Lynas Rare Earths Limited

Good day and thank you for standing by. Welcome to Linus Red Earth's quarterly resource briefing. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the call over to Linus Red Earth. Thank you. Please go ahead.

Good morning and welcome to the Linus Reris Investor Briefing for the March 2023 quarter. Today's briefing will be presented by Amanda Lacaze, CEO and Managing Director. And joining Amanda will be Guardian Sturtzenegger, CFO, Paul Leroux, COO, Daniel Havas, VP of Strategy and Investor Relations, and Sarah Leonard, General Counsel and Company Secretary. I'll now hand over to Amanda. Please go ahead, Amanda.

Good morning everybody. Thanks for joining us today. I think that most of you will have had at least a quick look at today's report and will know that it's got a lot of information. So I'll just step through the key points in a fairly orderly fashion. So actually I've decided that maybe what I'll do is I'll start at the very end, which is really as they say the bottom line, but after a significant investment in our future capability of $395 million year to date, we closed the quarter with $1.12 billion in the bank. And that of course reflects continuing strong demand and support from our customers Some really excellent production outcomes this quarter. Strong cash flow from our operations despite the fact that the price softened over the quarter. Continued very strong support from Jare and Jogmeg, so from our Japanese government partners as well as Sojet and also our Japanese customers. and the fact that spending is on track for our major projects. Of course, the really significant thing is that having $1.12 billion in the bank means that we have plenty of firepower to ensure that we are really well placed to capture upside opportunities via current growth and any other growth opportunities that present themselves And we are also in an excellent place to be able to weather any downside risks. And many others have written on the macroeconomic risks who have much more detail on that than me. Suffice to say, our balance sheet puts us in a good place to deal with any of those risks. So just taking those things one at a time. Starting with the market and starting with demand. I know that there has been a lot of coverage of Elon Musk's comments. Whatever he says appears to be newsworthy. Some of that coverage has included really some quite detailed assessment of what is the real impact of Tesla changing, announcing that they will change their motor technology. Some of you have even done some calculations on that. Suffice to say that from our perspective, we have always known that there are technology choices. I think I've even said to some of you, there is always an alternative, and if there's not, someone's working on finding an alternative. And there have always been technology choices with respect to the use of rare earths, particularly in electric vehicles. The neodymium ion boron magnet technology is the most energy efficient because it is the lightest motor and over the lifetime of a vehicle it gives you the best efficiency. It has the lowest CO2 emissions from the manufacturing process compared to the alternatives and it has the lowest CO2 emissions from the life of the vehicle. So there are many car makers. I know sometimes it seems like there's only one electric vehicle maker, but there are many electric vehicles on the road these days and many different models. And more are choosing NDFEB technology than the alternatives. So today, even with our excellent production outcomes, we find that demand still is ahead of our ability to service everyone who would like to buy Linus NVPR. Of course, across the quarter as well, the price has softened. We all know and expect volatility, and of course it's nice when it goes up and not so nice when it goes down, but that's the definition of volatility. Our assessment on this is that the current softness is very much about internal China dynamics. But we at Linus remain very confident of the long-term trend and we know that the Chinese rare earth firms share that confidence. We remain committed to growing to meet the market and that's one of the reasons why our ambitious capital investment plan continues. So that's a little bit about demand. Just moving into talking a little about production performance. Well, maybe a lot about production performance because really these are some outstanding results today. I can tell you I have never seen our people as energised as they are today, right across the business, in all parts of the business. Those producing today at Mount Weld and Quantan and those preparing for the future actually also in Mount Weld, Kalgoorlie and our US team. And so this quarter we've delivered record NDPR production. I could leave it there because that sort of speaks for itself but really want to point out that this is what we can do when external downtime is not a feature. It reflects the continuous process improvement of our operational teams at each site and also across our sites. So our teams are operating strongly and effectively and we can see that in our results. Of course, the revenue and cash outcomes reflect our strong production and strong demand. And that strong cash flow, as I've said, underpins our capital investment and future growth. I want to take this opportunity to recognise and thank our Japanese partners for their continued support. It's always, support comes in a variety of different ways. It can come from, you know, just sort of saying, well, we support you, Linus. right through to the sort of support that we really appreciate here. There's just over 200 million good reasons for us as investors and as the company to be very pleased about the Japanese commitment to the continued success of Linus. 