Lynas Rare Earths Limited

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

Good morning and welcome to the Linus Rare Earth investor briefing for the quarter ending 30 June 2024. Today's briefing will be presented by Amanda Lacaze, CEO and Managing Director of And joining Amanda today are Gardin Sturzenegger, CFO, Daniel Havis, VP 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. I see we have plenty of people on the call, which is always a delight. During the quarter, the first shipment of mixed rare earth carbonate left Kalgoorlie. After the incredible challenge of constructing that plant on the previously very constrained timelines, this was certainly a milestone to be celebrated. But frankly, we were all just a bit too busy to spend much time celebrating. I think that the quarter could best be described one where our internal focus remained firmly on improving efficiencies reducing costs and continually challenging ourselves to find new ways to improve and flourish in a tough market and of course to continue to deliver on our growth projects which will deliver extra capacity and but will also, importantly, deliver greater efficiencies, improve safety via new automation processes, and new revenue and margin via initiatives like our new DYTB separation circuit in Malaysia. I think everyone on the call knows the price of NDPR is stubbornly sticking at five-year lows. We all knew it would come off its very highest highs, but these lows really reflect continued slow conditions in the Chinese economy, and we watch with interest as we see the various economic initiatives being taken there. Despite those low prices, we're pleased to continue to report positive operating cash flow. That reflects our ongoing commitment to continuously improving our cost competitiveness and we are confident that alongside Northern Rare Earths, we're the only two firms that can be profitable at these price levels. Free cash flow, as pointed out by some keen observers, I was reading one of your reports is negative, but that's not surprising given the large capital projects that we are still completing. And that is our choice as we continue to prepare for future market growth. However, as also identified by certain keen observers, we are not accelerating the Calvioli ramp-up as we may have done under different market conditions. During the quarter production volumes were down but actually well aligned to the market and we continued to meet all customer needs from that production and a slight reduction in the inventory that we held at the end of the previous quarter. The bearing failure in Malaysia was not forecast but really on reflection was not completely unexpected. As one of our people noted, he had been working for over 10 years, God rest his soul. With the extra capacity coming online at Kalgoorlie, we now have the opportunity to plan some additional work at Malaysia, which is consistent with the age of the plant. And we will provide some further updates on that when we deliver the annual results at the end of August. And some other exciting news, which is canvassed in the report, we now have Carey Mining on site. Carey Mining is the first Aboriginal owned business in Australia. Daniel originally set this up about 30 years ago. It's very exciting to have them involved. Daniel grew up in the Laverton area and has a strong connection to country. They bring with them new kit which is really quite exciting to see on site. And the deployment of people and equipment to site has gone very smoothly, and we look forward to a long and productive relationship with Keri. During the quarter, we also announced the very efficient implementation of a new circuit in Malaysia to separate our dysprosium and terbium. These are materials which are required in high performance magnets and we have the great benefit of course now in Malaysia of being able to continuously improve and enhance the operations at that plant now that we have confidence about our ongoing presence. And then, of course, we had and we've included at least one picture, I think, the energisation of stage one of the Mount Weld expansion and great progress on phase two. For any of you who have visited Mount Weld coming to visit now, you will see that the site really looks very different from what it's looked like over the past decade. as we complete this really significant expansion. Work on that project is proceeding very well and we're really pleased with the fact that stage one will be fully commissioned and tied in with current operations over the next few months. which will allow us to progressively increase mount weld output as we de-bottleneck the de-watering stage. And then, of course, Kalgoorlie, and I'm sure some of you will be at Diggers and Dealers in a couple of weeks, and I know that you will be very impressed by this facility. I was there a couple of weeks ago, and it really – It is a thing of beauty to see a brand new sparkling plant. It's even better to know that it is operating as designed. And we've got a number of initiatives there which really go to this point about efficiency and automation. We mentioned one of them in here which is the use of what we call rotainers, which are basically bulk in containers, which we fill at Mount Weld, so we don't need to have the manual labour to fill the bags, which then are fully automated, operated by someone with what really looks a bit like a Nintendo game console, to lift that container and tip it into the hopper and then bring it back down. So all really very exciting. We are approaching the end of our very heavy capital investment phase with Mount World expected to complete this year. The land industrial plan, the continued enhancement of our facilities in Malaysia on track and the Kalgoorlie ramp up proceeding. We will continue to focus on pushing operating costs down Key areas of focus in that include, clearly, everybody here who even knows a little bit about mining will know that recoveries equal margin. We have significantly lifted recoveries at each of Mount Weld and Minus Malaysia. And as we bring on our new, particularly at Mount Weld, our new facilities, we will be able to improve that further as we bring in our fine grinding circuit. Last night, you would have seen that we released an announcement with respect to signing contracts with Zenith as a builder and operator of a gas-firmed hybrid renewable power station at Mount Weld. And that has always been part of that program is to identify ways that we can, as we increase our energy consumption, do it in a way that is consistent with our ESG objectives. So all in all, a fairly, in some ways, uneventful quarter, very much focused on ensuring that we continue to improve our business So that we, you know, remembering that our business is not about what we produce, but it's about how much money we make. And so really we are managing all of our activities at present to ensure that we maximize margins and profitability and what continues to be a very challenging market. And with that, I am happy to take questions.

