Lynas Rare Earths Limited

Good day and thank you for standing by. Welcome to Linus Rare Earth's quarterly results briefing. At this time, all participants are in a 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 1 and 1 on your telephone keypad. You will then hear an automated message saying your hand is raised. To withdraw your question, please press star 1 and 1 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 our investor briefing for the September quarter of FY26. Today's briefing will be presented by Amanda LaCaze, CEO and Managing Director, and joining Amanda today are Gardin Sturzenegger, CFO, Daniel Havas, VP Strategy and Investor Relations, Chris Jenny, VP Sales and Market Development, and Sarah Leonard, General Counsel and Company Secretary. I'll now hand over to Amanda LaCaze. Please go ahead, Amanda.

Thanks, Jen, and good morning, everybody. Thank you all for joining us this morning. And I am sure, because I actually have a sneak preview, that there are many questions. There are many in the queue already, so I will keep my introductory comments relatively short. I expect many of you will want to talk about the various geopolitics. We do live in an interesting world, don't we? But I want to start by talking about our business performance because, you know, we had a strong quarter in terms of business operations. The operating cash flow at about 55 million positive was a really pleasing return to a more – what we would see as a – a better level and we see that, as we look at current market settings, gives us quite a deal of confidence as we move forward. Of course, we are still seeing some runoff, particularly associated with the major projects, particularly Mount Wells, but that should mostly be flushed through the system by the end of this calendar year. That strong operating cash flow of course reflects sales. I know that everyone likes to get very focused on production numbers and of course we are very focused on production numbers but what actually matters is what we sell. We don't bank tons, we bank dollars and so we had a good quarter in terms of sales at $200 million for the quarter. the best in several years reflecting both the higher volume and also the higher prices that were achieved during the quarter. Production at just over 2,000 tonnes of NDPR and sort of very positively nearly 4,000 tonnes in total. I thought it was quite interesting that we've seen a number of comments about, well, it was a bit less than what was expected, but then when I really interrogated those, we're talking about less than 100 tonnes being the difference between expectation and performance. Put that in perspective, it's about four days' production for us. you know, we had our production where we wanted our production to be. It served all of our key customers without creating any supply side pressure or causing us to need to sell ahead of finalising a number of agreements on which we are working. With respect to the heavies, and, you know, I may regret the fact that, no, on the heavies, we have for the first time disclosed the amount of DYTB. And once again, I read some commentary about it being a bit lower than was expected. And I would remind everyone that, you know, the way that we have characterised the DYTB circus that we've got at Malaysia at present is it was really an opportunity, you know, sort of development for us. We had some mixer settlers available. It's just a small circuit, which is selectively separating a portion of the DYTB, not even all of it within the SEGH that we've produced alongside our current NDPR. But sufficient to test the market ahead of our larger expansions. I would also just to assist people to understand that we're not actually selling our SEGH into the market at all at present. We are stockpiling it ahead of future processing capability. And then in response to some of the questions I've had about, you know, sort of sales volumes and how quickly do they come online, some are done and dusted. Others, This is a new product and customers have certain qualification periods. Suffice to say that in terms of testing the market, we have identified extremely strong demand and we have also identified a preparedness to pay because of the scarcity of the material from outside China sources and of course, That is the reason why it is the first of our Towards 2030 projects that we will be bringing online, which is the full-scale HRE separation facility. And to do the full-scale separation requires us ultimately to put in a new building, put in new mix of settlers, precipitation, filtration and furnaces. But we, as I think everybody who follows us knows, we are always keen to move as quickly as we can. And so we have looked at what are opportunities to incrementally increase production as we move forward with the larger plan. And that includes, you know, doing some work with our current SX configuration, which would allow us to bring Sumerium online, Sumerium production online in the first half of 2026 calendar year. And Sumerium is an element which is In demand at present, we require those customers who need it to finalise some agreements with us on price. As I said, the little circuit that we've got at present is sufficient to have given us an opportunity to test the market. And as we think about how we derive a value from our heavies, it is a combination of the margin just on the sale of the heavies. But bear in mind, it's relatively small markets. You know, the total outside China market for DY, we estimated about 400 tonnes. So, you know, there's a certain amount which comes from just the pure margin on sales. And more beneficially, really, in the