200 million in equity, which is escrowed for an extended period of time, which reflects the Japanese JARE and JOMIG's belief in the future of our business. So I just like this opportunity to say thank you to our Japanese partners because this is certainly a key part of ensuring that we remain unquestionably strong. So then just looking a little at the major projects, I think everybody on the call would know we have an ambitious program. Our projects are on track. We indicated last quarter that we targeted feed on this quarter in Kalgoorlie, and we maintain that position. Alongside that, the work in Kwantan to be able to receive the new mixture of carbonate feedstock from Kalgoorlie. is well progressed and our Kuantan team will be ready to receive the material as it arrives onshore. In Mount Weld, we've put some pictures in because they always speak a thousand words. I can speak in cliches all day if I need to, I guess. But the pictures, I think, are very informative It's very exciting at Mount Weld to see the major earthworks. We've got some of our first civils with concrete being poured in preparation for our new dewatering circuit. And in the US, we have confirmed that we're in the final stages of all of the activities associated with the acquisition of the site on the Texas coast. And we have engaged an external engineering team to work with us to forward that project. These are all robust and resilient building blocks on which we can deliver sustained growth. But those of you who have been with us for a while would know it wouldn't be Linus if we didn't have a few challenges. And of course, our most significant challenge right now relates to our operating licence in Malaysia. We've already disclosed that the licence for renewal in March included the conditions which were first applied in the fifth operating licence, which had the effect of causing the shutdown of our cracking and leaking lease in Malaysia. The process of appealing against these conditions is, clear and it is sequential. So we have already appealed to the AELB Board. Our next step is an administrative appeal to the Minister and this appeal will be heard next Friday. We are very confident of our grounds in that appeal. As you would know, we have four scientific reviews which have consistently found that our operations in Malaysia are safe, they are low risk, they are compliant with all regulations, and the AELB itself, in every of its orders that it does of our plans, has found that we are very satisfactory, which is the highest rating available. There is not a single expert review which has ever recommended the closure of any part of the Linus facility in Malaysia because simply it is not supported by any scientific evidence. The licence process under Malaysian law should be evidence-based and free from political influence. And so, as I said, we believe that we have a very strong case against the maintenance of those conditions. However, I think as all of you would know as well, any legal process can be uncertain in terms of time and also in terms of outcome. So we have been working on alternate scenarios for some time. So of course, the best possible outcome is that we have two cracking and leaching plants operating, which gives us a big immediate step up in our capacity in that part of the process. It won't be without its own challenges as we optimize across two sites, which will be performing at different levels with different cost profiles, but nonetheless, that's a problem that we'll be delighted to be managing. The other option, which is where we only have our Kalgoorlie plant operating, of course, is more challenging. And the scenarios that we've developed there include an assessment of the feed-on date and then also on the relative speed of ramp-up So we've looked at what happens if it's a relatively slow ramp up, more akin to the sort of timing that it took us in Malaysia through to what if it looks like sort of the type of ramp up that you would expect in a business where you've got mature technology and known capability. We do expect that we should reap some benefit from our 10 years of operations and experience in Malaysia. As I've indicated previously, our focus as we look at these different scenarios and the actions that we might take remains on how do we manage our inventory to meet the needs of our key customers. It's become increasingly clear that if LAMP CNL is required to shut down on the 1st of July, we expect to be shut down from about mid-July into August in Malaysia. That reflects the fact that we get the first feed on in Kalgoorlie this quarter. However, we need then to build sufficient stock for a shipment. And then we have the shipment timing, which shows us that we're going to be looking at August feed on at the land. Of course, once we restart the facilities, the downstream facilities in Malaysia, the production profile of finished goods will align closely to the ramp up profile at Kalgoorlie. And as we've said, ramp-ups are intrinsically unpredictable before you start them. We expect within a couple of months we'll have a very good assessment of that. So we currently are planning lower production for at least the first quarter and probably into the second quarter. I know that many of you will ask me, well, how much lower? And I'll say now we cannot quantify that exactly until we have commenced operations, but we will be able to update as we move through the ramp-up process. Importantly, today we have sufficient finished goods inventory in the pipeline to meet the needs of our key customers during this transitional stage. And as we have indicated in this report, we plan to sell the relevant inventory, particularly for our Japanese customers, to Sojits during this quarter for distribution as required. So for modelling purposes, we will see normal sales this quarter, but lower sales next. Of course, we remain very optimistic that this plan will be redundant. Once again, our operations are safe. We are a very strong contributor to the Malaysian economy today. But equally importantly, the Linus plant in Malaysia offers Malaysia opportunities for development of both upstream and downstream industry. If our cracking and leaching plant is shut, those opportunities will be shut down as well. And we believe there are many in Malaysia today who understand that. So as quarterly activity reports go, I'm really proud to present this report. Really excellent production, good sales, strong cash flow, progress on all of our major projects. And that gives us a really solid foundation on which to continue to grow. So with that, I'm very happy to ask questions. I'm joined here today by Daniel, Paul, Gavin and Sarah, who are all ready to answer questions if there's any further detail required.

