Good day, and thank you for standing by. Welcome to Lynas Rare Earths's full year 2022 results investor 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 will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Ms. Jennifer Parker, Vice President, Corporate Affairs of Lynas Rare Earths. Please go ahead, ma'am.
Good morning and welcome to the Lynas Rare Earths Investor briefing for the 2022 financial year. Today's briefing will be presented by Amanda Lacaze. Joining Amanda here in Sydney today are Gaudenz Sturzenegger, CFO, Pol Le Roux, VP Downstream, 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.
Good morning, everybody. We have a full court press here today, and I think that should make for a very interesting call. You all get to hear from me quite a lot, but today, fortunately, I have many of my colleagues who can deal with any of the more gnarly questions that you might choose to ask. In particular, I have Pol Le Roux sitting next to me. Many of you know Pol, and he's just gonna show himself.
Hello, everyone.
There he is. We're trying this as a video, but it turns out that, you know, we really have to snuggle up close to each other to be able to do this really effectively. It's always polite to make an acknowledgment of country. I think for those of us in the minerals industry, it is even more important. We would like to acknowledge the traditional owners of the lands on which we live and work across Australia, and particularly in Western Australia. We acknowledge and value our Lynas Aboriginal and Torres Strait Islander employees, partners and communities, and we pay our respects to their elders, past, present, and emerging. We take this seriously in our business.
It is not just a case of form over substance, and we are working hard to engage with our local communities, particularly in Kalgoorlie and Mount Weld, to ensure that the prosperity that we're reporting today can be shared within the community. Well, what a year. For many of you, particularly the analysts who pore over our various results, because of our quarterly reporting format, we don't have a lot of new news. Sorry, I'm trying to move this along here. There we go. We don't have a lot of new news, but of course, we see this on an accounting basis. Notwithstanding that we don't have a lot of new news, I would like to just take a few moments to reflect on a fabulous year.
After all of those years of very hard work, of heavy lifting, it is a great time for us to be able to celebrate the reality of what I think I said to many of you who've been shareholders with us for many years, which is that we would be positioned to take full advantage of the benefit as the market picked up. I'm going to spend a few moments on that and then really talk a lot about what next. To stand still is to go backwards. We are enthusiastically marching forward in our business to ensure that we are able to continue to generate prosperity for our business and for our shareholders as the market continues to grow. Of course, what were the high points in the year to date?
A record profit that seems to be an understatement when we look at AUD 540.8 million in NPAT compared to last year's, which was, I think, also a record profit at AUD 157 million, but it's certainly a significant uplift from there. Nearly AUD 1 billion worth of sales. We did right through the year as we looked at our sales and operations planning process keep on having a chart which had a billion-dollar mark on the X-axis. Sorry, on the Y-axis. We were very keen that we should actually hit that. There were, you know, certainly some challenges that we continued to face in terms of external environment. We just came a little bit short on that.
EBITDA at AUD 601 million and finishing the year with AUD 965 million dollars in the bank certainly made us very happy. What are the things, though, that we really are, you know, I don't spend a lot of nights these days lying awake at night in my bed worrying about the business, but I still spend the occasional night where I worry about the business. What are the things that are maybe a better way to put it, really our key focus areas? First of all, production. Production was up in the year just past. NdPr production was up 7.7%. We would have liked it to have been more than that.
Our March quarter was particularly strong and gave us a great deal of confidence about our ability to be able to drive throughput, particularly through the lab. We do continue to manage some quite significant residual external challenges as a result of COVID. I'm sure that many of you who have listened to lots of results presentations will have heard about continuing logistics challenges. For us in Malaysia, we have an additional challenge, which is really about utilities, specifically water and the availability for that consistently within our business.
Both of these things have seen us have to modify the way that we go about managing our production, including the addition of charter vessels in addition to our normal commercial shipping to ensure that we have material on the ground in Malaysia ready to be processed. Also with water, we've put in place a number of mitigating strategies, but we're not always able to mitigate when the pipeline is dry. Of course, all of you who've been to other results presentations would have also had a lot of information on some of the challenges associated with costs. Certainly we've had some extraordinary increases in the business, particularly associated with the reagents that we use.
