We remain optimistic for the medium to long term, though the short-term outlook remains uncertain.

I really appreciate the color. Thank you for that. Maybe just as a follow-up. I know you said your piece on the rumored Lynas merger or takeover. I'm just curious if you can entertain us. What would be the industrial logic of something like that in your business?

So I was wondering how many different ways I would get asked this question and what fun jokes I could have. And I guess that's a good way to ask it. I mean, I guess I'll just refer you back to the script. I don't want to comment on any M&A speculation. I appreciate the way you're asking. I mean, I guess, what I would say is that objectively, when you look at any company in a generic sense, there are always things that companies can learn from each other and cut costs around and all of that. So your guess around all those kinds of things, if you're looking at a specific situation, there certainly are those things. But again, I'm not going to comment other than just refer you back to what I said in the script.

I appreciate that. Thank you.

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

Thank you. Hello everyone. I have a question about a prepayment that Ryan mentioned related to your downstream operations. I'm unclear whether it pertains to downstream or oxide sales. Could you provide more detail on the amount of this prepayment and when you expect to receive it so we can incorporate it into our models?

Hey, Carlos, it's Ryan. You were right. What we were talking about was related to the Fort Worth magnetics business and an expectation of prepayments over the course of the year that likely would help cover a very significant portion of the CapEx that's remaining for that facility. We're not going to go specific details on timing or quantum. Obviously, as I mentioned in my prepared remarks, customer conversations are ongoing. I think the major message though is that with operational success that we expect and that we're pushing towards as rapidly as possible, I tried to give you guys the building blocks to understand where we expect to end the year from a balance sheet and capital perspective. And so I think you can take those remarks and kind of do with them what you will to backsolve into the quantum here. But lot of puts and takes, but I think it's something that obviously is a very positive measure of success of ours as we go through the course of the year.

Thank you for your comment. You mentioned the investment in VREX, the tolling company in Vietnam, where you currently own 49%. Are you hoping to maintain that level of ownership, or do you have plans to increase your stake and potentially gain full control over the operation? This could help you have more influence over the tolling process.

Yeah, it's a great question. The 49% stake that we have in the business was really a factor of the amount of growth capital that we put in, in order to support the growth in potential output at that facility. I don't think we have any particularly prescriptive view on how things may look over time other than to say, I think the structure that we have in place right now is working very well for us. In addition to the investment, we obviously have the tolling arrangement, which provides us with a lot of certainty as to the amount of volumes that we'll be able to drive through that facility over time. And so as it stands right now, I think that we've accomplished quite a bit with the combination of the tolling framework and investment in VREX.

All right. Thank you very much.

Thanks, Carlos.

Next question comes from Corinne Blanchard with Deutsche Bank. Please proceed.

Hey, good afternoon. Maybe could you talk about the Phase III? So you said you completed the construction of the Texas facility. Can you walk us through again the timing expected there? Is there any remaining CapEx and how much.

Hey, Corinne, it's Ryan. I'll take that. Following up on my response to Carlos, regarding Stage III in the Fort Worth facility, the building and a lot of the supporting infrastructure are complete and operational. However, we are still bringing in significant capital equipment and continuing to fit out the factory to achieve our magnet production target by the end of 2025, as well as to have precursor products, metal and alloy, ready ahead of that timeline. Part of what I mentioned earlier pertains to our expectation of producing metal at the DFW facility later this year, which would trigger certain customer prepayments depending on our success with those initiatives. There is still more capital investment needed for the plant. Looking at 2024 from a cash flow standpoint, it's crucial to consider the balance between the investment in Stage III and the prepayments for products related to Stage III.

Okay. It might be a tough question, and I was trying to get that answer. You've started to discuss it a bit already. Do you have a specific pricing level at which you would need to rethink Phase III or adjust the volume for Phase II? Six or nine months ago, we would have thought that level would be around 50 to 60, which aligns with where we are now. It appears to be a challenge, but perhaps a significant price point. I'm just trying to understand at what price levels you might consider changing your strategy.