Thank you. We will now conduct the question and answer session. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by as we compile the Q&A roster. Our first question comes from Chen Jian of Bank of America. Please go ahead.

Good morning, Amanda. Thank you for taking my questions. Three questions from me, please. So congrats on the additional heavy wares capacity from Malaysia. I'm just wondering how should we think of the total heavy wares you can produce from from Mount Well, which won't change, does that mean the heavy rare earth you are going to produce from US is going to be reduced? How should we think about the phase talk? Thank you, Amanda.

Thanks, Chen. So at this stage, we are considering feeding both facilities with material from Mount Well, but we are also... discussing with the various different projects which are focused on producing materials which have heavy rare earths in them about potential future supply. As you know, there are many projects. relatively little production outside of Southeast Asia at this stage, with the exception of one in South America. But we are actively engaged. We certainly would like to see additional material come into the market. But if not, we will see from our Mountwell deposit.

Right, thanks for that. Just a follow-up, Amanda, do you have to change your minewell mining plan in order to do that?

We will, and I think I've flagged this previously. I think that, you know, over the past decade, we've primarily mined as miners will for grade. However, with the additional drilling that we've done, particularly over the last couple of years, we have a much better understanding of our ore body by element as well as by grade and so we do have the opportunity to become much more sophisticated in our mining plan and to mine by element as well so that will allow us to really look at ways to optimize the the the amount of heavies within our within our mining program. The other thing is that over the last number of years, as we talk about recoveries, our absolute laser focus has been on NDPR recoveries. The current process does not work as efficiently for our heavies, and we're doing a lot of metallurgical test work at present. to increase the proportion of heavies, particularly DYTB, that we've recovered through the process. And it's highly prospective and we're pretty confident about being able to improve recovery rates as well. So together, the optimising the mine plan and improving the recovery rates will give us a much better profile in terms of feedstock.

Sure. Thank you so much, Amanda, for your color. Maybe last question on the sulfuric asset from BHP's nickel waste closure. I understand that BHP will continue to supply the sulfuric asset by importing from the Sabor market. I'm just wondering who's going to bear the cost of importing? Is that BHP or online until 2027? And then what's the plan after 2027? Thank you.

Okay, so we are actively engaged in discussions with BHP at present. As you would appreciate, some of those are actually commercial and confidence. We will provide a further update. Suffice to say that in, as we indicated, We have a contract with BHP. It is a contract which requires best efforts to continue to supply us right from the beginning. It always conceived of there being times where imported acid would be required alongside that produced from the smelter because, of course, there were major maintenance shuts which were going to occur at the smelter in any case. And I think we have the direct relationship with BHP. I think also that most people would be alert to the fact that we are not the only sulfuric acid user in WA or indeed the only sulfuric acid customer of BHP. And so there are industry initiatives looking at how does this logistics chain work get rebuilt so that it works for inbound, not just outbound sulfuric acid management. So look, we're working on it, Chen. It's not as easy as our sulfuric in Malaysia, which is literally over the back fence, but we are confident that we can find a pathway through it.

Sure, sure. Thanks, Amanda. I have more questions, but I will be passing now. I'll be back to the line later. Thank you.

Thank you.

Thank you.

Our next question comes from Austin Yun of Macquarie. Please go ahead.

Morning, Amanda and the team. Two questions for me, please. The first one is on the downstream production in Malaysia. I understand that one of your accounts was offline for one month. I just came to understand how should we think about the production ramp-up and the production profile for the next six months to come back with the second one. Thank you.

