Lynas Rare Earths Ltd. (LYC) has provided an update on its operations and financial performance during its investor briefing for the half-year ending December 2023. CEO Amanda Lacaze highlighted the company's strategic progress, including the update of the Malaysian operating license and the completion of significant works at the Malaysian plant to increase NdPr production capacity.
Despite softer rare earth pricing affecting the financial results, Lynas remains optimistic about the demand for rare earths and is actively pursuing growth opportunities, including a new facility in the U.S. and expansion projects at Mount Weld.
Key Takeaways
- Lynas continued operations under an updated Malaysian license, allowing the import and processing of Lanthanide concentrate.
- The Malaysian plant is set to achieve a 10,500 tonnes per annum NdPr production rate.
- Lynas completed the Mount Weld exploration drilling program and is on schedule with the expansion project.
- A follow-on contract with the U.S. Department of Defense for a Heavy Rare Earths plant was signed.
- Despite lower pricing affecting first-half financial results, Lynas is confident in the growing demand for rare earths.
- Lynas is investing in asset upgrades and cost reductions in preparation for the next market upturn.
- The Kalgoorlie plant has begun operations, and Lynas is addressing challenges such as power outages and further construction work.
Company Outlook
- Lynas is focused on increasing production capacity and securing long-term contracts.
- The company plans to break ground on a new U.S. facility later in the year.
- Expansion at Mount Weld and exploration of ionic clay deposits are underway for additional supply of heavy rare earths.
- Lynas is exploring opportunities to improve market functioning outside China and expand its presence in the magnet-making industry.
Bearish Highlights
- Financial results for the first half were not as strong as previous years due to lower rare earth pricing.
- The market for rare earths is currently weak, with Lynas aiming to remain a low-cost producer.
- A $112 million addition to provisions for a permanent disposal facility in Malaysia has been made.
Bullish Highlights
- Lynas has signed a new contract with the U.S. Department of Defense, indicating continued government support.
- The company is selling all the material it produces and receives more inquiries than it can serve, suggesting strong market demand.
- Lynas is looking to increase the premium it receives for its products compared to the Chinese market price.
Misses
- Challenges such as power outages at the Kalgoorlie plant have been encountered, but Lynas used this time for further work.
Q&A Highlights
- Lynas assesses merger and acquisition opportunities and is open to increasing feedstock capacity.
- The company is focused on developing operations in Malaysia and considering opportunities in South America and Australia.
- Positive discussions with governments, particularly in the U.S., regarding funding and support, have been reported.
Lynas Rare Earths Ltd. is navigating a period of softer pricing in the rare earths market but remains committed to its growth strategy and operational excellence. The company's proactive approach in securing long-term contracts, expanding its production capabilities, and engaging in strategic partnerships reflects a robust business model designed to withstand market fluctuations and capitalize on future demand. With a clear focus on cost performance, environmental best practices, and the exploration of new opportunities, Lynas is positioning itself to thrive in the global rare earths industry.
InvestingPro Insights
Lynas Rare Earths Ltd. (LYC) presents a compelling case for investors with several positive financial metrics and outlooks. According to InvestingPro data, the company holds a market capitalization of approximately $3.67 billion USD. Despite a challenging market environment, Lynas has managed a P/E ratio (Price to Earnings) of 27.87, which adjusts to a more favorable 17.51 when based on the last twelve months as of Q4 2023. This adjustment reflects a more attractive valuation of the company's earnings potential.
A couple of InvestingPro Tips that stand out for Lynas include its strong liquidity position, as the company holds more cash than debt on its balance sheet and liquid assets exceed short-term obligations. This financial stability is crucial for navigating uncertain market conditions and pursuing growth opportunities, such as the U.S. facility and the Mount Weld expansion mentioned in the article. Furthermore, analysts predict that Lynas will be profitable this year, which is supported by the company being profitable over the last twelve months. These insights underscore Lynas's ability to maintain profitability despite market headwinds.
For those looking to delve deeper into the financial health and future prospects of Lynas Rare Earths Ltd., InvestingPro offers additional tips and metrics. In fact, there are 6 more InvestingPro Tips available that can provide further guidance to investors. To access these insights and make more informed decisions, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. This offer can enhance your investment strategy with a wealth of data and expert analysis.
Full transcript - Lynas Corporation (LYSCF) Q2 2024:
Unidentified Company Representative: Good morning, and welcome to the Lynas Rare Earths' Investor Briefing at the half-year ending December 2023. Today's presentation will be presented by Amanda Lacaze, CEO and Managing Director; and joining Amanda today are Gaudenz Sturzenegger, CFO; Pol Le Roux, COO; Daniel Havas, VP, Strategy and Investor Relations; and Sarah Leonard, General Counsel and Company Secretary. I'll now hand over to Amanda. Please go ahead, Amanda.