Sulfuric acid, probably prime amongst those where the prices are increased by up to 100%. Finding ways within our business to mitigate some of those extraordinary increases has been and remains a key focus for our organization. I think that, alongside these excellent financial results, we have seen some really good progress in terms of a number of our ESG initiatives. It has remained through the FY 2022 financial year and even today that we need to be focused on keeping our people safe through the pandemic, but also, of course, just our operational and process safety. We were delighted to have achieved a milestone of 400 days LTI free at Mount Weld. We continue to build our workforce.
This is really important as we look at a continuing growth market, that we are building our workforce in a way that really increases our capability. That means continuing to focus on diversity. We report gender diversity because that's what the ASX requires, but it is not the only lens that we bring to diversity. As I mentioned earlier, we are working very hard, particularly in Kalgoorlie, to engage with our local, you know, potential indigenous employees and suppliers. We are very pleased that we have been able to engage productively there, but there is more to be done. We certainly have seen significant improvements in gender diversity.
As we look at our statistics, I mean, clearly, to be able to get up to our target of at least 30% by the end of this financial year, we need to ensure that we are recruiting women at a faster rate as we seek to change these stats. In both jurisdictions, particularly in WA, we are very mindful of the findings of the Respect at Work reviews as well as the West Australian Government review and reviewing our processes and our systems to ensure that we provide a safe workplace, not just physically, but also psychologically for our people from diverse backgrounds, whether that's gender. I don't think I'm that diverse, but apparently I am. But also from diverse ethnic backgrounds.
There are things that we can do practically, and we are doing those things practically as well as continuing to focus on ensuring that where we do have casual sexism, of which I'm often guilty because, you know, blokes, they've got a few challenges, don't they? That's a little bit of casual sexism. Nonetheless, ensuring that we don't have casual sexism, which really translates into unconscious bias, is really important within our workplace. Of course, the other things which are incredibly important is focusing on our climate change, mitigating our climate change effects. Our products are important for the technologies which will see the globe be able to address some of these. Ensuring that we embed thinking on our effect on the environment in everything we do is really important.
A small instance of that is the fact that all of our CapEx forms now have a requirement for the people who are proposing the CapEx to actually provide specific information with respect to environmental impact and emissions. So you'll note that I didn't really make much of a comment on sales or the market. Once again, Pol is with me today, and we'll discuss this as you ask questions. But the biggest challenge that we have today with respect to the market is really just the speed at which it is growing and ensuring that we preserve our prosperity as we grow with that market. It's pretty exciting when we look at our growth plan. We have ahead of us three actually pretty big years in terms of capital investment. Three major projects.
The upgrade that we announced a couple of weeks ago at Mount Weld at about AUD 500 million provides us not only with the ability to more than double our throughput, but also to implement a number of initiatives to improve our resilience with respect to climate change, but also in terms of improving our effect on the environment. That includes water, improving our water recycling up to you know sort of 90% recycled. It also includes looking at alternative energy solutions to our current solution, which none of us like, which is of course you know our diesel-fired power. The second project, and some of you had the opportunity to actually see progress here, of course, is our new rare earths processing facility in Kalgoorlie, which is progressing apace.
We finished the year more than 40% completed on that, and I can tell you that it's significantly ahead as we speak. Every day, a visit to that site sees something new and different in place. Then, of course, the other very exciting thing was after you know, sort of many years of quite diligent work, we had the award for the heavy rare earths plant in the U.S. alongside the previous award for construction of the light rare earths plant. We are now well progressed in the phase two deliverables of that particular project. As with Kalgoorlie, we expect progress to now accelerate it.
Alongside those major projects, we have a number of complementary projects of smaller size, which are really about building our capability as a business as we go forward. The exploration program at Mount Weld is very exciting. I don't pretend that I get quite as excited as our geos do, but nonetheless, as I've briefed previously, we have identified an exploration target as a result of our one-kilometer deep drill hole that we did last year. It is very exciting. We saw continuous mineralization right through to the bottom of that drill hole, and that is, you know, certainly highly prospective for us to be able to continue to operate the Mount Weld deposit for many years to come. Debottlenecking activities at Mount Weld continue.