medium to long term, is the ability to bundle it with our other product in a way that serves customers' total needs rather than them having to have multiple suppliers. During the quarter, operations ran very smoothly. At Mount Weld, we operated on our old plant for most of the quarter as we were completing our commissioning activities for the new plant, which are progressing to plan. And we had a pretty exciting time where, as we're bringing on our new gas hybrid renewable power station, we were able to run the plant for, I think, close to a week on 100% renewable power only. And that's pretty exciting for everybody in Linus. In Kalgoorlie, as we've identified, we've made certain flow sheet adjustments, which are now delivering results. and we expect now to be able to progressively ramp up production in very good order. And at the LAMP, running very smoothly, but as we've indicated in the release, we will be doing these tie-in works for SM and SX during this quarter. That alongside some of the continuing market volatility means that we are going to manage our production rates very carefully and make trim to accommodate some of that tie-in work because we see the early production of samarium as being very valuable. During the quarter, many of you who were on the call participated in our capital raise, which sets us up for the next stage of growth, creatively named towards 2030. We've already disclosed some of the areas where we will be utilising that funding, the new HRE plant in Malaysia being the most significant. And then we've also released two magnet non-binding MOUs, but I can assure you that we are progressing to definitive documentation of those MOUs as quickly as possible. We are also continuing to negotiate long-term supply agreements with key end-users in each of the sort of key categories, so magnifiers most certainly, but also electronics. I mean, you know, this is a high-demand market and particularly in terms of microcapacitors, significant growth and a preparedness to pay for quality which Linus can deliver. So then turning a little to the geopolitics and the effect on the market. And I say again that we are managing carefully and sort of managing risk as we look into this very volatile market. But let's suffice to say that Rare Earths has... Well, in our view, because we think rare earths is the most important thing, we wake up thinking about it in the morning and go to bed thinking about it at night. But it's definitely got the attention that it deserves from various different governments. And as you look at some of the announcements that have been made, you can see that for now, the key focus has been on some of the development projects. And, you know, I would offer the view that this is because they are relatively easy for governments to execute with their current funding instruments. You know, every government has something like our EFA or has other sort of, you know, Some of the other sort of policy initiatives are a little more complex and will require governments to think about some different systems to be able to support it. But I would assure you that governments do understand that this is not a simple supply-side fix, even though some of the announcements may lead you to think that they think that right now. There is a recognition that there is a market failure which is shown in the price and also in the development of processing capability, including metals and magnets outside of China. And it's actually a little less about resource, but resource has a very long lead time, but it is more about market failure. And I think as everybody who's even sort of a passing observer would know, the MP deal does address all these elements. It addresses the issue of market failure with the price floor. It addresses the issue of market failure and processing with its support for the development of magnet making in the US. And I think that it seemed to come out of nowhere, but MP was facing an existential crisis as a result of, you know, the tariff and trade restrictions between China and the US and, you know, sort of the timely implementation of that there was important. But I think that what we're seeing right now is many governments who are actually working together. You know, we're looking forward to hearing some... expected outcomes from the G7, to ensure that the policy settings are right and that, you know, the like-minded governments are aligned in their approach. And I think governments also understand that there is no use pouring capital into this sector if the businesses can't be profitable in the long term. And, of course, that is the importance of getting the policy settings right, particularly on price. For Linus, yeah, because as I said before, we always like to get things done yesterday. Working with government can sometimes be a little frustrating because things take the time that things take. However, I would remind everyone that as the only proven operator in the current proven supply chain, we have options and we have value. And we will not spend that value cheaply. But whilst the market continues to be volatile, we will manage prudently. And I would simply point you to our track record of ensuring that we do get full value from whatever dynamics we see in the market. So for us, as we look at this, we see a good quarter in terms of performance, the uplift in price. Because we are a current producer, it's flowing through into our bank accounts immediately, and we continue to see the international focus on the rare earths market. is ultimately a very positive thing for Linus and look forward to sharing with you in the future some better outcomes in that space.