Amanda Lacaze: Good morning, everybody. And once again, thank you very much for joining us today. Something completely different, generally I just give a bit of an overview. I am going to actually step through the presentation to make sure that I don't miss anything as we go along. So I'm trying to do this, there we go. So first of all Acknowledgement of Country. And I think that it's important that we don't just skip over this because we work in areas very close with our indigenous people, so we acknowledge the traditional owners of the lands on which we live, work, and meet. We were pleased during the last quarter to see the native title determination in and around Mount Weld and the [indiscernible] have been recognized in that area as traditional owners. We are also very pleased to continue to improve indigenous representation within our workforce and I think they've now reached about 5% of our Kalgoorlie workforce indigenous. So we acknowledge and value Lynas' Aboriginal and Torres Strait Islander employees and contractors, partners, and communities and we pay respect to their elders, past and present. So I'm sure most of you have actually looked at our results online by this stage, but just to pick up some of the highlights. As we've said previously, this is a transitional year for us. We had a very large agenda in terms of growth projects and some of those are coming to a close, others are really rapidly moving towards that that position. So we had significant progress on our growth projects during this first 6 months of FY '24.And a few other things which are really significant for our business. And the first is that our Malaysian operating license was updated to allow us to continue to import and process Lanthanide concentrate from Mount Weld in our cracking and leaching facility in Malaysia. Malaysia -- our Malaysian operations have been a key part of our success and establishing a -- an agreement with regulators and the government which gives us a strong path forward is certainly important to our ongoing success. Immediately following that and in the last 6 weeks of last year, we actually had the Malaysian plant shut down as we undertook a significant works program, which will enable us to achieve 10,500 tonnes per annum of NdPr production. We had the first feed of material introduced to our facility in early December. The Mount Weld exploration, drilling program into the carbonatite was completed during the half year. The Mount Weld expansion project is continuing at pace, it's on schedule and construction is ongoing. And we signed the follow-on contract with U.S. DoD for the U.S. Heavy Rate Earths plant. The financial results for the first half were not as good as we have been able to achieve in the past couple of years. This will not surprise any of you who are on the call. We've been looking into a market with much lower pricing. It reinvigorates us in terms of ensuring that we are capturing efficiencies and continuing to drive cost reductions through our business. But the EBITDA at $62.6 million was positive. And we continue to have a strong balance sheet. And I think that once again for those of you who understand the vagaries of investment in the resources market, ensuring that one's balance sheet is in good order to deal with periods where you might have cyclic low pricing is incredibly important. Having said that, while surprise has been weak across the last 12 months, as we look at demand, it continues to grow. In 2023, demand was about 45% higher than it was in 2019. That's at the pre-COVID levels. So that is really significant demand growth, whilst it was modest in 2023. And that's mostly related to the economic conditions inside China. We continue to see forecasts -- significant growth with our forecast to grow by about 81%, but -- sorry, the projections require current supply to grow by about 81% to 2035. So I think once again, everyone who's been involved in this market for some time would understand that we don't always have direct relationships between demand, supply, and price. It is quite a distorted market with some dominance in market power resting in -- in one area. In this instance, we do see a closer correlation, we think, between demand and price than -- than often with demand just being that little bit softer in China than we've seen previously. However, we don't see this being an ongoing trend that demand will continue to weaken. We actually see that all of the fundamental drivers for rare earths remain very positive. And unlike some other minerals, for us, the good thing is that we are not completely dependent upon 1 or 2 segments, for example, electric vehicles, to drive our growth. We are important, we are essential to the automotive industry, whether it's IC vehicles or whether its battery electric vehicles or any of the options in between; hybrid [indiscernible] hybrids. We are essential in the electronics industry. We are essential as we're looking to further automation, particularly in factory settings. We are essential in a number of the renewable energy applications. All of these things actually give us a great deal of confidence that our business will continue to grow, which is the reason why I'm not sitting here today telling you, oh, we're get to rip out all of our investment because actually we see that ensuring that we have our investment and ensuring that we're upgrading our assets efficiently is critically important for the next upturn in the market, which will come, I'm sure [indiscernible].We -- in terms of this -- this growth, if you look at this map, I think we first presented a map on increasing our footprint at our 2019 Investor Day and at that stage there were lots of dotted lines and -- and a few sort of aspirations, I guess, rather than actions on the ground. Today we see ourselves with a very strong footprint and -- and further growth available to us. So if we start at Mount Weld, where are we compared to, say, where we were even 5 years ago? Well, the mine and concentrator continues to operate. Mount Weld is a low-cost facility. It's one of the things that compared to many other mining projects where we've got the ability to use infrastructure, public infrastructure for much of what we do. We don't have to have our own airstrip. We don't have to have our own road. We actually are able to use the Laverton airport. We're able to use the road. These things -- and then of course, the most important thing is the high grade about ore body, means that it is much lower cost to process than others where you need to process a lot more material. So Mount Weld continues to serve us incredibly well. The Mount Weld team have been running very efficiently and have been able to build inventory as we look forward to having 2 cracking operations operating. Feedstock capacity to increase to 12,000 tonnes per annum as we know. Malaysia, it has had its moments over the past few years. Sometimes it's given, may cause for some sleepless nights and I didn't really sleep very peacefully. However, it is a key part of our success, once again, a low-cost facility where we have built significant expertise and IP. Kalgoorlie, for those of you who have seen it, and we've put some photos into the report as well. Very exciting. A really significant installation. We are facing, as most people would find when they've built a greenfield facility, we are still facing challenges with ensuring that everything works as designed and that we are operating safely. However, we are very confident about the ability of that plant to ramp up. And then of course, the U.S. facility, we're now really significantly processed. And as I'll talk about a little bit further down the track, we now have need for approval, which is a significant milestone. So in Malaysia, as I've said, the updated operating license provides pathway for us to continue to not just operate, but also enhance our operations in Malaysia. The variation to our operating license was announced on the 24th of October. That means that we can run the whole of the plant, it certainly is, I think people who were probably talking