In Malaysia, we remain very committed to our Malaysian facilities. Many of you who've been with us for many years would know that, you know, we've had pretty low sustaining CapEx over many of those years. We're now really looking at ensuring that we direct CapEx to ensure asset integrity in the most important areas. As is indicated in both our release and in our financial report today, we have a number of projects in Kuantan which will see us be able to pick up throughput growth over the next two years as well. As always, I think it's best if I talk rather less in terms of outlining the situation.
You've got a number of documents, including our financial report, the release, and also the presentation, which I'm sure that you can go through at your leisure. Really, the best opportunity is for us to take your questions. I'm very happy to do that now.
As a reminder, to ask a question, you will need to press star one one on your telephone. Please stand by while we compile the Q&A roster. Once again, to ask a question, please press star one one on your telephone. Our first question comes from the line of Paul Young from Goldman Sachs. Please ask your question.
Good morning, Amanda and team. Hope you're all well. Amanda, hopefully this question is not too gnarly, but thanks for additional information around the CapEx for 2023 and 2024. Just trying to figure out, you know, what you need to spend on LAMP to get that facility from 7.2- 10.5. You've given us the KAL CapEx of AUD 600 million or so. You've given us Mount Weld of AUD 500 million, and, you know, clearly nothing comes cheap at the moment. You know, to expand a small concentrator. Just trying to figure out what of the AUD 1.2 billion you've outlined today in 2023-2024 is going into LAMP and what is the budget to expand LAMP?
In terms of the expansion, and the investment in the LAMP facility, there are a few areas in that. It's a little bit difficult to just pull out, you know, just the single point around uplift in terms of throughput. The big areas that we're talking about in the LAMP, the first is actually the MREC receival. That's receiving the material which comes from Kalgoorlie and, as part of that, receiving that mixed rare earth carbonate and dissolving it ready to feed into the process. We are putting in a number of enhanced activities there, including things like management of soda ash and receival and a number of other areas.
The actual throughput uplift as it relates to the ability to get material through solvent extraction is a relatively small capital number because we're putting in place a flow sheet enhancement. You know, we haven't finalized the actual number on that, but it's in the low tens of AUD millions as opposed to hundreds of AUD millions to do that because we're taking this new approach to flow sheet. We will be putting in additional capability in our product finishing area. Once again, in the low tens of AUD millions to do that by putting in new furnaces for production there. A number of other things that we're doing within the LAMP investment is really more about enhancing, as I said, asset integrity. You know, it's a.
The plant is now a little older. It's still a relatively new plant, but still it's a little older. Also some significant process efficiencies like, for example, continuous precipitation rather than batch precipitation. That gives you a sense. We will give a more detailed update on the LAMP capability. What we wanted to do in here was to put in some sort of markers for the size of that capital, but in the same way that we provided more detail on Kalgoorlie, we will at the appropriate time, once we've completed all of that task, provide more information on the LAMP.
Yeah. Okay. That's really helpful, Amanda. Maybe just further to that. Is there a little bit of CapEx in FY 2025 to finish off LAMP and also the US refinery, you know, to hit the 2025 target? I presume there is.
There will be a little, and you know, it's always a bit tricky. There's the capital commitments, and then there's when the cash actually goes out. Putting this sort of AUD 600 + 600, that should certainly by the end of FY 2024, we should be looking at the commitments have all been made. It won't necessarily mean all the cash has gone out. For the U.S., because most of that is coming from the U.S. government grant. That will just be a cash flow basis as we will have some cash go out, and then it will actually come back to us as we claim that through the grant program.
Okay, thanks. A final one from me for now is around, I guess, heavy production of heavies at Tb, Dy-wise, et cetera. First of all, thanks for clarifying the 12,000 tons of NdPr is on a product basis, not equivalent. Just at that rate, can you guide us to, you know, how much what production of heavies will you have on an annualized basis?
Yeah, we can do that. Pol, would you like to address that?
Yes. Good morning. I think we have. Yes, here I am. Yeah. That's better.
Look at us. We could be in one of those nice, you know, sort of photos from a century ago.
