MP Materials Corp.

Hello, everyone. Thank you for your patience. Welcome to the MP Materials fourth quarter 2021 financial results conference call and webcast. My name is Daisy and I'll be coordinating today's call. You will have the opportunity to ask a question at the end of the presentation. If you would like to register a question, please press star followed by one on your telephone keypads. I will now hand over to your host, Martin Sheehan, the head of investor relations from MP Materials. So, Martin, please go ahead.

Thank you, Operator, and good day, everyone. Welcome to MP Materials' fourth quarter 2021 earnings call. With me today are Jim Latinsky, Chairman and Chief Executive Officer of MP Materials, Michael Rosenthal, Chief Operating Officer, and Ryan Corbett, Chief Financial Officer. Before we get to Jim's, Michael's, and Ryan's opening remarks, as a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation, earnings release, and in our SEC filings. In addition, we have included some non-GAAP financial measures in this presentation. Reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today's presentation and earnings release. Any reference to our discussion today to EBITDA means adjusted EBITDA. Finally, the earnings release and slide presentation are available on our website. With that, I'll turn the call over to Jim. Jim?

Thanks, Martin, and thank you to everyone joining us this afternoon. I assume many of you saw or heard about the White House event on Tuesday announcing our new partnership with the Department of Defense. That was a really special day for all of us at MP Materials, so on behalf of the entire team, I wanted to again thank the President, the Department of Defense, and the State of California for all their confidence and support in us as we continue to execute on our mission to restore the full rare earth supply chain to the United States. It was a very busy quarter and year, and we have a lot of exciting things to discuss today. First, I will recap the highlights of a remarkable year. I will then provide some more detail on our December announcement regarding our initial Stage 3 magnetics facility and our agreement with General Motors. Next, Michael and I will cover our plans regarding our heavy rare earths expansion and give an update on Stage 2 process flow. Then, Ryan will summarize our financial performance, provide color on the new SK1300 Reserve Report, and discuss our upcoming investment and operating expectations. I would be remiss if I did not address the short reports, so I will do that before wrapping it up with some closing thoughts. After that, we'll open it up for Q&A. So let's start with slide four. Here is a summary of some of our major accomplishments in 2021 and year-to-date. MP has an execution-focused owner-operator culture, and I think our outstanding results demonstrate that. We produced over 42,000 metric tons of rare earth oxides in concentrates. This represents the highest production in the 70-year history of Mountain Pass and the highest primary production in U.S. history. This was driven by continued improvement in efficiencies in the plant's operations, including feed rates, mineral recoveries, and plant uptimes. Record production and a focus on efficiencies and costs, combined with strong market pricing, led to a doubling of our annual revenues and an over five times increase in our adjusted EBITDA for 2021 compared to 2020. And significant growth in adjusted EBITDA resulted in $154 million of normalized Stage 1 free cash flow. This cash flow generation meant that we were able to make significant growth investments throughout the year while maintaining around $490 million in net cash. The delta between our gross and net cash holdings is essentially the $690 million green convertible bond we issued last March. As we scale financially and operationally in pursuit of our mission, being a green bond issuer sends an important signal to key industry and government stakeholders about MP's commitment to this supply chain and the environment. Our Fortress balance sheet positions us with firepower to continue to invest in the substantial growth opportunities in front of us while also being better ready to both absorb any potential volatility and be opportunistic as we work to create long-term shareholder value. Next, we have wonderful news on our key resource, Mountain Pass. We recently completed the new SEC regulation SK-1300 reserve report. Ryan will cover it more in a bit, but it extended our mine life by 11 years and our contained REO reserves by 28%, versus the last study from mid 2020, we have consistently said that mountain pass is a unique world-class ore body. And we are happy that even more detailed outside diligence on it versus last time has added significantly to its estimated life and value. We will talk more about progress on stage stages two and three in a moment, but I want to congratulate Michael and his team for something of the utmost importance, an outstanding safety record. We went the whole year without a lost time injury and are now actually approaching 700 consecutive days without such an injury. Our employee count has grown by over 50% since the end of 2020 to nearly 400 strong today. MP is growing in people, assets, and complexity, and it is no small feat to do so safely. I want to highlight how proud I am of everyone at MP for this. We continue to make progress on stage two. and have had some notable recent achievements. We recommissioned our combined heat and power plant and our reverse osmosis water treatment plant. Both of these are needed for stage two commissioning. In fact, in January, we went into island mode. This means that we are now generating 100% of our heat, power, and steam onsite instead of getting it from the grid. This is beneficial for cost and operational reliability and resiliency as we further invest in Mountain Pass. The last part of our earnings deck has pictures from around Mountain Pass, so please check that out. While Stage 2 progresses, separating some rare earths at Mountain Pass, a remarkable achievement in and of itself, was never our end goal. We have made clear that restoring the full rare earth magnetic supply chain was what we were after, and we have also made clear that this would not happen overnight. It will be painstaking, and take time. In 2020, around the time we went public, we were awarded a preliminary contract by the DoD to begin design work and study the feasibility of separating heavies at mountain paths. Heavy rare earths, specifically terbium and dysprosium, are typically utilized in small amounts along with significantly more NDPR in rare earth magnets. These small amounts of heavies typically improve the performance of magnets at high temperatures. Therefore, successfully delivering on MP's mission meant our original Stage 2 process flow would get us almost all the way there, but not fully. A tremendous amount of work has gone on behind the scenes. Our team has