Sure. Corinne, there are several aspects to address. Regarding Stage III, we have been cautious about structuring that business from the very start, ensuring it operates as a standalone entity that needs to generate an attractive return on capital. We designed our initial contracts to ensure that we viewed it as a worthwhile investment. It's true that the global landscape has shifted concerning capital costs and the general perception of electrification and its adoption rate. However, I want to emphasize that the supply chain in the Western world is virtually non-existent. Transitioning from nothing to something still presents a highly appealing opportunity. We remain adaptable and ready to revise our strategies if necessary. Nevertheless, despite the challenging environment, feedback from customers indicates a continued interest in developing this supply chain. There are indeed significant difficulties related to capital and execution, but we are navigating through them. As for other overall prices, it’s vital to reiterate that we cannot foresee commodity prices; it’s unpredictable. Even industry insiders do not have that clarity. Our strategy has always been to focus on controllable factors. From the outset, we structured our balance sheet to endure various market conditions. Currently, we are among the lowest cost producers globally, which protects us when conditions become unprofitable—even if temporarily, those situations can’t last forever. Our focus remains on maintaining our low-cost position. It's also noteworthy that our investment of 60K for upstream expansion will boost our REO output by about 50%, which is remarkable. A few years back, people valued MP's assets around $10 billion before much of our current work. With a 50% increase, the new potential value stands at $15 billion, not accounting for inflation over time. The key is that market conditions fluctuate, and we can only control our actions while striving for execution excellence. Lastly, I found Ryan’s remarks significant. Concerning Stage II, our updated approach focuses on ensuring our refining processes are ultra-low cost. We've made significant strides but recognize there’s still much work ahead. High prices diminish the importance of minor cost fluctuations, but in the current climate, we have to be vigilant. Surviving these tough environments ultimately leads to operational excellence. When faced with the necessity to reduce costs for survival, that drives us to improve effectively. We’ve experienced this before when we took control of these assets in 2017 and managed to navigate through that difficult period successfully. We are confident that we will again find our way through this challenge, and we don't spend much time attempting to predict prices.

Great. Thank you very much. Good luck.

Our final question comes from Bill Peterson with JPMorgan. Please proceed.

Good afternoon, and thank you for the question. I would like to ask a previous question in a different way. Is there a specific price point that would allow you to cycle more through Stage II? Additionally, is there a minimum price you would need to achieve in order to continue improving yield and overall cost in separation and finishing? Can you make cost improvements by operating at a lower capacity in Stage II, such that in a higher price environment, you could greatly benefit from that leverage?

Hi, this is Michael. To answer the latter part of your question, we are currently operating all circuits at commercial and significant throughput volumes. This allows us to show chemistry, throughput capability, and the effectiveness of our processes. We do operate at lower uptime in parts of the Stage II business compared to upstream. As we enhance each area of our operations, we anticipate seeing a reduction in our cost structure and a shift in the trade-off between running through Stage II versus operating at more modest volumes to produce more concentrate for sale. We expect this shift to become more evident starting in the second quarter. Once we achieve leach yields at a point where we are maximizing the recovery of NdPr with the most reagent-efficient methods, we will increase the material processed through free leach. However, we also want to ensure that we are not losing material due to inefficiencies, such as in purification processes or product finishing. It is crucial that we have an efficiently running integrated process before increasing volume, so we don't lose the gains we've made in any area. We are very confident in our progress, which we see every day, and we recognize opportunities for improvement. Given the current pricing environment, pushing for volume just for the sake of volume is not a priority.

Yeah, Bill, this is Ryan. I'll start off, and Mike can chime in as well. My previous comment about the price range of 70 to 90 wasn't intended to suggest it was unappealing. Instead, I believe that for many new projects, that price range may not serve as the right incentive. There are numerous promising projects that anticipate being viable at 70 to 90 but likely will not be, which aligns with Jim's previous remarks. This situation represents one of the largest possible increases in supply in the Western world. Regarding the price range of 70 to 90, it's important to assess the additional profit potential from transitioning from selling concentrate to separating the product and selling it as oxide. Significant profit can be achieved at 70 and 90, and even at 55 there are opportunities. However, we recognize that some parts of our process are not fully optimized, and as Michael mentioned, we evaluate daily whether to operate based on the potential profits from our upstream product versus producing suboptimized products that might reduce yield or increase variable costs to the point where it isn't worthwhile at these price levels just to increase volume for the sake of volume.