Okay. So, as I just indicated, it's a timely reminder of the fact that we properly, in the period when... We had the challenges on the license, fully depreciated the cracking and leaching plant in Malaysia and operated RNM on the basis of recognizing that it might be a time bound facility. It is now time for us to reconsider what needs to be done there for a plant which is you know, a decade old in, you know, I think most people would say, fairly, you know, sort of the environment. It's a hot and humid environment. You know, the facility itself is, you know, sort of quite challenging. And so we are, our maintenance team is really assessing all of these items. Actually, a bearing failure is not something that they can easily predict. But looking at how do we make sure that we do all of the work which is necessary to set this facility up for the next 10 years is the key task of our team in Malaysia at present. I will give you a further update on that when we announce our annual results at the end of August. But we certainly, you know, this is the area now that we've got Kalgoorlie online that we do have some headroom in terms of capacity. So we will make our plan to optimize production and to align it to market conditions.

Okay. Thank you, Amanda. I just want to clarify to make sure that I understand it properly. So are you expecting to do more major maintenance at the accumulation simulation, which means lower production rate and higher capex for the next six months in Malaysia, while the production shortfall could be met by the kaguli ramp-up. Is that the right way to understand it?

No, almost. But the first thing is that we have, and we've already indicated to the market, and what we call the LAMP industrial plan, which is about optimising, improving, maintaining, et cetera, the LAMP facility. And so any capital will be covered within that envelope, so you don't need to be putting in additional capital into your plan. the way that I mean none of it is sort of like tomorrow urgent it just is work that needs to be done and we have the opportunity now to be able to schedule accordingly and once again because the market is muted let's say that's a nice word we certainly have the opportunity to make sure that we plan in a way that is aligned with the market rather than just pumping out as much NDPR as we possibly can.

Okay, thank you. My second question is around the esophageal acid. Just trying to understand the acid usage intensity, like if, you know, for one time of concentrated process, Will the consumption be around 1.5 to 2 tonne of asset? Is that the right way to think about how much asset you need? And also, do you have any plans to build your own sulfuric acid plant beyond the medium term? Thank you.

So we don't actually disclose how much acid we use. It is a significant input into the process. Do we build our own sulfuric acid plant? Very expensive. Maybe if the government was keen to gift us some money, maybe we might think about doing it. But it is certainly part of the assessment of potential options for ongoing supply and was always part of our thinking, which is one of the reasons why we set the initial contract to get us through early stage commissioning and operation and gave us the opportunity to really look at a variety of other solutions for that sulfuric acid requirement. So, yeah, look, that's all I can tell you at this stage. We will provide further updates as we move through this process.

Thank you, Amanda. I'll pass it on.

Thank you. Our next question comes from Paul Young of Goldman Sachs. Please go ahead.

Thanks. Morning, Amanda and Sam. Amanda, a few questions on the market. Pretty strong, I think, of you coming through that you're only going to ramp up as demand in the market improves, which I think is sensible. But just a few questions around your inventory, NDPR inventory. I think you had 500 tonnes at the end of the March quarter. Did you continue to... build inventory in the June quarter and also to build an inventory, that decision, was that a voluntary decision or are you actually getting some pushback from some of your customers saying they can't take the volume?

Oh, no, no, no. We deliberately built the inventory because we had customers, we had demand for anything that we produced. Some of that is from customers who are inside China, but we have a very deliberate strategy to not sell into the spot market, and we also have a very deliberate strategy to not be selling material that others may put into inventory and hold for when the price improves, when we can actually afford to carry that inventory ourselves. For some of us, we can remember selling NDPR at $29 a kilo in 2016. I think that Paul and I both had this tattooed on our foreheads. At that stage, we didn't have the option. because we were on a knife edge in terms of cash flow. Today, we have the option to choose to hold the inventory until the price improves. We did actually reduce the inventory by a couple of hundred tonnes during this quarter.

Okay, that's good to know. And then Amanda, just on future offtake and expansion, you've had this question a few times. I mean, there's still quite a few emerging earth companies who are stating that, They believe they can sign higher fixed price contracts in the order of $100 a kilo with emerging magnet producers, existing magnet producers. And you stated that no one's making money at $50, $60 a kilo and we know that nothing really works as far as the higher quality projects unless you do have an $80 a kilo long run price. So The question I have, though, is that do you have the ability to actually and the flex to actually potentially go sign fixed price contracts, higher fixed price contracts with non-Japanese magnet producers, i.e. Germany, in Germany, in Korea, in the US? Do you have that ability to go and sell fixed price contracts to the non-Japanese magnet industry?