with this this time last year. Well, yes, there's a lot of risk in this and in the transition period, and it has significantly de-risked -- completely de-risked that -- that part of the facility. As part of that, we've agreed to increase our investment in R&D in Malaysia, with that investment focused on the methods to remove naturally occurring radioactive material from residues. And we have good work already in train on this, a number of methods which have been proven at bench scale, and really the task of the various teams are to now scale it up to pilot project level and then -- that then we will, of course, in due course we will transition to operations. This is really very exciting for us. We see some of those new processes in the new flow sheet, also giving us opportunities to continue to reduce cost. So not only do we get a better outcome in terms of the regulatory environment, but potentially as we move through some of the new technologies, we'll see a further improvement in our cost position, which of course being in Malaysia has always given us a significant cost advantage. I'm really pleased that during the quarter we undertook the largest works program that we've done in over a decade in Malaysia. That has allowed us for really very low cost, to be able to increase our nameplate from 7,000 tonnes per annum of NdPr to -- by the end of this year when we bring in some additional equipment and product finishing to 10,500 tonnes per annum of NdPr. The important work which was done during the shutdown, included reconfiguring some of what we do in solvent extraction. That's for 2 purposes. One was that it enabled an increase in throughput for NdPr. The second is, of course, that it was factoring the tie and works for our ability to receive mixture of carbonate from Kalgoorlie and/or other sources and therefore be able to introduce that into solvent extraction circuit.We also undertook some further works to improve plant reliability and of course whilst there was still some uncertainty on the cracking and leaching facility, we had been cautious in our expenditure on maintenance and development projects in that area. And we took the opportunity whilst plant was shut down to do a number of those major maintenance tasks. What's really pleasing is that the plant restarted on the 1st of January efficiently without incident and is running really -- is running at nameplate as we speak. The first feed at the Kalgoorlie occurred in early December. Construction activities largely complete during that time. We've got a significant number of Malaysian our team members assisting with the stand up and the ramp up. We had a bit of a sort of a challenge when I think most people would know, Kalgoorlie was without power for actually industrial use like us for a couple of weeks because of the lightning strikes that took down the electricity towers. Since then we've sort of took that opportunity to do some further work. The kiln is at temperature now and so we still expect that we'll have material coming out of the plant in -- and being fed into our Lynas Malaysia facility during this half year. Of course, as with any minerals -- mining and minerals company our ore body is the source of our sustained value and so we have continued to do significant exploration at Mount Weld. I won't go through exactly how many drill holes have been done and where, except to say that one of the things that we wanted to really validate was that there was significant mineralization below the current pit, as people would remember, those who sort of have observed this for some time, Mount Weld is a collapsed volcano core and we've been mining the weathered zone and always had a bit of a wonder about the primary mineralization in the carbonatite. And so that's been the key purpose of this exploration program. And we would expect that we will have an updated resource model later this year as a result of that drilling. As well as that we've done a lot of drilling within our current life of mine plan to improve our understanding. And unlike some other minerals, so we mine rare earth elements, there's 15 of them and most of them are present in one way or another. Understanding where they are in the ore body and progressively becoming more sophisticated in the way that we mine. So we mine not just for upgrade, but we also mine for element is a real opportunity. And we certainly have a much better understanding now of where the heavies are within the ore body and we'll be integrating that into our mine plan in due course. So the Mount Weld expansion, well, look at that photo. I mean, it's well and truly on track. What we're looking at here is really the work involved with the dewatering circuit. Dewatering circuit is the current bottleneck at Mount Weld. And so as soon as we're able to bring this online, it will enable us to consistently lift our production at Mount Weld. We were delighted to receive the ministerial statement in December 2023 and have received all of our process plant works approvals from the Western Australian Department of Water and Environmental regulation. And we are very well progressed in contract negotiations for our gas-firmed hybrid renewable power station, which of course is like, once again, every mining company we're looking for better energy solutions than burning diesel. In the U.S., it's really starting to look like not just an aspiration, but a real -- we're really on track now to get this facility constructed and operating. We've signed the follow-on contract, which is an excellent contract for Lynas' shareholders. It means that we will be able to recover costs, all properly allocable construction costs from the U.S. Government. We've been very engaged with local communities. You can see that we've got one of the photos there. We've got the National Environmental Policy, that's NEPA, approval with -- that was received in January with the issuance of a finding of no significant impact. That was published. There were no public comments made to it. And we continue to engage with the DoD on the next step, which is ensuring that the light rare earth, a part of the project, is managed under the same conditions as the heavies. It's always easy for people to skip over the ESG commitments area, although maybe less so these days, people are taking a little bit more notice of it. In terms of safety, the increase in the activity on all of our sites is something which has kept us very focused on our safety processes and our safety culture. We have a lot of contractors on site on each and every one of our sites. And as I said, in Lynas Malaysia, very proud of the fact that we had, I think, at its peak, 600 contractors on the site. And we were incident-free. We continue to work very hard to ensure that we are providing excellent job opportunities for our local communities in all jurisdictions. Environmentally, it is really important as we produce materials which are used in new technologies that we ensure that the environmental benefits, which are being captured with the end product are not being outweighed by the environmental consequences upstream. And so ensuring that we are not just in compliance, but that we adopt international best practice, where that's sort of at a higher level than the regulatory environment and this is particularly for us with relation to tailings and byproduct management, increasing water recycling at Kalgoorlie facility, we use ground water. We reuse it about 6x through the process before it goes out to timing stamps. We are well progressed, and we did a significant pilot on water recycling at the Lynas Malaysia plant in the 6 months to the end of December. All of these things assist us to continue to drive down our costs over time. And once again, as we look into a market with softer pricing, it is essential that we keep a laser-like focus on our cost performance. So with that, I think that I will rest on our final slide, which is our value slide, which is not just something that we have on posters on the wall, but which is something that we live every day, and I will happily take questions.