This is high tech, right? One single personal computer support. At the 600 tons a month of NdPr, basically, and again, it depends on the mix of ore we get from Mount Weld, but the average Dy content is around 70 tons of Dy a year and 15 tons or 20 tons of terbium. This will move up proportionally when we move to 900 tons a month. Assuming we have always the same mineral coming, but of course here there might be some development as well.
Just on that, one of the things that the exploration program and our continuous resource drilling focuses on is not just mining for grade, but mining for elements. Up until now, we really have mined for grade, and so the heavies that have come with the NdPr have simply come with the NdPr. As we do more resource drilling, we understand that there are areas within our ore body where the heavies are relatively enriched. We're at present reviewing our mine program, and we will look to be able to move into some of those areas preferentially, as we put our production capability in place.
Okay, thanks. There were so many more, but I will pass it on. Thanks.
Thanks, Pol.
All right, thank you. Our next question comes from the line of Hayden Bairstow from Macquarie. Please ask your question, Hayden.
Morning, Amanda. It's a bit echoey for some reason. Just a couple from me. Just on, firstly on the tax, for the accounts. Just wanna understand how much more tax credits you've got so that you can bring back on the balance sheet and sort of give yourself tax shelter going forward. Then just some comments on the NdPr market, maybe from Pol. Just keen to understand why the prices have come off as aggressively as they have, particularly in the last few weeks. What you're seeing on that front, is it just literally these power restrictions in China closing down manufacturing or is there something more to it? Thanks.
Thanks, Hayden, and I just love those questions 'cause I'm not gonna answer either of them. I'm gonna throw to Gaudenz to talk to you about tax, and then I'll throw to Pol to talk to you about the market.
Yes, hello. Good morning. A quick point on the taxes. I think we are still in Malaysia under the Pioneer Status, so you will not see the taxes coming through in Malaysia. In Australia, I think we did use up the tax loss carry forwards. However, with the commissioning of the Kalgoorlie plant, there is another event happening there which will probably also take this forward. Yeah, I think it's pretty cleaned out on the tax side.
Okay. Across to Pol.
Yes. In regard to market, and I guess, the only focus is on price. Just a reminder, NdPr price was CNY 290 in July 2020, five hundred and fifty in July 2021, and today CNY 630. Yes, I know that it was CNY 1,000 a few months ago, but CNY 630 a kilogram is equivalent to $85 CIF China. It's not that painful. I think what is important to understand is that the demand, and that's what we see, the demand increase and continues to increase substantially. Sorry, we are looking at this in calendar years. Current year 2022, we expect this to be way a few percent more higher than 20%.
Probably 22%-23% up versus 2021, which was 16% up versus 2020. 2020 was a bit slow growth, but I think a few businesses grew as much, 3% growth. Before it was 6%-9%. We are really in a situation of very strong growth. The main drive, and I think it's very important to understand the main drivers for this growth. Basically very simple. First element is wind turbines. I think after years, and I think in the presentation pack there is a slide on wind turbines. You will see that, after talking about wind turbines for many years, in fact, the new installation of wind turbines was rather flat until 2020. 2020- 2021 is a step change.
We reached 93 or 95 gigawatts units are turned every year. The most important is to see the portion of direct drive. Direct drive, as you know, consumes a lot more NdPr or magnets. It's 850 kilos of magnets per megawatt. Ten gigawatts consumes basically in direct drive, 3,000 tons of NdPr. We foresee a continuous growth. If you look at the GWEC, I think the well-recognized Global Wind Energy Council numbers, just the confirmed projects around the world show a continuous growth of minimum 6%-7% in the next five years. A growing portion of direct drive. This is first driver for the global demand. Every wind turbine maker I meet is very eager to secure their raw material supply.
Second, trigger or driver for the growth is automotive. Global economy being a bit uncertain, I think it's reasonable to not plan for growth, any growth in the global automotive market. Let's assume that you would still have 85 million cars sold a year worldwide in five years' time, and then we will see. Hopefully, the world will become easier. Let's be reasonable. When you build internal combustion engine car, you have inside an average of 1.2 kilograms of magnets. When you go for a hybrid or plug hybrid, it's 2.5 kilograms of magnets.