Thank you. We will now begin the question and answer session. If you would like to ask a question on the phone, please press star 11 and wait for your name to be announced. If you would like to cancel your request, please press star 11 again. Once again, to ask question, please press star 11. First question comes from Levi Spry from UBS. Please go ahead.

Good morning, Amanda and team. Thanks for the call and the update. So I guess we would like to ask you a little bit more about production. So can you talk to, I guess, Kalgoorlie, your confidence levels around feed later this quarter? And then this idea of product starting to go to Malaysia in August, how we think about that profile thereafter, if you're also telling us that it's going to be shut for three months, which probably takes us to late October.

Okay, so I guess the simple answer to the first question is that we would not be affirming feed on this quarter if we didn't have a, I mean nothing is ever absolute in our world, but that's our planning at present. We have prioritised all of the productive assets at Kalgoorlie, as you would know, sometimes there are buildings which you want in a plant in the longer term, like an administration building, but which doesn't need to be done for you to start production. So with a focus on the key productive assets, we do believe that we're going to have feed on this quarter. The three months is not necessarily into October. I mean, we think that we will, you know, it will be once we have material in Kuantan, it should be relatively quick for that to start to come through. I mean, it takes a couple of weeks to get through the downstream processes. But we will have, this is unlike when we first started the LAMP, for example. I mean, we do have our solvent extraction units loaded and will be sort of stable ahead of the introduction of the new feed. So what we're indicating is that it will be lower production for that three month period. But if we have material arriving in Kuantan in August, then we will start to introduce that into the process at that time. The complete shutdown of the plant, Of course, once again, it's still dependent upon a couple of these things that we've not seen yet. First of all, it's dependent upon our appeal not being successful, but then the complete shutdown of the plant where we have no feed at all, given that we reach our quarter four feed on, given that the ship doesn't go doesn't sink on the way to Malaysia, which we think is unlikely because we've not had any do that, but it could happen, then probably the complete shutdown of the plant isn't going to be much more than we had during the first shutdown with COVID. So, you know, I mean, we're not looking at something which is dire here, but it certainly is a transition and any transition brings risk with it.

Yeah, thanks, Amanda. Maybe something that would help us understand your confidence levels would be just if you could talk me through first V this quarter. So that's June, I imagine the month of June. and then product to Malaysia in August. What happens in between those two points? I'm not going to ask you about critical paths, obviously.

Well, I'll tell you this. We have what we would regard as four critical path items at Kalgoorlie, and everybody here would understand that the critical path moves around. They're a different four from a couple of months ago because once something goes on a critical path, you take action to take it off. We have four critical path items at Kalgoorlie, all of which have good plans to address them. And so therefore, I guess, if you're asking about confidence, confidence can only be based on do we know what we know? And I believe we do. Do we know what we don't know? I think we've got a reasonably good idea of that. But of course, the final thing and the reason why no CEO will ever say I'm 100% confident is that there is always the potential for the stuff that we don't know that we don't know. But we have a very clear, very detailed plan area by area at Kalgoorlie. We have the commissioning teams have already, in fact, started commissioning in some parts of the factory, including I think in particular the filter presses. So both our dry and our wet commissioning plans are very clear and people know what they need to do and when they need to do it to be able to deliver the outcomes that we're looking for. Why is there a gap between getting feed on and getting product in Kalgoorlie because we're not going to ship a container at a time so we need to build sufficient, produce sufficient at Kalgoorlie to fill a shipment basically which is not a whole ship but you know it's We've got to have enough material that arrives in Kwantan that when we then start feed on in the receiving area in Kwantan, that we have confidence that we can continue that. Remember, we are operating big chemical plants. They do not like to be stopped and started. So we need to have enough inventory before we turn that on for us to be able to confidently continue production.

Does that help? A little bit, thank you. And maybe I can just sneak one in on price. So what is the price now? Is it low 60s? Probably a bit lower than what we thought it might get to. Can you talk us through that?

Yeah, look, the price... This is a very concentrated market and the... effects on price in the short term can be many and varied and sometimes not even obviously logical. Yes, it's in the low to mid 60s. It started to, just in the last few days, stabilize and start to turn a little bit positive. As I said, we see it being very much more about the dynamics inside China as China recovers from some of their more disrupting activities through the late part of the pandemic. But we don't see really any change in the long term perspective for this market. Demand is strong and it's likely that there'll be periods where demand notionally outstrips supply. But Paul, did you want to add anything to that?

Sorry, it's difficult because I was cut for the five minutes, so I don't know what... Oh, okay. Sorry for that.

The question was, the price is now sitting in the low 60s. Do we think it can go any lower or what do we think is going on? I was just reaffirming our view that it's about China, inside China dynamics. The price can, of course, always go very low or very high because short-term implications can be significant, but in the long term we still see it positive.

Yes, and it's definitely more than ever in the hands of China. which is the main reason why the demand is a bit weak at the moment. It's also because the Chinese economy is a bit down. So, yeah.

Okay, thanks, Paul. All right, on to the next slide.

Thank you for the questions. One moment for the next questions. Next questions, we have the live from Daniel Morgan from Barranjoy. Please go ahead.

Hi Amanda and Sam, cracking operational result on NDPR, pun intended. How do you anticipate production for this coming quarter, the June quarter? Should we expect the same again or is there some sort of a water or maintenance issue that might disrupt things?

As Paul would say, We always aim that today is better than yesterday and much worse than tomorrow. So our objective this quarter would be that we continue to improve on our previous quarter's performance. Unfortunately, when there is an external disruption of some sort, it is not something that we can easily predict. So I cannot put my hand on my heart and say the pipe won't have another burst water pipe. However, we don't have any indication today that that should be the case. So as I said, our team is 100% focused. I can assure you, Paul drives them very hard on a daily basis and reminds them exactly how many tonnes have to be produced every day to get to our forecast. But absent any more significant external events, yes, there'll be some internal maintenance. But we delivered those results last quarter with a full three-day shutdown as we did the tie-in activities for the new MREC facility in Malaysia.