Sure, absolutely. And, you know... I won't comment on other people's assertions except to say that we actually run a business, not a spreadsheet. And so we have contracts with European customers and we have some of those which are, you know, I know people sort of talk about these as their new pricing models. We have some which are fixed price. We have some which are floor ceilings. And we have some which are sort of pegged to the published market price. We've always thought that the best way for us to be able to optimize pricing was to have a portfolio of pricing constructs. And we continue to have that today. The only thing that I could tell you is that we do engage with all, you know, sort of both magnet makers and magnet buyers, you know, sort of the large magnet buyers. I have yet anyone to say to me, you know, I'd be delighted to sign a fixed price contract at $80 a kilo. I mean, I could assure you that we would have that signed, sealed and delivered within hours. So I'm I think that recognising that as the market changes over time, so too do customers' expectations and part of the art of selling is to understand the right time to strike those relevant contracts. There are things that I think will improve some of the buyer activity including the most recent critical minerals regulations which are being brought in by the EU and I think that that does provide further opportunities for us to engage effectively in that market but I think that anyone who thinks that we just make stuff and then whoever feels like buying it for whatever price they feel like buying it, that we sell it to them, doesn't truly understand the level of focus and attention this gets in our business. And I think that you can see quite clearly in the results that we consistently deliver better outcomes than than just the published market price would suggest, which reflects the fact that we don't just sell at spot price to whoever happens to ring up that day.

Yep. Okay. Thanks, Amanda. Understood. Just last one, just on the numbers, maybe bring Gaudenz into it. Just on Kalgoorlie and the cost there, are you still capitalising or is it included in the $131 million in CAPEX or actually expensing within the $84 million in the quarter of OPEX?

We are still capitalising. We expect to reach a stage where we would meet the accounting requirements that would allow us to then move it off the capital account and into operating expenses.

Okay, great. All right. Thanks, Amanda.

Thank you. Thank you. Our next question comes from Daniel Morgan of Baron Joey. Please go ahead.

Hi, Amanda and Tim. So I understand the ramp-up of your business is subject to market conditions, which absolutely makes sense. Should I expect that production should be at about a 7,000 tonne per annum run rate until the market improves?

Is that about right? So I think that's an excellent question, Danielle. You will have noted that we rarely give detailed guidance on production and it's not my intention to do so today. Having said that, we are absolutely alert to sort of the various statements that we've made over time particularly with respect to linus 2025 and we feel that it is important in this coming financial year that we demonstrate our ability to be able to produce at those sorts of rates but we will make a choice on when we do that according to market conditions okay um should i should we expect um Sorry, Daniel, I won't be too cute about it. You should expect that we are not going to start, well, we have not started the year and said, okay, let's go for 10,500 tonnes this financial year. Clearly, it would not be a sensible thing for us to do with the market the way that it is at present. But we are keeping a close watching brief on inventory levels within China. There has been some destocking, and as we see more of that occur, we will make decisions about how we dial up or dial down our production.

Okay, that's sensible, of course. On China, what do you make of the latest China government policies on the industry there, and what does greater control there entail? or consolidation there mean for your business? However you want to answer that question.

Generally speaking, when the China central government exercises more rather than less control, the market does appear to operate more functionally. And so that means That sort of seems at odds with an underlying belief in sort of free market activity, but there are many dynamics in the Chinese market, many more than just what the central government does. It's what state governments do. You still have some independent producers, particularly a a lot of independent producers of magnets. So you can have a variety of different dynamics, all sort of not necessarily going in the same direction. And we saw this in 2015 and 2016 with the sort of really significant production of illegally produced IE not licensed materials. And when the government stepped in and really took control of that was when you started to see the market function more rationally. So on balance, is it a good thing for the Chinese government, given the Chinese environment and ecosystem, we would see it as probably more likely to be positive than negative, but, you know, it's difficult to forecast what will ever happen inside China. Suffice to say that the Chinese industry is, you know, other than, as I said earlier, you know, our assessment is Northern Rare Earths and Linus are... able to continue to be profitable because of our low operating costs. And I think that there is a recognition that always has been in China that the industry is important for China's economic success and will continue to take actions to improve it.