When it's battery electric cars, it's three kilograms of magnets. All in all, what the key numbers to keep in mind is that for 10 million cars, if it's internal combustion engine, it consumes 4,500 tons of NdPr oxide. If it's a hybrid or plug hybrid, it's 5,000 tons more. When you replace internal combustion engine with hybrid, plug hybrid, you actually consume 5,000 tons more of NdPr oxide. If you replace that by batteries, BEVs, it would be close to 7,000 tons oxide more. That is exactly what is happening in Europe. This morning, there was announcement for California to ban internal combustion engines by 2035. I was in France enjoying too hot climatically and weather last month.
I was amazed to see the number of electric cars. Today it's ahead of diesel cars, which is something that is very new. This doesn't change. The demand is very strong. You have a temporary situation where we saw recently the price decreasing again to a level that is not too painful. $85 a few years back would be our dream. Not even in our dreams. Well, not forgetting that the costs have increased a lot, so everything is relative. The key question is on supply, and the key question was how much production quotas China would release. It was announced end of July or early August. I know that magnet buyers and makers were expecting a 40% increase in quotas.
Rare suppliers would prefer 20%, and at the end of the day, the increase was 25%. Which shows that actually China is concerned about maintaining a certain stability on the market. That should make us all very comfortable with the price forward. Again, as I always say, the best way to enjoy NdPr price is buy some from us, put this in your garage and you will make a lot of money sometime.
Okay, great. Thanks. Just following up on that tax question, Amanda, just on when does that holiday run out? I mean, you've been operating for almost 10 years, haven't you, now in Malaysia?
Yes. That ends?
Yeah, it's running until 2026. It's another three years to go.
I would apologize to all the Americans on the line for Pol thinking that California was in Europe. However, there are some consistencies, I guess, in approach to some of the regulations. I think, Hayden, within your question was also, you know, sort of this temporary softness in the price, which certainly is reflecting some quite difficult situations within China. Outside of China, I think it is always incumbent on me to remind investors that we are the only non-Chinese producer of separated rare earths. Demand remains very strong, and we find that not only, of course, our traditional and highly valued magnet-making customers, particularly in Japan, demand is very strong.
We are seeing a lot more pull-through as well from end users both in European and US markets. Once again, the core reason why we are so focused on increasing our capability as fast as possible so that we can continue to grow with the market.
Thank you. Our next question comes from the line of Daniel Morgan from Barrenjoey. Daniel, please ask your question.
Hi. Is that me?
I assure you.
Yeah, sorry. It just broke off. My first question is, you're expanding your business, which is great. Just wondering about your customer base in the years to come. What is your latest thoughts on magnet making facilities being built outside of China? When you grow as you plan to, does that additional volume, is it gonna go to Japan, is it gonna go to China, or might we have European or United States magnet making facilities?
Once again, I'll let Pol take that question.
I think, as of today, the biggest magnet manufacturing, of course, is Japanese. I say Japanese because the major magnet maker has a new base in Vietnam, Shin-Etsu. They are growing altogether very strong and much more than what we were expecting a few years back. There are many projects around in Europe and US. We are following them very closely. Of course, any projects for magnet making anywhere needs to secure supply of NdPr outside China. There is not many options. It's an easy marketing for us. Our job, I think, is very simple, is to provide the environment for magnet maker to grow or to happen in the US and in Europe and in Asia.
What we aim at is to provide both light, heavies and recycling capability in these areas. On the supply side, the competitive environment, you know that when you make magnets, it's very important to have next door a recycling capability, otherwise you are not competitive. To continue promoting these possibilities and capabilities to with the OEMs, because at the end of the day, the decision is from the OEMs to actually secure part of their supply or sourcing from a non-fully, non-Chinese supply chain. Decision is in their hands. Our job is to provide the environment for this to happen. I'm pretty sure it will happen, there is absolutely no confirmed project as far as I'm concerned today.
Does that mean that you're targeting to try to sign offtake agreements with, you know, for your book that is, you know, not contracted away? Maybe just remind us on what your order book or offtake agreements are with Japan, and then how does that change as you grow?