Operator: [Operator Instructions] Your first question is from Chen Jiang from Bank of America (NYSE:BAC).
Chen Jiang: Just a few from me, please. Firstly, in today's release, Lynas mentioned that in addition to growth projects, merger and acquisition opportunities were considered during this period. So firstly, I'm wondering for M&A opportunities, there are some early-stage rare earth exploration projects in Australia and then outside of China that need funding. Do you see yourselves interested in early-stage rare earth exploration projects or more towards the rare earth companies that are currently producing rare earth concentrate or carbonatite?
Amanda Lacaze: We assess all opportunities. I think that as we look at some of the projects globally, actually, in some of the early-stage projects. Some of them have been early-stage projects for a very long time. And as you look at those and you really assess sort of the position and why is this so? You find things that make it difficult for that project to go -- to come to market. Of course, in a low-price environment as we have today, that makes it even that bit more difficult. But if you're talking about lower grade resources or you're talking about them being very remote or high radioactivity or there's a whole series of things that can play into that. But we diligently do assess them on an ongoing basis. We certainly -- whilst we're really pleased that we had the Mount Weld ore body, which sort of continues to perform extremely well. We are always assessing whether we need additional feedstock capacity. And so, yes, we look at them all.
Chen Jiang: Just a follow-up on that. I guess, you mentioned the rare earth prices remain weak. Is that fair to say your acquisition strategy is opportunistic amend the weak rare earth prices? I guess you have the options in your downstream capacity, so are you looking for rare earth concentrate to maximize your downstream capacity?
Amanda Lacaze: As we complete Mount Weld, we will certainly be able to feed the Mount Weld expansion, we are able to feed downstream capacity. So just -- that's not an issue. So -- even though the price is weak, the key issue for us with weak pricing is to ensure that we remain cost -- a low-cost producer. We are a low-cost producer. We have been able to be successful in a market where the prices are weaker than they are today. And we will continue to do that. Additional feedstock, we don't need today, but it's prudent for us to always be assessing whether there's an alternate source, which can complement our Mount Weld material and enhance our operations.
Chen Jiang: Maybe last question from me. On your cash cost, I mean, you mentioned multiple times in the presentation to maintain cash costs. By looking out to the first half, the rare earth oxide produced on unit basis, I think it's around $30 per kilogram. Obviously, you had maintenance shutdown impact your production and sales from inventory. I'm just wondering if this $30 per kilogram cash cost is the indication of unit costs going forward?
Amanda Lacaze: Actually Chen when you're mentioning $30 a kilo, are you speaking to NdPr or are you speaking to -- I'm quite sure what your analysis is? Is this on a REO basis?
Chen Jiang: Yes, sorry. Yes. It's on rare earth oxide.
Amanda Lacaze: Yes, yes. So on an REO basis. No, I mean, we -- there's just I think 26 weeks, in 6 months, and we only produced for 20 of those. So the numbers are going to be higher than they are when we're actually producing at nameplate for the full period. So no, we don't see [indiscernible] REO is our target.
Operator: The next question is from Paul Young from Goldman Sachs (NYSE:GS).
Paul Young: Amanda, first question is on the market. And we've seen the Chinese production quota released a little ahead of time. And I think most of the market see NdPr as a bit of a surplus at the moment and I think your comments on demand, near-term weakness in China sort of match with sort of that view. In your view, just looking at the production quota and looking at what's -- the question is, what is required to actually see the market move back into balance? What do we need to see on demand from a -- is it, when is it EVs? Is it underlying sort of industrial demand recovery?