So just on that MREC, that receiving plant that's in Kuantan, is that complete and tied in now?

It's tied in. We've still got work to do to complete it. And on that one as well, I think I've indicated this before, we've taken the opportunity to not only just put in, you know, we could have just said, oh, well, we'll just put in a new dissolution plan, but we've actually improved a number of our operational tasks there, new soda ash load and unload, a few other circuits which actually improve our overall operations in addition to just doing the load unload. As a result, the next time you come up to visit in Malaysia, you'll see that we have a new building with new facilities associated with it. It's still got work to be done, but we're confident it will be ready to receive the material when it comes from Kalgoorlie.

Thank you. And the Malaysian appeals process, I watched a press conference a while ago by the relevant minister where he outlined that the delegation had gone to your plan in Kalgoorlie and that they were confident you were confident at the time that the plant would be ready and so I guess they foresaw that there wasn't going to be any production hiatus. Now that you are formally saying that there is a risk if 1 July is the date that there is a production hiatus is there any ability to get that formally recognised by the relevant authorities to give you a few months grace on this issue or is it Are you not having that sort of informal back and forth on this issue?

We have a number of submissions and we have a number of relationships with various stakeholders and ministries in the government. I think that there is a very good understanding not only of what Linus does today, the effect of taking Linus production out of the global rare earth market, even for a short time, and the potential economic effect on Malaysia today and in the future. Whether or not Kalgoorlie is ready is of course an important point, but the license in Malaysia really should be about our performance in Malaysia and our investment in Malaysia, not our investment in Kalgoorlie. And so Linus invested in Malaysia. We were invited, as we've gone through this, I've sort of looked over the history. I think it's 16 years ago, you know, was the invitation to invest in Malaysia. And there were certain expectations of performance on both sides, from Linus and also from... And I can tell you that we have met every one of our commitments as part of that. And so really the appeal is about Malaysia. It should not be about Kalgoorlie. However, if the Minister saw fit to grant a stay as appeal in any subsequent actions, properly considered, then of course we would be very open to receive that sort of determination.

And, I mean, you have to prepare for all options. I mean, you might have to send some concentrate to Malaysia for a scenario where you are successful on this appeal, but it might be redundant, you know, if it were to arrive past 1st July. Is that something that you would you would do and spend money on running down that avenue?

Sure. Concentrated logistics, one never likes to waste money, but I tell you what, there's no way that if we get an approval to continue operating on the 1st of July that they will then say, oh dear, the dog ate my homework and we have no feedstock. I can assure you that if we get approval to continue to operate, we will be able to operate.

Okay, thank you very much.

Thanks, Samuel.

Thank you for the questions. One moment for the next question. Next question, we have the line from Rex Mentor from Kennecott. Please go ahead.

Thanks. Good morning, Amanda and Sam. I don't really want to labour it because you did provide some, I guess, meaningful Can I just clarify that irrespective of the ramp up of Kalgoorlie and whether or not you're able to continue to crack and leach in Malaysia, that there will be some volume of sales during that short period, albeit it will just be a lot lower than the normal production rate. Can I just clarify that? Sure.

In the first instance, there will be As I've said before, we will have some work in progress material when we hit the 30th of June because if we don't get a change here, Paul and Amir and Gannison will be running, cracking and leaching at absolute sort of max rates to ensure that we have as much whip for NDPR as possible in the system. So that will take... some days for that to actually see its way through the system, finally through to finished goods. And of course we will still be, we will still have Lansdowne cerium and probably some SEG material that we will be selling through that period because we have more inventory of that right now. And Indeed, we have more work in progress right now. We prioritise through even our tunnel furnaces. We prioritise the NDPR. So we're holding more work in progress on some of those other materials that we'll be able to bring through, but it will be at significantly lower levels than the business that we're writing today. Of course we looked at this and we said should we, because we have a forecast from our key customers and we're looking at how do we match our inventory against our key customer requirements. sat down and said, well, do we sell it now or do we sort of dribble it out over time? And we've made the decision that it is best to have it, the majority of the material, which goes to particularly our Japanese customers in the Sochit's inventory, close to the customers. And that's the reason why we will see those sales during this quarter.

Okay, that's clear. Thanks, Amanda. I guess I've previously assumed that you might opt to dribble it out, but that certainly makes sense. In terms of the possibility of a successful appeal, how long might... Happy birthday! What was that? Sorry.

If you said in the case of a successful appeal, I said happy birthday. Okay. Champagne called climate. Yeah, sorry.

No, that's okay. Have you sought a specific period of extension and that be related to how Kalgoorlie might ramp up or you've just sought an extension and whatever period that might be would be subject to the respective authorities?

No, we have not sought an extension. It is our position that we were invited to invest in Malaysia under a certain set of conditions, that we have met our commitments on those conditions, and so therefore the imposition of additional conditions a decade on from us making the investment is not appropriate. So our appeal is not about an extension. Our appeal is about the removal of the conditions.