As part of our agreement with JARE, we have certain offtake agreements which see us prioritize supply so long as it is at no commercial disadvantage, which is a really important clause that basically says that we will sell to the Japanese providing they will pay us more than anybody else will pay us. In terms of the, you know, sort of our portfolio of customers, you know, as Pol's just been indicating, we have magnet makers and we have magnet buyers. Most of what we sell at present and most of it is actually to magnet makers.
We do have some contracts with magnet buyers as well, where we will assure the supply of the raw material, and they will actually give us the address of their magnet maker, to deliver to. As we look at this, the dominant portion of our business goes to magnet makers today, but we have strong demand from magnet buyers. Once again, one of the reasons why we're seeking to increase our throughput as quickly as we can, so we will be able to allocate material into there. When we think about pricing, particularly, you know, do we take pricing strategies that mitigate the fluctuations of, you know, sort of the published price? Once again, we've indicated for some years that we look to have a portfolio of pricing.
We do have a couple of key contracts which have floor-ceiling prices, which, you know, sometimes that works in our favor, sometimes not. But across the period of the contract, we have found our floor-ceiling prices have had a net benefit to the company. And then there are particular segments where we might look at other options, like for example, a fixed price. This is particularly relevant for wind, and as Pol said, you know, this is an increasingly important segment. A producer of wind turbines will have a project which might have a two-year life, and it is more important to them as they conclude their negotiations on that to have guaranteed supply at a set price, rather than necessarily how it might correlate to any particular day's published price.
We do have within our order book the majority of our material sold with some sort of reference to the published price, a portion of our material sold on floor ceiling contracts, and a smaller proportion sold on fixed prices. We're always open to the concept of fixed prices, probably for not much more than about two years, but coming up with fixed price contracts for that period of time where it is relevant for you know sort of our customers' business.
Thank you.
Thank you.
Switching to Mount Weld. Sorry, just some feedback. Re-resource drilling that you're undertaking, can you just outline what is the extent of the drilling campaign? Is there a target date for a new resource reserve? And then how important is the upgrade to the Mount Weld expansion that you've outlined recently, the AUD 500 million to do apatite ore processing? Like how important is that for the future resource reserve at Mount Weld?
Yeah. It's a really good question, Daniel. We have two pieces of drilling work, of course. We have the normal resource drilling, which is associated with our mine plan on the existing mineral reserve. We continue to do that at present as part of the mining campaign, and that's the piece where I was talking about really drilling into some areas, we call them the Mickey Mouse ears in particular, but into some areas where we have more relatively where it is relatively enriched with the heavies. Then separate from that is the more fundamental exploration program, which is really about the carbonatite resource and what lies beneath the current you know life of mine pit floor.
That we expect is at least a two-year program, and we will provide some further information on that as we move forward. Of course, it is really important for us to understand the reserve, the ore body. We do expect that as we move through that program of work, we will be able to provide a new resource and reserve statement. We don't have a target date for disclosure at this time. The apatite, as Alex Logan, who I think you've met, says, apatite it can be our best friend, and it is certainly part of the flow sheet as we move forward. What are the challenges with apatite?
Well, the challenges are, you know, sort of the speed at which it will float and ensuring that we improve our recoveries, when we have a mixture of the apatite and the monazitic ores. That has been factored into the flow sheet for the Mount Weld expansion.
Thank you very much.
Thanks, Daniel.
Thank you. Our next question comes from the line of Reg Spencer from Canaccord. Please go ahead, Reg.
Thanks. Good morning, Amanda, Gaudenz and Pol. I've got three questions, and they're really more top-down market stuff. Amanda, so you probably get a bit of a reprieve here and maybe one for Pol or several for Pol. I appreciate your comments around your observations of the NdPr price. You know, I too am trying to connect the dots between, you know, anecdotal evidence of strong demand, how that might interact with increases in Chinese production quotas and pricing action. I know it's not a pure market, and we just kind of have to accept it for what it is. Just on those Chinese production quota increases, Pol, what do you believe that capacity utilization is now? Because we've seen almost four consecutive years of quota production increases.