Thank you. Just last question. Has MRAC, and I mean Kalgoorlie-sourced MRAC, has that made it through the back end of the Malaysian plant as of yet, or is that still to come?

Not yet, but it's on site. It's unloaded. We're sort of working on the basis of we just have to manage how we batch it through in the first instance so that we've got the opportunity to really assess it. But we've got nothing at this stage which makes us any more nervous than you ever are when you start a new process.

Okay. Thank you so much for your perspectives, Amanda.

Thanks, Danielle. Thank you. Our next question comes from Dhim Arushan from UBS. Please go ahead.

Dhim Arushan Thanks, Amanda. First question from me. Just on the heavy-rare announcement that you made a while back, is there anything you can do or say to help us quantify that, the revenue uplift, and give you some value for it?

That's my first question. Not really.

Can I ask?

I know it would be hard. Maybe I'll ask it differently. I think I know the answer, but I guess why now? Maybe I'm missing something. I think I know the answer, but this is an option that was available to you years ago. or is this something that you're doing now because of where the market's at and you're just trying to optimise, I guess?

Okay. All right. So the answer on that, well, first up, we will get a margin uplift from separating DY and TB, right? And, you know, it will, bearing in mind that they're still relatively small volumes, I don't want to, you know, sort of overstate it. But the benefit to us from being able to separate our own DYTB is that we are able to then offer magnet makers and other higher, there are some higher value sectors that utilize those materials. We are able to offer those materials either as a package with our NDPR to magnet makers otherwise. So it is about enhancing the product range as well as improving the margin that we are able to generate from that material. Bearing in mind that these days and I know that there's lots and lots and lots of discussion about DYTB prices alongside all of the discussion about NDPR prices but you know five or six years or ten years ago you typically used about 1 to 10, actually it was even higher than that previously in high performance magnets, a ratio of about 1 to 10 HRE to NDPR, DYTB to NDPR. That's actually dropped back to about 1 to 14 these days. A lot of focus from magnet makers and magnet users on ways to continuously improve their magnet and their magnet coercivity. So magnetic properties above 100 degrees. But it remains an interesting market. And for us, the ability to generate full value from the materials within the Mountwell's ore body is and always has been key to our strategy. Why didn't we do it earlier? Well, for a variety of reasons. When we first looked at this, on my watch anyway, we didn't do it because we didn't have any money. Then as we moved through, we then sort of hit 2018 with some of the challenges with the licensed situation in Malaysia. You guys would have hung me if we'd sort of talked about making any sort of significant investment in Malaysia with that hanging over us. We have clarity on the path forward in Malaysia. It's by far the most efficient way for us to enhance production and so that's what we're doing.

Is that the answer you thought, Jim? Maybe I can try a little bit more. It needs to go into a cell. So if I assume a 40% discount to, you know, so SEG to heavier error, does that narrow to 20%? I guess it's maybe too early to figure that out, but...

I don't have that number off the top of my head, Jim, sorry, but I'm sure that Danielle and Gavin will be happy to have a bit more discussion with you to give you a bit more on that off the call.

Yeah, yeah, cool. And then maybe another question, just helping quantify. But with the sulfuric acid issue, I guess the first thing is I don't expect there to be any or do you expect any issue for sulfuric acid or the variability impeding the ramp up? And again, rough numbers, I know you can't give us tons or usage, but sort of pie chart, 20% of your costs now, just for us to assess how material, which is your cost base, I guess, going forward.

Yeah, okay, so it won't impede the ramp up. Whilst the sort of ramp down at the smelter is relatively short term, there will be plenty of sulfuric still sitting in that tank for a while afterwards. We have enough headroom to be able to manage this transition. So we're good with that. And in terms of financial effect, we won't know that until we've actually resolved some of the logistics. So I'm sorry, but you'll just have to be a little bit more patient on that. Everybody knows that to operate facilities in Australia is more expensive than to operate them in Southeast Asia. And so we continue to work on ways to optimize our cost base. And a fair bit of that is associated with logistics. And we have some good plans to continue to improve that as we move forward. We do need the Kalgoorlie facility to be more efficient in terms of costs, and it is really at the top of our list. So having got the plant working now, a lot of our focus switches to improving cost competitiveness, and sulfuric will simply just be one of those elements.