Okay, understood. That's clear. Thanks for that, Amanda. And maybe just one last question, if I may, for Paul. We've seen pricing get down to high 60s, low 70s at the minute. Have you any idea or are you able to tell us what that marginal cost of Chinese production might be And do we start to approach a level where we do hit the top of that cost curve?

Yes. I'm not sure what I can say. First, there is not the Chinese cost. There is a cost for different producers in China. So obviously a difference between Northern Rears integrated from mine to finish product from independent small producers who are buying concentrate or mixtures carbonate so you can easily make the numbers that I cannot share with you but you take the price of concentrate imported imported from outside China into China and assume this is just adding the cost of a production from there and you will end up with easy to estimate price point for those marginal players who are paying at a high price to concentrate, basically. So, yeah, we'll see. We're probably getting closer. That's the maximum I can tell you, but it's easy calculation to make.

Okay. That's very useful because I guess the point I'm making is, you know, if we are approaching that marginal cost, you know, might we, given the way that it's traded. But that's useful, Paul. Thank you very much. Thanks, Amanda, and I'll pass it on.

Thank you.

Thank you for the questions. One moment for the next questions. The next questions, we have the line from Trent Allen of COSA. Please go ahead.

Thanks, guys. I just wanted to talk about your cash and, in particular, what you might like to spend it on. I mean, you mentioned that we described it as a firepower. You know there's a lot of consolidation M&A going on at the moment and I mean you've already got the, we can call it the biggest and the highest grade rare earth deposit in the world by an order of magnitude. So what could you look at to add to the line of story? Is it a heavy rare earth deposit or you know what sort of jurisdictions are you looking in? And also I'd like to ask about how the exploration program is going at Mount Weld as a second part. Thank you.

So let me start with the second part. So we're now nearly a year into, I think, the exploration at Mount World. We've done quite a lot of drilling. I think my last board meeting when we were out there, one of our directors wanted to know, well, can we go faster if we put more money on it? But, of course, some of these things As you know Trent, just take time. We're actually in the process of really assessing a lot of those core samples and that will allow us to, we're working towards getting a chalk resource and ultimately reserve on that carbonate type material. At the same time, we are doing more drilling within the current life of mine design. which will allow us to increasingly become more sophisticated in our mining. Up until now, we've mined for grade, but we do know that there are various parts of the ore body which are relatively enriched with different materials, particularly heavy rare earths. And so they might be slightly lower grade but have a higher proportion of heavies in them. So we're looking to better understand that sort of geology so that we can be more sophisticated in our mine schedule, as I said, mine for elements as well as for grade. So the geology team at Mount Weld's pretty excited, and we do also have working alongside us for this period a couple of really very experienced geologists from JOGMEC as well. So that's really sort of fortified our team there. With respect to growth, You guys are always so demanding, right? You know, we've got over a billion dollar capital program right now.

You opened the door with your opening comment there. It would be rude not to walk through it. Yeah, okay.

All right, I'll take that. So... Yes, we have a really strong and well articulated program which sees us do more of what we're doing today but broadening particularly our industrial footprint because different customers and different jurisdictions are very keen to see production closer to home. So we do have that, and as we execute on the already disclosed major projects, which we will do over the next one to two years, then we'll be in an even stronger position than we are today. So then, yes, upstream, do we look at alternate resources? Certainly ionic clay deposits with their preference for heavies is of interest. Rare earths that are not from hard rock deposits are interesting because anything where the mining costs have already been sunk is of interest. In Malaysia, for example, that might include things like some monazite-rich tin tailings or, as you know with Iluka, the mineral sands tailings. The Swedes are looking at rare earths out of some of the iron ore tailings from their large iron ore. um company and of course that's what uh northern rare earths in china primarily is their feedstock so there are upstream opportunities we have a watching brief on that and understanding the difference between the different types of deposits and then of course there remains downstream activities um internally we now have a really robust um and really you know sort of a number of world leading brains working on particularly developments around various types of catalysts. One of the most exciting is the use of lanthanum and cerium catalysts in the production of blue and green hydrogen. Well, green hydrogen, but also blue hydrogen. So it gives us a pathway to get to the green hydrogen as well. these are serious opportunities and then do we want to have a greater position in the magnet value chain is always a watching brief. I think I've said before, our objective is to ensure that somewhere like our plant in the US has alongside it metal and magnet making capability and we're happy to do that either with an independent firm, a partner or ultimately if it doesn't happen then we'll have to look at doing it ourselves. So yes, there are many opportunities in addition to our current big engine room for growth which is really about you know, sort of stepping up our capability in our core business.

Okay, thanks very much. That's a lot to think about.

Thank you. It's actually, you know, it's an exciting business that we're in. It's an exciting market and we see lots of opportunities. And as always, you know, it comes down to making good choices, not trying to do everything all at once.

Thank you for the questions. Next up, we have the live from Al Harvey from JP Morgan. Please ask your question.

Yeah. Morning, Amanda. Just another one on Malaysia. Can you just remind us what grounds the AELB appeal didn't pass? And I guess an extension of that, why you'd be more confident in the appeal directly to the Minister? And again, sorry, another little aside, you did mention the contribution to the Malaysian economy. Do you have any kind of quick stats that would reflect Linus's contribution there?