Amanda Lacaze: a bit of all of the above, Paul. I think, first of all, the quotas were very modest, the place in the quotas? And if you pull them to pieces and you look at how much was in the mining quota, some of which was to balance out, I think, what the Chinese see as potential shortfall in concentrate, which has been coming from MP Materials into China, but as MP move to their own separated material, there'll be some change in that. The increase in quotas for processing was very modest. We do think that there's been some inventory build in China, and we would expect that based upon the quotas and what we see as sort of the demand trends right now, that that will unwind sort of over this calendar year. I think that the demand in China has been a little bit more muted across every one of those categories you're talking about. Outside China, we still got plenty of demand. We're able to place all of the material that we produce. And it's really that inside China demand, which is leading to the softer price. And I think that it will -- I think that China has been an economic sort of miracle previously. I think it's taking them a bit longer to come out of some of the challenges that they've got this time, but I think that they will.
Paul Young: And then Amanda, you mentioned MP, so I might just ask a few questions on the market in MP, if that's okay. I mean, first one is I noticed they are slowing down the ramp-up of their refinery. And I think that's to save $2 a kilo or something around U.S. $10 million or so, so pretty modest without slowing the ramp up of the refinery a bit, and that's based on the market conditions, but also to reduce OpEx. Just wondering as far as your ramp-up is concerned 8,000 to 9,000 tonnes per annum over the course of the next 12 months. Can you remind us of the offtakes? What have you signed as far as fixed volumes? And can you sell all of your produce this year?
Amanda Lacaze: Yes, we can sell everything that we produce. Yes, we have more inquiries to our sales line even today than then we can serve today. It's one of the important things about making sure that we do have our various assets in place and operating is because they really high-value contracts that we seek to complete are ones where we're able to provide guarantees on supply for a 3- to 5-year period. We don't sell into the spot market. And so continuing to develop our assets and increase our capacity. Certainly, we're very confident about our ability to place that in the market.
Paul Young: That's great news. And then lastly, just on MP specifically and discussions you were having and now not having an MP mentioned on their conference call that cost savings were part of the reasons for initial discussions. Can you maybe comment around what was the attraction and why discussions now are off? I mean just noting obviously, MP selling to Sumitomo now selling it to Japan and you obviously, they've got an established U.S. refinery already?
Amanda Lacaze: Well, I think actually, as you indicated, Paul, I don't have an established US refinery. And we've been there, done that in terms of how long it takes to ramp up and develop a refinery. So I think that we've always said very clearly that the best thing for our business is really robust and vigorous and energized outside China industry. And there is room for many winners in this market, notwithstanding the fact that some of it is not as positive as we would like it to be right now. I think that we have a market which is dominated by a single geography and opportunities for us to improve the dynamics of the outside China market are somewhat limited, but we need to explore all of them. And to that, I would simply say that that's what we've done is that we've explored that. It didn't -- it didn't end up with us moving forward, but it's always worthwhile if we go right back to Jiang's question about assessing juniors, I mean, it's always in our best interests to actually assess every opportunity that there is to continue to grow and develop the outside China market.
Operator: The next question is from Daniel Morgan from Barrenjoey.
Daniel Morgan: Probably just following on that. I mean price is obviously market conditions and price is obviously a problem financially for the industry right now and yourself. What can you do to get a better pricing outcome like what are you trying to do with the ecosystem that exists while you need to go downstream. What can you do to get better prices?
Amanda Lacaze: So I think that getting better prices, as we look at our business, our -- as we've said, we've been sold out for several years with our existing strategic customer base with -- particularly into the Japanese market, but with a number of other key customers. And so when we have particularly magnet buyers rather than magnet makers, contacting us to see, say, a Tier 1 supplier in Europe, contacting us to see if they can write an agreement with us, say, a long-term agreement, we actually haven't had the capacity to be able to engage with a number of those inquiries. And they remain -- these suppliers of high-powered motors and those sorts of things, they remain very positive about the future direction of their businesses. And so as we bring on more capacity, it allows us to be able to meet that demand. And given the tenure of a number of those contracts gives us an opportunity to explore different pricing scenarios than one which is completely tied to the inside time price. So certainly, there's that -- the second piece is that we need more magnet making outside of China. There are, I think, 7 different projects in the U.S. right now for increasing making capacity in the U.S. There's a couple of new projects in Vietnam. Not all of these will come to market. We all know that. But we believe that there will be sufficient come to market that we start to create a different ecosystem. The third thing which we should never lose sight of is that government policy is such that there is a determination to rebuild this manufacturing ecosystem. And therefore, we should be in a position to take full advantage of that and ensure that governments do understand that in periods of low price that patient capital is required. So I think that there's a number of these areas that we really do have opportunities to continue to grow. And that's really looking at NdPr and magnets, which is today's current growth and revenue driver. But bear in mind that rare elements are valuable because their functional materials, our R&D focus is not on more -- what more can we do with NdPr. NdPr is barely for giving in terms of sort of quality and physical characteristics because it goes into a metal and then into a magnet. On the catalyst side of the business and the ability to use some of our other materials like lanthanum and cerium, particularly in new technologies at hydrogen, for example, and some of the new technologies creating the fuels of the future. This is where we have a lot of the focus for our R&D and bearing in mind that we sell a lot of lanthanum in cerium increasing the contribution that, that makes to our business will be significant. And because it can be significantly more specified for customer use. It's -- it becomes a more sustainable source of premium. So we've got work on both -- in both areas. And I think that we can continue to develop further opportunities to continue to increase the premium that we received versus that inside China price.