Cool. Thanks. Just one last quick question. Just on, so I think Daniel and the others tried to get the best on the ramp up, just in particular with Mount Weld expansion. Is that on time versus, I guess, your original guidance or stage two a little bit behind schedule from my read? Is that?

It's a little bit, but the actual project is going really well. We did have to do some additional surveys as part of environmental approvals earlier this year. Once again, it's all about the market. If the market was strong, then we would. put our foot back on the accelerator all the way down to the floor. But it's not necessary to do that right now and speed always has some sort of cost associated with it. We think that the program as it stands works very well for us in terms of aligning to the market. As said, it's really important to note our current bottleneck at Mount Weld is the dewatering circuit. Stage one of the expansion is the dewatering circuit, so it allows us to release that bottleneck. It also replaces an area where we've always had challenges in terms of safe performance, and it automates that and takes human bodies out of the operation of our filter circuits. And so that will actually give us an interim step up And that interim step up we think will be sufficient for this financial year, which is the reason why we are now looking to complete, you know, by the end of the financial year rather than, you know, I think three years ago we were originally targeting sort of the end of the calendar year. But we don't see this as being anything other than properly aligned to our general business plan.

That's great. Okay, cool. Thank you. Thanks. I'll pass it on.

Thank you. Just a moment for our next question, please. Next question we have from Milan Tomic from JP Morgan. Please go ahead.

Yeah, thanks. And morning, Amanda and team. Just a question. The reconfiguration of the Malaysian solvent extraction circuit to produce heavies, I think you mentioned that that was going to take some NDPR oxide solvent extraction out. I'm just interested in that ratio. If I could put it in another way, if you get to 1,500 tonnes of heavies, does that take out 1,500 tonnes of NDPR oxide production? Or if you could just provide some colour on that ratio, it would be great.

Hi, Milan. Sorry, that is maybe a little bit misleading, the way that that's been stated. I'll just check on how we've stated it, because the intention is not to indicate that we have any reduction. In fact, we're increasing our NDPR production rates at Linus Malaysia. So currently, the circuits are configured to produce, oh sorry, up until now, the last circuits were configured to produce about 7,000. We have done the work on two of our trains to take that up to about 9,000 and we will at the right time do the additional work to take that up to 10,500 and potentially even 12,000 tons of NDPR. As part of that we put in some new circuits in our new MREC receivable area and so that has freed up some of the circuits that were previously used for NDPR separation and those are the ones that we're now repurposing for HRE. So the introduction of the HRE, certain separation does not have any effect on our plans for the ramp up of NDPR capacity.

Great. Thanks very much. And just another one on the heavy strategy. The U.S. RAIS update from August last year indicated an operational target timeframe of FY26, that recent update on the quantum heavy strategy, I think you mentioned that you have production starting then midway through calendar year 25. Are you able to just step us through the latest thoughts on sequencing of these two projects?

So of course we can do it much faster in Malaysia because we have a brownfield site and as I said, we're repurposing those particular circuits. It's also exclusively DYTB and a bit of Holmium separation. It's a more complex facility that we're talking about in the US, and we are continuing to progress with all of those pre-construction activities, including the design, the review we're working with our US government partners on that. In the meantime, the sooner we get the DYTB out of Malaysia, the better for everyone.

Thanks. That's all for me.

Thanks. Thank you. Just a moment for our next question. Next we have Matt Hope from AudMinet. Please go ahead.

Yeah, thanks, Matt. Just back on to Malaysia and Kalgoorlie. So just first with... Oh, sorry, Texas. Well, first with... Are you still planning to send the heavy, rare residues from Malaysia to Texas? Because, as you noted, there's really no third-party MRAC likely to be available from South America until, you know, 2028 at best. And it's just puzzling to see how you could produce 3,000 to 3,500 tonnes of heavies from Mount Waldor alone without those heavy residues.

So I'm not sure what you mean when you say the heavy residues. We produce SEG, which is a heavy rare earth compound in Malaysia. We do expect that. Yeah, that's what I was referring to. Yeah, yeah. So we will use some of that as feedstock in the U.S. And we will, you know, the current plan is also to feed the US with the mixed rare earth carbonate from Kalgoorlie. And once again, that will simply be optimized at the time according to demand, bearing in mind that, you know, as said, demand varies over time and I think this is one of the things which is really important. Once again I go back to we run a business, we don't run a production plant and understanding what the market needs, when it needs it and when and the fact that we produce materials which are used in technology applications and that varies over time. We see demand for DYTB going certainly a long way into the future. US government sees the importance of that, which is why they're supporting the development of that plant. We are fortunate that we have heavies in our deposit, but we are very happy to complement that with heavies from other sources as they come online.