Are we getting towards capacity or is this, you know, are we kind of witnessing some capacity being exported to Myanmar, for example?
That's a good question because it used to be you used to say 50% the capacity is idle. That was years ago. Yes, you're right. Step by step, 20%- 20%, they are hitting this capacity. This being said, Chinese, to me, remain on top of everyone in terms of execution of industrial plans. I would not expect too much that at some stage they would be unable or being short of capacity. They can build factories faster than anyone else. What I want to explain a little bit because I always hear that the price mechanism or the price is not a proper market price. Well, I think the market price in rares is like in many other metals.
It's in fact based and fixed by the real spot market, which is probably 15%-20% of the total market. 80% of the market is referring to published price. The real spot price is small, and that's the reason why from time to time you see price variations that are against the actual supply-demand situation simply because someone bought the spot market volatility and dried up this market. Drive the price up even if the demand goes down or vice versa. The other element that was making the price very volatile in the past was the fact that you have 25%-30% of product that is actually recycled swarf, and that was managed by mainly independent companies and is now mostly integrated into the big suppliers in China.
It's a lot less volatile. That's the reason why we see now prices that are much more stable than what we have seen in the past.
Okay. Understood. Thanks. I guess an associated question to that, Pol, would be obviously NdPr price is based on, you know, the public reported prices has fallen 30% since the middle of the year, but yet the other key magnet REOs in Pr, terbium and dysprosium have fallen by much less. Do you think that's a function of just market size and liquidity relative to NdPr, which is obviously much, much larger? 'Cause if demand has apparently fallen or market conditions have eased based on NdPr prices falling, I would have thought you would have seen a similar impact in Dy and Tb as well.
Well, Dy terbium has a different situation. There is a real shortage of resource. China is very serious in reducing the in-situ leaching. Today main sourcing of ionic clay is from Myanmar, and I heard that some supply comes from Laos and other Southeast Asian countries that we know very well. Basically, this resource is limited and that's a concern because as you know, the Dy terbium role in a magnet is to improve the temperature resistance of magnets. My view on this is that you will not change mother nature. When the market grows so much and mother nature cannot change and develop more resource, what will happen is a restructuring, kind of restructuring of the magnet market.
Because when you look into detail on the technical capability of magnet makers, you see a lot of differences in their expertise. When one would use 3% Dy for a given magnet, another one would use only 1%. This is making massive difference in competitiveness. We'll definitely restructure, especially in China, the magnet market, and I think we'll have a lot less players in the magnet industry in China in very few years than what we see today.
Excellent, Pol. Your help is always very much appreciated as I'm understanding this market. Last question is probably one back to you, Amanda. The Inflation Reduction Act, there's obviously some pretty relevant components of that and what that might mean for critical minerals markets. Are you able to comment on what that might mean for your business' strategy going forward? The development of a domestic North American magnet supply chain, would you look at potential additional separation or finishing capacity in North America? I'm just trying to get a feel for what you think that might mean for Lynas as a business.
Yeah. I always love the way that you guys, the minute we sort of announce that we're doing one thing, you ask us, "Well, what's coming next?" As a poor dumb operating manager, I'm a bit more focused on executing the one thing that we've said. Constructing our rare earths processing facility in the U.S. is gonna keep us fairly busy for the short term. As Pol Le Roux said before, you know, we are focused on creating an environment in which it's attractive for people to invest in magnet making, and proximity to raw materials and recycling capability is important for that. I can't provide terribly insightful views on the Inflation Reduction Act. I have to say.
I can say that we are at present finalizing, you know, a second go-round at the costs of implementing our US facility. Our discussions with the US government are based upon understanding the various forces that play into that. It looks like Pol Le Roux wants to say something, so I'm gonna let him say something.
Just to clarify, the U.S. project, when you look at the numbers, the light and heavy rare separation that we plan to put in place together with the recycling capability, would be able to supply for close to 7,000 tons of finished magnets per year. To make it very simple, that would give U.S. to move from, let's say, 0 tons of production of magnets today to around 50% of what Japan is producing. Let's do that first, with whoever serious magnet maker willing to get there and OEM committing really to make a change. Then after catching up 50% of Japan, maybe it will be time to look at 100% and why not 150%. We'll be more than happy if not retired.