Daniel Morgan: Maybe just expanding on these comments. How does that pricing and volume interplay work this year? I mean you're going to have a lot more productive capacity in theory this year. If you're saying that you can satisfy customers, well, you can satisfy new customers for the first time with maybe new pricing strategies. Does that mean you're going to run full tilt with the new capacity? Or will you be watching the marketplace as well and do what MP has done and manage for market conditions on volume?
Amanda Lacaze: I think everybody knows that idle capital can be quite expensive. So running our assets to be as efficient -- to run them as efficiently as possible is always sort of very close to the top of our priority list. We will drive to getting that 10,500 tonnes by the end of this year. We will seek to optimize a way that we operate our facilities. We might not run everything at 100% a 100% of the time. That's just sort of a pretty obvious day-to-day management. But we will drive to run our facilities as efficiently as possible, and that's not running them at 50%. As we've seen, just in terms of costs in the last quarter, where we were shut down for half the quarter, we're not as cost efficient as if we're running at 100% of capacity. But we will -- yes, I mean, it is my there's still jobs for human beings in businesses because judgment does come into play, and we will make judgments according to the way that the market operates and the sorts of business that we are able to write within this sort of slightly more challenging environment. But I think we have a good track record of being able to manage our business through the tough times as well as manage it in the good times.
Daniel Morgan: And just last question. Good to see progress on the U.S. facility. What is the timeline from here as you see it to breaking ground on that project?
Amanda Lacaze: Do you want me to tell you what the team says or do you want me to tell you what I say?
Daniel Morgan: Whatever is most realistic.
Amanda Lacaze: It will be later this year. We're still working on optimizing that. As we speak, there's one particular piece of technology that we want to introduce as a new mechanism in the plant that we're finalizing, but we will be breaking ground this year.
Operator: The next question is from Al Harvey from JPMorgan (NYSE:JPM).
Al Harvey: Amanda, I just want to follow-up on some commentary in your release from earlier this month, just looking around your messaging, saying you're continuing to seek opportunities, proven expertise to build scale and improve market functioning to add value. I was just wanting to know what you see or what kind of opportunities there are for improving market functioning and, I guess, how potentially inorganic growth feeds into that?
Amanda Lacaze: Thanks, Al. I think that I can say without undue conceit that we understand the processing of rare earths, better than anyone else outside of China. And indeed, better than some inside China, not all. There are some here, our assessment, but still be that -- that some of the initiatives inside China are still are a bit ahead of some of ours, but we're rapidly catching up even to those. I think that as we go back to what I was saying about the most important thing for us is the development of the outside China ecosystem in terms of our long-term health. I mean if we all dig up our resources and send them to China for all of the value adding, just like every Western government in the world says, that's really not desirable and that means that we're not capturing the economic benefit of that in the non-Chinese economies. And so as we think about this, when we think about assessing has been -- already been used, looking at development projects and otherwise, we think about how does what we know or how would what we know assist to bring that project to market sooner or to do it more efficiently. And so that's just one of the lenses through which we look at other projects to identify whether they would be prospective for us or not. It would be beneficial for us, notwithstanding that everybody -- it will be beneficial for us for there to be more activity outside of China. It will be beneficial for us for there to be more magnet makers outside of China, working with those magnet makers, understanding their needs, seeing how we can actually supply them, working with sort of catalyst producers, even with the big oil and gas companies as they look to transition from current processing through to say, for example, production of hydrogen. All of these are excellent opportunities for us, and we continue to focus on those. So really, it's how there are some instances where we would say what we know isn't necessarily assist that particular project. But there's a number of areas where we could look at it. We could say, well, if we were to apply what we know now to that project, could it accelerate its development or do it more efficiently. So that's really what that comment was about.
Al Harvey: I guess just as a follow-up there, then it sounds like perhaps Lynas has to take a bit of a lead in terms of getting these projects -- potentially getting these projects up and running. So I mean I know you've obviously still got down well, it looks like it does have some growth capacity. But I guess, you're looking externally does that imply that perhaps Mount Weld does cap out at that 12,000 tonne per annum NdPr oxide rate even once you do expand it and get into the fresh carbonatite?