Okay, so there's no... requirement for the government to produce a certain production level given they're funding it? No. Right okay and the second question was just I was wondering about whether there's been any evolution on your plans for Kalgoorlie about how to manage that high capacity over the longer term and do you know yet whether production can be flexed downwards and remain cost competitive?

Ah, so yeah, they're good questions. At present, we're really focused on getting it to target rates. Is our initial target to get to nameplate? No. Our initial target is to get to an interim production level that we see is consistent with the market and allows us to be cost competitive. But as I indicated before, as we ramp the facility up, We now are starting to switch focus into what can we do to improve efficiencies in that facility and ensure that it doesn't carry a cost penalty compared to the materials that we take through Malaysia. That will take some time but is very much sort of our focus as we get the facility operating.

All right, thanks for that. Thanks.

Thank you.

Well, we're just about on the hour, Maggie, so I think unless we've got anybody else in the queue, we're probably... We have... OK.

We have three more questions. Would you like to...?

Sure, sure.

OK.

I can't see the questions, so that's fine.

No problem. Our next question comes from Shannon Shinha from Morgan Stanley. Your line is open.

Hi Amanda and team. Again, towards the end, so all of the questions have been answered. But I thought I'd ask around the Mount World capex, just given that we saw the increase at Kalgoorlie capex last quarter, how that's running. Are you still confident in that capex budget?

Yes, if we were, we would have disclosed it, Shannon.

so it's running very well okay and I just had another question around the hybrid renewable energy at Mount Weld I was wondering it's obviously good from an ESG standpoint was there any impact costs from that at all or is it pretty much in line with what they are currently so as part of the Mount Weld expansion we increase our energy draw by

about, I'm not going to say the number, but significantly, right? So if we take that, and we indicated this in the announcements, we take that and we assume that that is served by a diesel power plant compared to being served by the solution that we've got, the cost per kilowatt hour is significantly reduced. So compared to today's energy draw, the cost is higher because today's energy draw is much lower. But bear in mind the Mount Weld expansion processes four times as much material. And we also have quite energy-hungry fine grinding circuit, which allows us to reprocess some of the material which we've currently got in the tailings and it allows us to improve recoveries. And so this is a very cost-effective solution for that increased power requirement in the future.

Great. Thanks for that. That's all from me. Thank you.

Thank you. Just a moment for our next question, please. Next, we have David Deckerbaum from TD Cowen. Your line is now open.

Thanks, Amanda and team, for hanging out a little while longer. I wanted to ask just one more on the heavy rare earths. Should we view this as a strategic attempt to perhaps open more commercial avenues for your business with new customers, new areas, or Is this perhaps just taking more control over your product over time so that you would have future optionality? I'm trying to get a sense of how imminent maybe this commercial opportunity would be.

There are new sectors that we don't participate in at present because we don't have separated DYTB. And then, of course, there are existing customers, which is in the making of magnets. And so some of the new sectors, which includes the electronics market, are very attractive to us and it gives us an opportunity to expand into those areas. And then, of course, as I said, for our existing Magnet Barn customers, being able to offer them sort of a package of NDPR and DYTB is potentially of significant value as well.

Appreciate that. Just a little bit on the details. I'm curious with the grant money that was received this quarter, was that specific to Australian projects from the Australian government or is that how you're accounting for some of the DOD support for C-Drift build-out?

I will get Gavin to confirm this, but that is a combination of grant monies received from both the Australian and the US government. Is that correct, Gavin?

It's a purely Australian project.

Okay.

Thank you.

Thank you. There are no other questions on my side. I will now pass back to Linus.

Okay. Well, once again, thank you all. I would just reiterate that the market is not as hot as it was a couple of years ago, but we remain very... We remain completely aligned with a medium and long-term view that it will continue to grow and therefore we continue to develop our business to be able to meet that future growth whilst really focusing on ensuring that we are profitable even at the lower price and more muted demand levels that we're seeing today. So again, thank you for your interest in our business and I'll look forward to speaking with you again in a month or so when we release our annual results. Thanks. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.