Sure. So we employ directly about 1,000 Malaysians. Indirectly, we've contributed to the creation of... The economic study said about 4,600 jobs. We spend over 700 million ringgit a year and a lot of that is in the east coast of Malaysia and the state of Pahang in which we operate. That's a significant contribution. We were, I think, on the last time this assessment was done, about 1% of GDP because, of course, all of our exports you know, there's $900 million worth of exports out of Malaysia last year. These are the sorts of numbers that we are talking about. They are really significant. And as we look at, you know, sort of support, as I said, you know, support can come in many forms. And I can tell you that we have a list of submissions from local communities, schools, universities, suppliers, the local village chiefs, their economic development people, all of which form part of our submissions to the minister. Why would it be different? I think that sometimes when you're dealing with anything politically anywhere, it sort of starts, there might be someone with a particular perspective politically and it starts to get a bit of life and then it takes a little while for others to catch up. So there's a few dynamics around how politics work, but ultimately we believe, and there are a number of avenues for appeal, this is simply the next step. We believe we have a strong, robust argument which supports the continuation, supports the fact that we should be able to continue to get economic benefit from the assets in which we invested in Malaysia.

All right, thanks, Amanda. And just another follow-up. The commentary in the release was very low or possibly no production for three months out of quantime. I just wanted to clarify, would that very low production be the work in progress and right at the start of that period, or is there ways that you could continue producing at least some material?

So as I said, we've got sort of a range of scenarios from sort of best case right through to very worst case. On a best case scenario, we will have a relatively short complete shutdown, and then we will start to produce some tons of NDPR, but we don't know how many of those will be until we've actually got the material and put it through the system. So I'm not being cute by not giving you a number. It's just not possible to do it until we see how we go. As I said, we will still have inventory for Lanthanum and Cerium, and I expect we'll probably still have some because we're sort of holding some inventory on that at present as we wait for the prices to turn around again. And so we would expect to continue, we'll be able to continue to process some of the LACE and we will certainly continue to make some sales in that area.

Great. On your comments around Elon Musk's views on magnets, I guess, are you able to kind of quantify just at a high level that the differences between NDPR and ferrite magnets, I guess, take on board that they are efficient and lighter, but probably a fairly incremental weight to a vehicle? So just trying to get some figures around, you know, the cost benefit on NDPR oxide versus ferrite magnets, especially in the context of... some potential capability sourcing supply of NDPR.

So I'm going to just throw that one directly to Paul because he's an expert on this.

Okay. No, I'm not as expert as Elon Musk, who is expert at inferencing the market price and your views on the market demand. Basically, there are many technologies. You mentioned ferrite magnets. I saw that someone, another experts in the world there are so many of them mentioned that it was probably a permanent magnet synchronous motor using ferrite magnets i don't believe so but anyway um man said that in r d these guys in r d developed a new technology with no rails inside by the way he was using induction motors until three years ago four years ago so And from R&D to things getting under the hood takes five years, so there is no reason to stress too much on this. um if you compare uh existing technologies induction motors to a permanent magnet motor permanent magnet motor will be twice lighter twice smaller and around 20 percent more energy efficient with specifically a point to make here very clear the energy you save depends on how you use your car. So there is a difference between the guy who will use his car on the highway and not being too aggressive versus a guy who uses his car to go to work, stop and go all the time. So that's where you can say anything in the opposite because everything is in the cycle of the car. But at the end of the day, what we always say is in average, you would have 20% smaller battery or 20% longer range for your electric cars, which is substantial. And so that's why we are not worried too much on the demand of the magnets. The other point Munch said was that producing rays contaminates the planet. And I think this is the most important part of his comment. Mr. Mance, please pay attention to selecting your supplier because some are dirty and others are not. And like any industrial process, this can be managed properly, provided the buyer pays attention to it.

All right. Thanks, Paul and Amanda. Appreciate it.

Thank you.

Thank you for the questions. We have another question from the line of Paul Young of Common Text. One moment, please. Hello, Paul. Your line is now open. Please proceed with the questions.

Thank you. Good morning, Amanda. Sorry, I didn't realise the line was open. First question, Amanda, is... Yeah, hi there. First question is on the on the, with respect to the hearing for the appeal with the Minister of Mosty on the 28th of April. When do you expect an actual decision from that hearing and are there any other examples of similar hearings in Malaysia and how long it takes for the Minister to actually release a decision?

No, we don't know. We mentioned this in the report. We say there's no statutory timeframe under the Atomic Energy Licensing Act by when the Minister of MOSTI is required to make a decision. We've requested that those appeals are addressed urgently. We understand that that request is being received and indeed even the scheduling of the appeal hearing itself did reflect the fact that we had indicated the urgency of the matter.

Okay, thanks, Amanda. And another call's been going on for a while, so just one last one, second one for myself, and that's on just for cost modeling purposes. And, you know, assuming that, you know, LAMP did have to close temporarily for up to three months in December half, what percentage, roughly, what percentage of your, you know, $110 million of costs on a quarterly basis, and I understand that, of course, they include royalties, which is price dependent, but what percentage of the $110 million are actually fixed costs of LAMP?