Amanda Lacaze: Look, the future for Mount Weld remains sort of blessed with opportunities actually. The 12,000 tonnes we can get there, we can get there without even needing to sort of dip into the carbonatite. But certainly, our geos and our mining team there are very excited about sort of those prospects. We do have 2 projects, which would allow us to process more efficiently even within the saprolite zone, which would allow us to reduce again sort of our cutoff grade. You might recall that our cutoff grade is 4.5% REO and then there are opportunities to certainly improve that. But it's our task to identify, are there better ways if we were to talk about sort of the next step at Mount Weld there will be additional capital associated with that. Are there better ways to do that, would supporting one of the other development projects actually give us a better outcome, that is, as said, ongoing assessment. The other thing clearly for us is understanding how to augment our undeniably sort of leading NdPr supply with additional heavies. So whilst we do have sort of excellent opportunities to continue to drive our heavies production that comes from changing our mine plan somewhat. The heavies are in some areas in the ore body, which is slightly lower grade, but which actually have more heavies. We are much more sophisticated now in terms of measuring recoveries right from Mount Weld through, and we know that for the first 10 years of our operation because we've been so very focused on NdPr, we probably not recovered as many heavies as we should, so we remain very focused on doing that as well. But finding another source for heavies certainly is on our priority list. In Malaysia, people who are close watches of market would know that Malaysia has the same ionic clay geology that you see through Southeast Asia. There's a strong desire and commitment to develop those ionic clay deposits. And indeed, late last year, the Malaysian government indicated an intent to cease export of the mixed rare earth carbonate that can come from the development of those deposits. So there is an excellent opportunity for us to investigate partnerships in a jurisdiction where we're very familiar and where we have the ability to process the material. But we certainly are looking at other ionic clay sources for heavies. There's a number of very early-stage projects globally and understanding whether we can -- whether our participation in any of those would accelerate their development, come back to the point that I was making before, Al, that's really what we're thinking about here is how do we bring more of that material in? And is it from simply agreeing sort of uptake, which we're always happy to do? Or is there something more that we can do in terms of partnership with some of those [indiscernible] projects. So that's the sort of thing that we're thinking about. If I had something to announce, I'd announce it. Unfortunately, I don't have anything to announce. But certainly, it's an area where we have significant focus and effort.
Operator: The next question is from Chris Drew from Jefferies.
Chris Drew: Just a quick point of perhaps clarification, Amanda. The comment you made during the presentation there about the fate from Kalgoorlie going into Malaysia in the first half. I assume the target there remains March. Or is that potentially moving into the second quarter at this point?
Amanda Lacaze: It's we're a little agnostic to exactly when it goes in because we don't need it to be there. What we do need is the Kalgoorlie to ramp up in good order so that as we move further into the second half, and we do need the MREC to complement the cracking and leaching to get us to the sort of 750 tonnes a month initially and then 900 tonnes, which is what takes us to the 10,500 tonnes. That's when we need it. So we're just optimizing our sales and operations planning for how we do that. And certainly, where we didn't have clarity on continuing to operate cracking and leaching, we might have shipped less commercial quantities. If you ship fewer containers, it's going to cost you a bit more, but we would have done that to keep that feed going. But we're just simply optimizing for when it comes out -- out of Kalgoorlie and when we put it into Malaysia. The Malaysian circuit has been tested with mixed rare earth carbonate that we've actually produced in Malaysia. So we're pretty confident about a relatively smooth ramp-up as that material is introduced into the facility.
Chris Drew: And second question, there's been a bit of focus on the sulfuric acid supply in WA, obviously, with the risk [ nickel waste ] closes. I guess this is not going to come as a shock to you. So are there alternative supply sources out there or flexibility that you have in your sort of supply arrangements, you're confident that that's not going to be a major concern to work around that?
Amanda Lacaze: I think that governments need to be alert at all times to the fact that the minerals industry is an ecosystem. It's not just sort of a whole variety of things that sit alongside each other. The BHP smelter has been a source of sulfuric acid for goldfields processing for many years. And it is certainly when we initially scoped Kalgoorlie, we looked at a variety of different sources for sulfuric and buying acid from the BHP smelter was by far the most cost-effective and also lowest risk in terms of being able to bring it into our operations on a timely basis. However, as part of that, we were always alert as with BHP is the fact that BHP would not run its smelter for the benefit of our facility. So we needed to look at what were alternate pathways to ensure that we had sulfuric acid, and we will work through those. I know that there's the prospective closure of the refinery, I know, however, that BHP has not reached that conclusion at this stage. So we'll work with our supplier to understand what the alternatives are.
Operator: The next question is from Dim Ariyasinghe from UBS.
Dim Ariyasinghe: Just on Kal. So I guess, with everything on the market and your comments before, is the plan still to ramp up Kal to 100% before potentially seeing what the market allows next?
Amanda Lacaze: We will ramp it up and manage it alongside now the fact that we have 2 cracking and leaching facilities operating. So at nameplate between them, they can produce about 6,000 tonnes of NdPr per annum. So we need to think carefully about how we optimize that and how we manage those 2 facilities alongside each other. But there is no change currently to our plan to at a minimum, be ramping up to sort of the initial nameplate at Kalgoorlie, which is so 7,000 tonnes per annum with the ability for us to be able to increase that as required. The big thing for us is to ensure that we manage the production across the 2 facilities in the way that is most cost effective as we look at the low-price environment and we will be doing that. But where we are right now, we're still a fair way away from being at nameplate. So once we get there, that will be an issue that I'm happy to deal with once where the -- at present, we want to get that facility running. We want it to get running reliably, and we want to get it running cost effectively.
Dim Ariyasinghe: And then just a quick one on the market. And I think everyone on the call is with you in terms of wanting loans as higher price for what is, in my view, a strategic source of NdPr. In your time though, how much closer are we actually seeing this premier emerge? Is it because right now despite it all, despite having relating the only producer of rare earth is China, you're still beholden to that China price. Do you think something in the tales that could get us a bit more confident?
