Lynas Rare Earths Limited

Good day and thank you for standing by. Welcome to Linair's quarterly results webcast conference call. 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 a session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To assure your question, please press star 11 again. please be advised that today's conference is being recorded. I would now like to hand over to Linus. Please go ahead.

Good morning and welcome to the Linus Reris Investor Briefing for the September quarter of 2023. Today's briefing will be presented by Amanda LaCasse, CEO and Managing Director, and joining Amanda are Gardin Sturzenegger, CFO, Paul LaRue, Chief Executive Officer, and Daniel Havas, VP Strategy and Investor Relations. I'll now hand over to Amanda. Please go ahead, Amanda. Thanks, Jen. And good morning to everybody.

Thank you again for joining us. Well, we have had another busy quarter, which means that we have a jam-packed quarterly report. To start with, I would just like to highlight what for us is really fabulous news which is that at Kalgoorlie all areas which are required for production, construction and commissioning is now complete and we have switched the kiln on. I say that in quotation marks, it's not quite switching it on, it's not like turning on the light when you walk into the room. But this is a major milestone and I know that everybody on the team is really very excited that we're there. We now have to go through a heat-up cycle and this will be followed with first production. So we're just going to take just a moment to enjoy that but I think the team is already very, very much engaged in the next steps. Moving on and just looking a little at the quarterly results, We had slightly lower production in the first quarter of FY24 compared to the final two quarters of FY23. That really reflected the fact that we had to do some planned and preventive maintenance on the cracking and leaching facility in Kwan Tan, maintenance which we had delayed in the previous quarter. The result of just over 1500 tonnes is still very good when we calculate it back to a daily production basis, taking out the lower equipment availability for the days that we were unable to operate the kilns because we were conducting maintenance. As I've indicated in the quarterly report, For the first time, actually, in the time that I've been in Linus, we did not sell every gram reproduced, not because we didn't have enough demand, but as we've explained in the report, we are still managing for potentially different scenarios over the next six months. which may include a variation in our licence conditions in Malaysia and certainly recognising that any ramp up of a plant of the size and complexity of Kalgoorlie is inherently unpredictable. So we have held some NDPR inventory within our own warehouses and we also have NDPR inventory sitting with our distributor to ensure that we will be able to provide supply continuity for our key customers. In addition, we have actually held some SEG inventory as well, which we're holding for purely commercial reasons as we see the price continuing to strengthen. It's been sensible to hold some of that back. The other very big news which we've included in this quarterly report is the fact that we have now decided that we will go ahead with our upgrade to LAMP downstream operations. And as we've explained in the report, we need this additional capacity in solvent extraction and product finishing under either of the two key scenarios that we're considering. If there is a revision to our licence conditions in Malaysia, then certainly we want the downstream plant in Malaysia to be able to process both material which is processed in the cracking and leaching facility in Malaysia and also the mixed rare earth carbonate that Malaysia will receive from the Kalgoorlie facility. If not, as we indicated last quarter, we now are able to produce up to 9,000 tonnes a year once we reach name plate capacity at Kalgoorlie and so therefore we need to increase our downstream in Malaysia. So this first stage where we'll be Making changes to about NDPR separation trains in solvent extraction will take us to the 10,500 tonnes which has always been our FY25, our Linus 25 target. The process that we'll be doing that is completely innovative and is something of which we're very proud because it's an in-house development. As we look at this, we are conservative as to production in the third quarter because we expect that solvent extraction circuits will have to equilibrate, come back into balance before we're able to achieve the significant uplift in production for which they'll be designed. In addition, we will be putting some extra equipment into product finishing once again, which will enhance efficiency, continuous precipitation circuits and some new furnaces in that area. They'll take a little longer, but we will be able to take advantage even with our current PF configuration once we have the ESSEC circuit stable and producing. So the decision to make these changes in the downstream area, as said, they're needed on any scenario. We're pretty excited to be doing them, but they will affect this quarter and next. And I think we've spoken for some time and foreshadowed the fact that this really, this financial year is an adjustment year. to ensure that we are in the strongest possible position as the market returns to what we hope will be better settings in the near future. The Mountwell project continues on track. We're very close to the end of stage one. This is a logical time for us to review stage two scoping costs, ensure that we've actually engineered this to give us the best possible efficiencies as we move forward. Our Stage 2 estimate is slightly up on the original estimate, but well within the sorts of variations you would expect at this stage of the project. Of course, during the quarter, and we've spoken to you previously about this when we released the annual results, finalized the Heavy Rare Earth Contract with the US Department of Defense. We're pretty excited about it. It's an expenditure-based contract under which all of our properly allocable construction costs will be reimbursed. The team is champing at the bit to move forward on this. We've had our US-based engineering partners in Kuantan for an extended period of time. working with our in-house engineers to ensure that we're able to move forward with that project on the most efficient basis possible. And of course in Malaysia we continue to engage with the Malaysian government and the regulators on the conditions associated with our licence and indeed also continue to pursue all of our rights under Malaysian law. And we think that this is important as parallel path to the much preferred pathway of actually reaching a better outcome with the regulators and the government. So as I said, a jam-packed quarter and a jam-packed quarterly report. Very exciting times for us. Everybody in the business has been sort of holding their breath as we wait for Kalgoorlie to come on and a smooth ramp up is now our target. A smooth and rapid ramp up is now our target. Also in Malaysia it's very exciting to see us be able to do some of the upgrades we're talking about there. So with that I know there's always loads and loads and loads of questions so I'll leave us with 50 minutes through to the end of the call so that I can take as many questions as possible.