Why not? Janice, do you have that number to hand? Yeah, sorry, go on.

Yeah. Paul, I think we can say 60% is in the variable category. And of the remaining one, you have a couple of elements, I would say semi-variable, like the utility. where it's a little bit of a mixed picture. But if you split that again, I would say probably 25%, 15%, 60%. But that's LAMP-specific. So Kalgoorlie obviously will be different depending on what volumes obviously we are running there. Thank you, Anastasios.

Just for modelling, it's not our intention to reduce production at Mount Wells. We don't mind actually building a bit of a stockpile. And, of course, you know, all costs are variable over time. And we will make decisions accordingly in Malaysia. But probably a good comparison would be, as I said, during the... COVID shutdown, we continue to operate Mountwell at normal rates whilst the lamp was shut down completely. So it gives you a good comparator.

Yeah, that's helpful. Thank you, Amanda and Gauden. Sorry, just one last one is actually just on, assuming you do have to shut down temporarily, I presume that means a complete shutdown of the SX circuit, you know, the 600... Well, so tanks and on that basis, you know, and when you restart that circuit, is there any sort of rule of thumb we should think about as far as how long it actually takes to restart the refinery and ramp up?

I'll let Paul say a few words there, but the first thing I would say is that, you know, in the last, even just in the last 18 months, we've had two instances where we have had the shutdown completely. And they were unplanned, right? So it was COVID. Yeah, we had sort of 48 hours worth of planning to the shutdown, but it wasn't really significant. And then of course we had the catastrophic water outage in September last year. So this will be a planned shutdown if we are required to shut. So therefore we will be able to ensure that we have things in equilibrium, things shut down not suddenly because when anything shuts down suddenly that's not such a great outcome. So we think that any restart will be absent some of the hiccups that we've had when we've restarted after unplanned shutdowns. But having said that, I'll allow Paul to make a few more comments on that without sort of guaranteeing anything because the world is always a bit of a challenge.

No, nothing to add to this. We've been trained extensively, thanks to our water supplier, into restarting the factory. So trust us, we are really experts in that. So it's a matter of hours. It's like Formula One experts, you know. If you pit stop for refueling, we are really on top of the game.

Thanks, Paul. Okay, thanks Paul. Thank you Paul and thanks Amanda.

And thank you for the questions. We do have a few more questions on the line. Next question is coming from Regan Burroughs from Bell Potter. One moment please.

Hi Amanda and team. Congratulations on the result this quarter. Just a quick one from me. Obviously, the focus is going to shift to getting Calcoly sort of up and running with the potential to spill over to next year. Just curious, does this sort of take away from your focus on the Mountwell concentrated capacity increase? And I guess how should we sort of think about the timeline to that? And then I guess a follow-on to that is, say, sort of hypothetically, the Malaysian licence isn't adjusted. Do we need to sort of anticipate, I guess, bottlenecks with getting to, I guess, your longer-term 12,000 run rate and, I guess, further requirements for capacity at Kalgoorlie.

Oh, well, might have only been one question, Regan, but it's got many facets, doesn't it? Our teams that are constructing and commissioning and will ramp up Kalgoorlie are different from our team that is working on the Mountwell expansion. that are both fully staffed owner's teams with relevant sort of contractor organisations. So no focus on Kalgoorlie does not in any way detract from a focus on the Mount World expansion. In fact, it's been a while since we've done a $500 million project, like a decade. And so the learnings that we've had from Kalgoorlie are certainly being applied into our Mount World expansion. And we think that that is to its benefit rather than its detriment. Yes, we are looking at what is phase two Kalgoorlie. I mean, we've certainly not wanted our Kalgoorlie team being distracted from phase one to be thinking about phase two. until we have it fully constructed, commissioned and ramped up. But certainly our facility at Kalgoorlie has been designed with an understanding that we may seek to do more there over time. Similarly, in Malaysia, given that we have an acceptable outcome from the appeal process, we have a series of actions that we would be keen to take there to further expand our capability. But I go back to, you know, we sort of like to do things with focus and so two $500 million projects today, one in Cal and one in Mount Weld is a plus for work in the lab to receive that material. This is keeping us pretty busy.

Certainly. Thanks. And I guess if I could squeeze one in, just on the shutdown planning you mentioned previously, do you sort of make it, I guess, do you have a view on when you're going to make that call? Is it going to be sort of right on the deadline or is this something that you're planning for, I guess, now?

No, we will run the cracking and leaching facility under any scenario until midnight on the 30th of June.

Got it. Thanks. I'll leave it there. Thank you very much.

Thanks, Regan.

We have another question from Austin Luce from Bluebird Capital. Please go ahead.

Hi, good morning. Amanda, congratulations on the fantastic results. My question today is about pricing. I mean, clearly there's a very strong demand for the product outside of China, but it seems like there is, is there a bifurcation between all of the markets in the non-China market versus the Chinese market? Because even though there's a strong demand outside of China for your product, pricing seems to be affected by the oversupply onshore. Can you comment a little bit about that? Is it possible for that linkage to be somewhat broken over time? Thank you.