Let's try to get to 50% first. That's what we put in place is this environment for anyone to put in place 50% of the existing capacity of magnet making in Japan.
That makes a lot of sense, Pol and Amanda and good answer. Thanks very much. I'll pass it on.
Thanks, Reg.
Thank you. Our next question comes from the line of Michael Evans from Acova Capital . Please go ahead, Michael.
Hello. Thanks very much, Susan.
Yeah.
Great feedback. I just wanna revisit the capital questions, please, Amanda and team. Thanks for the guidance on the AUD 600 this year and AUD 600 next year. Maybe let's start with the simpler ones. On that not Malaysia, Kalgoorlie, it's about 40% complete. Should we assume about 40% of the cash has gone out the door or higher or lower? And on the PDF in Malaysia, can you give us an indication of how much has already been spent on that up to June 30? I suppose the third part of the question is, on that AUD 600 + AUD 600, are you assuming that you'll continue to be able to crack and leach in Malaysia beyond July next year?
For whatever reason, if not, how does that impact that CapEx? Then maybe the fourth part of the question is on the product finishing and separation in Malaysia. You've got, I think at the beginning of last year, you indicated about $60 million for, I think it was 1,250 of NdPr production at the LRE plant in Texas. Is that a good capital intensity to apply to the product finishing and the separation in Malaysia?
Okay.
That's, they're my questions.
It's nice to hear from you again, Michael.
Yeah.
I will let Gaudenz deal with the first two parts of the question. I'll deal with the third. What was the third one?
CNL.
Was the CNL in Malaysia continuing. We make no assumptions, but we have been steadfast in our view that the various reviews of our operations in Malaysia have found that our operations are intrinsically low risk and that we are compliant with all regulations. The Pakatan Harapan government's executive review committee in 2018 recommended that we should implement a PDF for the WLP residue, the iron phosphate residue, and we have done that. Once again, we have complied with the guidance and the recommendations from the scientists who were involved in doing that review.
We maintain the position that this is the facility in Malaysia operating as a full facility is good for us, and it is also good for Malaysia, and particularly for our Malaysian employees and communities. We continue to advocate on that behalf. We do not make any assumptions with respect to what the political or policy position will be. Gaudenz can deal with the first two parts of the question and then just on the final one in terms of capital intensity. The task of increasing throughput in Malaysia, of course, is a much simpler task than the greenfields operation that we're talking about in the US.
A brownfields expansion, even if it does require us to put in, you know, say, new buildings like we are doing for the Mixed Rare Earth Carbonate receival, is still a much lower cost than, you know, a greenfields project of the sort that we have in the US. No. The simple answer is no. The capital intensity is much higher for the US than it will be in Malaysia. Over to you, Gaudenz, to answer the first two questions on capital spent at Kalgoorlie.
Yeah. Hello, Michael. I think the answer obviously on the Kalgoorlie one is pretty straightforward. Cash follows the activity. Well, the cash spend is slightly below the 40%, but not too much.
That's it.
On the PDF, I think we are already slightly above 50% on that one. As you recall, there were kind of milestones or there are milestones in place. What obviously still needs to follow is the construction costs which are flowing through and also the removal or moving the material from the plant sites to the PDF. That obviously can only happen when we have at least the first cell finished. Overall, slightly above 50% has been incurred.
If you look at it in the accounts, it's kind of on operating costs, really the rehab which has been realized.
Okay. That's great. That's really helpful on all those answers. Thanks, Amanda. Thanks, Gaudenz.
Thank you all.
As a reminder.
Thank you. As a reminder, to ask a question, you need to press star one one on your telephone.
Okay. Well, I see that we're now at 11:03. If we have no more questions in the queue, we'll wrap up now. Once again, with a reminder that we've had an excellent year, and we continue to look forward to a very prosperous future as we execute our ambitious capital program and, you know, as the market continues to grow. Thank you all. I'm sure that we're going to see many of you in person over the next week, and I look forward to doing so. Thanks, all.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.