designed, piloted, and refined our technological approach. The hope was that we could expand and enhance our Stage 2 process flow to accelerate towards our overall goal and also grow the economic potential of our site. The $35 million award from DoD is clearly a huge vote of confidence in MP. We are humbled and grateful, and I will talk more about what this all means in a moment. But that is not it. We are pursuing our mission on parallel fronts. We believe critical industry and government stakeholders are counting on us, so we will move as quickly as we can so long as we preserve our execution-focused owner-operator culture. Over the course of 2021, we built up our world-class MP Magnetics team, and we continue to grow that team. The pace has been pretty amazing, but also methodical and pragmatic. In December, we announced we are building our first magnetics manufacturing facility in Fort Worth, Texas, and that we signed a binding long-term agreement with General Motors as the foundational automotive customer of the facility. I am very pleased to report that we broke ground on the new facility last week. We have a long way to go, but what an incredible milestone. Let's discuss some more specifics about it on slide five. Our new Fort Worth facility will convert rare earth oxides we produced at Mount Pass into metal and ultimately neodymium iron boron or NDFEB alloy and magnets. Along with the groundbreaking, we are already sourcing long lead equipment The objective is to have this facility ready to begin delivering alloy in late 2023 and magnets in 2025. We are currently planning to produce about 1,000 metric tons of NDFEB magnets per year with some additional alloy capacity, which could feed roughly 500,000 EV motors. This would consume just mid- to high-single-digit percentages of our current expected Mountain Pass NDPR outputs. So we have significantly more runway to expand the magnetics business over time. As we position the company to enter the magnetics business, we are also expanding into magnetics recycling. And we believe MP is uniquely positioned for leadership in this burgeoning opportunity. Let me explain. There's a fair amount of waste generated in the magnetics manufacturing process. With such valuable material inputted into the process, maintaining a competitive cost structure is greatly aided by having the ability to do something with that waste. Our team has been conducting extensive piloting at Mountain Pass for the last 18 months, and some of these pilot projects include large commercial partners. Our extraction assets and the high level of co-location in our operation mean we can run a highly integrated, closed-loop magnetic manufacturing process where materials are mined, refined, metallized, alloyed, and then made into finished magnets. And materials created along the way can be fed back into the process. MP is now positioned to become the only truly integrated magnetic company in the world outside of China that can do this. Plus, as the world electrifies, and many electric vehicles, when turbines and other like assets get to the end of their life, MP expects to participate in recycling those end-of-life permanent magnets. Our full integration means we believe we will be able to insert those third-party feeds into various points in our asset base. Michael will explain more on this in a moment. Lastly, as I mentioned earlier, we have a binding long-term agreement with General Motors as the foundational automotive customer for MP Magnetics and our Fort Worth facilities. We expect a gradual production ramp to begin in late 2023, beginning with the supply of alloy to GM, with a gradual expansion into finished magnet production in the 2025 timeframe. With recent efforts around our heavy expansion and breaking ground in Fort Worth, we believe MP has pulled forward our mission by at least a couple years, at least certainly compared to where we expected to be at this point back when we went public. We believe this is incredibly significant for American industry. GM and other future MP customers will have access to rare earth magnets produced in the U.S. entirely of sustainable U.S.-sourced materials. That is simply not possible today, given the state of the supply chain, and filling this void is significant to both our businesses and the American economy overall. Let's move on to slide six. As the long list of achievements on the last two slides suggests, We entered 2022 in a much stronger position than a year ago. The electrification of the global economy, even as the capital markets appear more challenging recently, is accelerating. Our business developments clearly suggest that critical industry and government stakeholders want MP to become a Western champion in our industry, and they want it to happen as quickly as possible. By the way, Our stage two heavy rare earth addition is being designed to accept third party feed. So that should expand what we thought of as our previous light and heavy rare earth output potential. And it also means we can help other Western projects develop as we become a potential customer for their intermediate materials. We realize the scale of this opportunity and we are pushing forward on parallel paths. We know that we must execute with precision and we must get it right. Against this backdrop, we continue to see many supply chain, labor, logistical, and materials challenges throughout the global economy. I would say that in Q4 of 2021, we did not make as much progress on stage two construction as we had hoped. Issues around Omicron created labor issues all around the economy that were well documented this past quarter, and we, along with our contractors and suppliers, certainly saw our share of that. Executing an expansion and scope changes in an inflationary environment is testing all of us. Nothing is happening as fast as we would like, but we remain relentless. Engineering and procurement are wrapping up, and construction is accelerating. We are still targeting to mechanically complete the light rare earth portion, i.e. separation, finishing, and related infrastructure of our Stage 2 later this year, but with the expanded construction and scope around heavies and recycling, next year won't be a full normalized year but we still expect to achieve full run rate production volumes in 2023. ryan is going to discuss our current expectations around capex which was previewed a bit in our announcement on tuesday and what this all means financially and operationally in a bit but let me be crystal clear in saying that all this is extremely exciting we are generating significant operating cash flow today we are pulling forward the opportunity We believe we are investing at high returns on capital. We believe everyone, well, almost everyone, is rooting for our success. And we believe we are creating significant enterprise value. I'll be back after Ryan, but before that, let me turn it over to Michael for more process details around stages two and three. Michael.