Amanda Lacaze: Look, I mean, it is -- we sell just to be very clear, if people do so you'd be able to work that. We sell every kilo of material that we sell outside China, we sell at a premium to the inside China price, every single kilo. But we are -- but it is still, in most instances, pegged back to the inside China price. But we do have opportunities as we move forward to make some agreements, which will put us -- which will give us more stability in our pricing and a premium. But I think that it is really important for everybody who operates in a global industry, not to keep their fingers crossed for the day and that everything magically is in their favor. We have to be cost competitive. Every processor has to be cost competitive. And whilst it's helpful when governments are prepared to provide support for capital, it's no use actually getting something built and then not being able to compete in the market. So yes, we are continuing to work on opportunities to improve our price, I learn is a very young market, $1 in price pulls to the bottom -- straight to the bottom line. But having said that, what we need to do and what we are doing is focusing on our cost profile to ensure that we can be successful even if -- even if we get a premium, it's still going to be following the same shape at present, at least with the dynamics in the market of that inside China price. So we need to be competitive and anyone who feels themselves that they're not going to be cost competitive and somehow going to be successful is probably going to do a lot of dough. That's sort of the harsh reality of it. So our focus is on making sure that we are a low-cost producer. -- and that we can make money even when the market is soft -- whilst focusing on where the best opportunity is for us to be able to enhance our pricing and some of that is with NdPr and some of it is with the other products that we produce.
Dim Ariyasinghe: And just one last one for smalls, but in the provisions, there was a $112 million addition for the permanent disposal facility. Is there anything on that notice it's doubled like what it's previously been in, if you could expand on that?
Amanda Lacaze: So we have -- yes, sure. So we made some agreements in Malaysia with respect to dealing with both the iron phosphate material WLP and also the gypsum material. And it ensures that we are able to deal with both of these materials, and it -- in there as part of the rehab provision. I'm happy for -- actually maybe because I can see I'm just being prompted that we're, over time, maybe Gaudenz can have a chat to you afterwards to just sort of take you through that in a bit more detail. Okay. So I think that we're at 5 past 11. And the webcast engineer, I think, tells me that we've got 2 left in the queue for questions. So I'll just take those but bearing in mind that I'm sure you all have work to do. You've got Lynas' shares to buy.
Operator: The next question is from Austin Yun from Macquarie.
Austin Yun: Most of the questions have been asked already. Just one quick follow-up. You mentioned that you opened ionic clay opportunities. How do you assess the jurisdiction risk outside of Australia and Malaysia? Would you consider all the opportunities? Or will you be more kind of selective?
Amanda Lacaze: Sorry, Austin, you just broke up in there. How would we -- you said something about Malaysia and Australia.
Austin Yun: Yes, just outside of Malaysia and then Australia for the ionic clay opportunities you see, how do you assess the jurisdiction risk or any other kind of key hurdles when you look at those opportunities?
Amanda Lacaze: Sure. As you know, having lived through the last decade with some of the sovereign risk challenges that we've had, you would not be surprised. I'm very alert to sort of jurisdiction risk. Having -- so it is one of the things that we factor into sort of our assessment of the various projects. I think where we are right now, there is some very good prospective ionic clay deposits in Malaysia, and that sits at the top of our list to really look at how can we work in partnership with companies in Malaysia, and it's really part of our commitment to Malaysia to continuing to develop the Malaysian rare earth's industry, which is part of -- I've been saying right through this continuing to develop outside China industry is good for everybody. So clearly, working alongside those who are close to us where we have processing facilities is sort of the most prospective and the lowest risk pathway for us. Yes, there are some interesting deposits here in Australia. And then I guess the others on everybody's lips are the ones in South America. I've been to all the continents, but not South America. So when we do our trivia quiz at home, I always hand South American questions to somebody else. However, we have people on our team who have worked in South America. So we have good understanding of, sort of, which jurisdictions are going to be likely less challenging than others. But right now, frankly, our focus is on continuing to develop our Malaysian operations and hopefully with Malaysian feedstock.
Austin Yun: Just one quick one. You said patience and capital is required in a low-price environment. Would you consider to get additional funding from the U.S. Government since they have a strong interest and probably through expansion or a larger footprint in the U.S.?
Amanda Lacaze: I think that our discussions with government continue to be very positive in all jurisdictions. And I think that the U.S. more than anywhere else is really understood in its legislation, the importance, not just of constructing the facilities but ensuring that they remain efficient and competitive on an ongoing basis and things like the tax credit legislation has part of the IRA, but other prospective legislation, I think, is important on that. But we will engage with our key government partners for the best ways to ensure that we can remain aligned with government policy during a period where we have sustained low pricing.
Operator: There are no further questions at this time. I'll now hand back to Amanda for closing remarks.
Amanda Lacaze: Terrific. Thank you very much, and thanks, everybody. I'll try to get you back on track by just making this very quick. Thanks for joining us. And I look forward to seeing a number of you, I think, over the next couple of days at sort of various events. So thanks very much, and we'll talk soon.
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