Thanks, Austin. Once again, I'll invite Paul to comment on this as well. But the dynamics for rare earths pricing is, are always more complex than simply supply and demand. It's maybe got a little bit more aligned in recent years than, you know, sort of some years ago. We would see the price, you know, fluctuate on a rumour, you know, someone's going to do this or the government's going to make this new policy or otherwise. So at present, I think, yes, the demand inside China is soft. I think at present you also see some jockeying inside China for market share, which is another sort of influence on the pricing. And then of course there is sort of some consideration also to how certain of the Chinese firms might be seeking to manage the purchase of materials from outside China. So I think there's a variety of different dynamics which are at work and they will affect short term prices. But we know that the big Chinese firms are very confident in continued growth in the market. and that's inside China as well as sort of the outside China demand. So we would expect to see this normalize over time. Paul, did you want to add anything to that?

Well, just a few ones. The question related to whether we could have two different markets, one China and the other outside China, I think it's long past that the world is one single planet. The market is global. And while there is a bit of benefit recognized and therefore paid for securing a non-Chinese supply chain and probably increasing appetite for that, the world remains global. So you can't fully disconnect one versus the other. The other point is you mentioned rumors. It's just amazing how often and still we get fake rumors and news on the lack of transparency of prices of reels in China so that they would be manipulated, not representative of reality. I saw last week someone in publication, probably a very good expert on reels again, saying that the published price of reels is lower but the real price inside China is higher so that the non-Chinese suppliers are suffering whereas the ones in China are enjoying life. I can tell you the price is published on any website like Asian Metal or otherwise, absolutely in line with the reality of the business and it's pretty transparent and there is no reason in the real business to not believe that because everyone in the real business knows that this is well-representing. Currently, the demand inside China is weak. The economy, especially the real estate economy, the business is poor, so that affects the demand. So we go through a period of time of a weaker demand and, you know, things going down will go up someday and vice versa, so... No reason to worry and no reason to imagine that there is very sophisticated manipulation behind that.

Thanks for that. Thanks for the comments and all the best with the appeal. Thank you.

Thanks, Austin.

Thank you. Lastly, we have a live from Daniel Bolton from Barron Joint. Please ask your follow-up questions.

Sorry, guys. I just didn't think the call was long enough. Just a question on the quotas. I mean, when the quota came out in China, plus 17%, I think the figure was, year on year, it was a big number. At that time, it didn't really seem to reflect the strength of the economy or what would be the downstream demand. Why such a big number, in your opinion, for the Chinese rare earth industry? Have they just misjudged demand?

Over to you, Paul.

No. No, here I think I would take it as a part of the country's strategy of China China, if you look at their recent change in regulation from government, basically addressing the technology controls, say that anything related to rears cracking, separation, magnet making, metal making, et cetera, all this technology is strictly banned for export, in other words, If you are a Chinese citizen caught helping a foreign company developing a factory like LAMP or magnet making, etc., you go to jail, which is probably unpleasant, as far as I was told. And at the same time, all the mining sector, so any Chinese who will help the mining sector can be allowed to do so in the new category called restricted, which means that under conditions, under conditions that the raw material ends up in China, you can help foreign companies to develop their mining activities. So clearly China wants to secure their downstream dominance. And so increasing production quotas helps to secure that because then they can use at a higher rate their capacities and hurt a lot. And I guess they hurt a lot, especially newcomers, junior companies. who were betting on $120 a kilogram of NDPR forever for their financing and all of a sudden are facing difficult times because it's not that high. So the aim is to really maintain this dominance downstream and so limiting newcomers to come in the game is important for them and that's what they're doing. That's how I understand because they know very well that the demand was a bit weaker. So that's the only reason they did that.

And Paul, let's news on Myanmar, the regulations regarding mining there, is that something we should pay attention to or not? What are people saying in the trade?

I think anything related to regulation in this part of the world is difficult to address through official news actually. It's kind of a grey area, so, yeah, I can't commit more than this.

Okay, and last question, I'll let you go. But I think the overseeing minister a while ago, maybe two years, said we, i.e. China, are selling our product at an earth price, not a rare price. If I recall, the price was about 70 a kilo back then.

Oh, no, it was about 35 when he said that.

Yeah. Are we in that? Are we in that category now where the Chinese industry or some people in the Chinese industry or players are feeling the pressure and maybe they're not getting the economic rent that they could out of this industry?

Obviously, I mean, again, I repeat what I said. If you run the numbers, look at the published concentrate price imported into China from US, for instance, at the cost, you will see that the non-integrated Chinese players are are suffering these days because the current prices are very close to their cash costs.

Thank you very much, Amanda, Paul. Go ahead, Anson.

Thanks, Daniel.

Thank you. We have no more questions on the line. I'd like to hand the call back to Amanda for closing.

Okay. Once again, thank you, everybody. Like I said, terrific presentation. Absolutely terrific quarter in terms of our operations, and we look forward to continuing to grow this business. And for any of my Malaysian colleagues who may be online, I'll just say salamat hari raya for tomorrow. Thank you all.

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