MP Materials Corp. Q3 FY2024 earnings call

Upstream

• Achieved new upstream production record of 13,742 metric tons of contained REO, 15% higher than previous best quarter. Upstream 60K optimizations drove improved recoveries.

Midstream

• Achieved record NdPr oxide production of 478 metric tons, 76% increase QoQ, well above guidance for 50% sequential growth. Expect to exit Q1 with positive Midstream gross margins.

Downstream

• Commissioning electrolysis cells for metal production in Fort Worth. Began prototyping on-spec magnets in the integrated facility.

Tax Credits

• Treasury Department issued final rules for 45X Advanced Manufacturing Production Tax Credit, which benefits MP by including extraction and material costs for vertically integrated US minor refiners.

Upstream: Achieved a new production record of 13,742 metric tons of contained REO, a 28% year-over-year growth. Midstream: Produced a record 478 metric tons of NdPr oxide in the quarter, a 76% increase from the second quarter. Downstream: Began commissioning electrolysis cells for metal production in Fort Worth and started prototyping on-spec magnets in the integrated facility.

Production

• Q4 NdPr oxide production expected to be roughly flat with Q3.

Pricing

• Expect concentrate prices to grow just under 10% sequentially in Q4, NdPr pricing to increase approximately 5%.

CapEx

• 2024 CapEx reduced to approximately $200 million. 2025 CapEx details to be provided later.

Margin

• Line of sight to positive gross margin on NdPr oxide sales by exit of Q1.

Operational

• Operational challenges and setbacks in Upstream and Midstream operations, which may cause temporary disruptions.

Market

• Uncertainty in market pricing and demand fluctuations.

Geopolitical

• Impact of geopolitical events like Myanmar's supply chain on rare earth prices, potentially causing upward volatility in pricing.

Q: About demand for new robotics applications and magnetic optic agreements.

A: Jim Litinsky said robotics demand is accelerating, with prototyping and initial design active, but mass production still a few years out. Also mentioned national security aspects and supply chain readiness.

Q: Gross margin positivity in refining business.

A: Jim Litinsky stated positive gross profit expected in Q1, with EBITDA positive not far behind, depending on production growth and cost reduction.

Q: Impact of Myanmar on supply chains.

A: Jim Litinsky noted potential medium/long-term upward pressure on pricing due to more controlled and environmentally friendly production in Myanmar, highlighting supply chain security importance.

Q: End market demand for NdPr.

A: Jim Litinsky discussed stable prices, Chinese stimulus impact, and recent customer engagements outside China, with some green shoots in demand.

Q: Policy and level playing field.

A: Jim Litinsky talked about various policy aspects needed for a level playing field, including tax credits and tariff-related policies, but specifics unclear.