I want to expand on a point I mentioned earlier, as I know I've discussed this in many calls. When considering global supply and the challenges of getting products online, it's straightforward from a financial analysis perspective to set an incentive price and expect that it will attract people to come online and earn a good return. However, the reality is different. Recently, a major source of expected incremental supply from Australia announced significant cost overruns and may not have the capital needed to fully meet supply demands, highlighting the difficulty of bringing this supply online. This reinforces the value of our existing assets. Looking at any medium or long-term perspective, the challenge of getting new supply online is significant. This is one reason why the Upstream 60K is important, as it showcases our capability to add incremental supply. It's also important to clarify that when Ryan shared those figures, it wasn't to imply that there isn't potential for significant profit at 70 or 90. Our focus on these prices comes from a desire to maximize our cash flow while we intensely work on reducing our cost structure, knowing that market conditions can shift rapidly, often faster than anticipated.

Yes, that's understood. I'd like to ask about mergers and acquisitions in a different way, somewhat related to what you mentioned. You talked about stressed assets. I'm not referring to the rumored M&A; I'm asking if there are other assets that might be worthwhile for you to consider in light of a long-term market strategy. Are there areas such as heavy rare earths, as opposed to light, that could support your magnetization efforts? I'm curious if these lower valuation assets might be of interest.

Absolutely, Bill. It's crucial for us to position the company to be proactive during times like these. Our expectation is that over the long term, we'll be able to acquire a significant amount of invested capital at a favorable rate. Typically, in a project, there is a disconnect where the initial expectations for costs and the anticipated discount rate differ significantly. Often, projects end up costing much more than estimated, and the discount rate also increases. For the perspectives of all parties to align, there usually need to be catalysts that facilitate this convergence. Times like now often serve as those catalysts. In summary, we are always on the lookout for opportunities and believe that there will be potential prospects arising from this situation. However, regardless of the investment, I want to emphasize Upstream 60K, which represents an exceptional opportunity compared to anything currently available.

Yeah. Makes sense.

Our final question comes from Davis Sunderland with Baird. Please proceed.

Hey, guys, thanks for the update. Appreciate the time. I was just wondering if you could talk a little bit more about the physical expansion that's already been completed for Upstream 60K? Maybe any incremental capital that will be spent on that this year and just how we think about volumes ramping up from that over the next four years.

Mike, you want to kick us off?

The total amount of capital spending this year will be relatively modest. We are making a small equipment expansion to our grinding circuit, which we believe will help increase capacity and enhance efficiency, contributing to improved flotation recovery. This is our only ongoing capital activity. Additionally, we have significant piloting efforts underway and are focused on executing these plans as capital efficiently as possible. There are generally three perspectives to consider: the first is optimizations, which require minimal capital; the second involves modest capital investments aimed at achieving step change improvements; and the third includes potential larger investments that could greatly increase throughput for production. The current project falls into the second category, involving modest capital that we hope will significantly enhance recovery, although we haven't included it in our plans for this year. We aim to initiate it in the second half of the year.

Awesome. Thanks guys.

Thank you all for your questions. That will conclude the Q&A session. I will now turn the conference over to Jim Litinsky for further remarks.

Well, thank you, everyone. And I just wanted to reiterate that despite what is clearly a tough pricing environment, I think the execution across the board across all stages of our business has been really remarkable. And I have no doubt that we are positioned very well for the coming months and years ahead. So we wish prices were higher, but we won't focus on it. We'll just keep working on the things that we can control and continue to execute for you all. So we look forward to seeing you next quarter. Thanks, everyone.

That concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.