Hello, welcome to Virtual Investor Conferences. On behalf of OTC Markets, we are very pleased you have joined us for our two-day Precious Metals and Critical Minerals Conference. The next presentation of the day is from Neo Performance Materials. Please note, you may submit questions for the presenter at any time. You can also view a company's availability for a one-on-one meeting by clicking "Book a Meeting." At this point, I'm very pleased to welcome Jonathan Baksh. He's the Executive Vice President and Chief Financial Officer of Neo Performance Materials, which trades on the OTCQX Best Market under the symbol NOPMF and on the TSX under the symbol NEO. Welcome back, Jonathan.
Hi, everyone, thanks, Greg. As Greg mentioned, I'm Jonathan Baksh, CFO at Neo. I've been with the company for three years. I'm really excited to share Neo's story with you today. Neo is a fantastic company, a company with an interesting and deep history. As you'll see throughout the presentation, our products are critical to fast-forwarding the energy transition. Our materials are critical to supporting many of the industrial tailwinds that you're seeing around the world. You'll see both macro and geopolitical tailwinds, as well as strong technical capability. You'll see our vision is bold, but we have a really strong team executing it. Before I get into the presentation, I will comment that there will be, of course, forward-looking statements and non-IFRS measures, I always do encourage people to reference our public disclosures for additional information.
With that, we're actually going to start with some headlines. I think it is now known that the world faces a rare earth magnetic supply chain crisis and many challenges and headwinds. It really became front-page news April of last year when China responded to U.S. tariffs with export restrictions on heavy rare earths, and the only named product being permanent magnets. This is when we saw headlines around the world of supply chains shutting down or potentially shutting down, primarily in the U.S. and European automotive markets. This is when rare earths again became front-page news, and specifically permanent magnets. The next bit of headlines we had is actually specific to the company. This is during the G7 Summit last year.
This is basically President Ursula von der Leyen holding up one of Neo's magnets in her opening speech and talking about the criticality of these products and how it's going to take global cooperation to ensure supply chain stability long term. It was a really major moment for a company of our size to be held on that stage. In fact, Prime Minister Carney also held up one of our magnets in his opening speech as well. This was a fantastic moment for the company, showing how important our products are. Now let me tell you a little bit about the company. You'll see Neo is a company that spans multiple divisions. We basically operate as both a rare earth permanent magnet provider as well as a critical materials provider.
We have decades of experience within the rare earth value chain, both from midstream chemical separation to metal making to magnet making, as well as we've been an operator of fantastic assets within the Rare Metals Division that does critical materials. That I'll get into later. The point being, I'll spend a lot of time in this deck talking about growth, but I do not want to underwhelm the fact that we have a really, really strong base business, and you can see some of our financial measures to the right. The point being we have diversified end markets, diversified revenues coming across different products and different geographies, really, really strong earnings profile. You'll see continued margin expansion and growth if you look back in the last few years of operations. We're considered the most experienced integrated global rare earth magnetics company today.
Like I mentioned, I don't want to underwhelm the decades of experience that we have. As mentioned in the opening, we do trade obviously on the OTCQX and on the TSX, and you can see the covering analysts at the bottom right. Okay. I'd be remiss not to comment on the record quarter that we had in Q1. You can see the EBITDA trending chart there, and we delivered the strongest EBITDA performance in the company's history. The reality is we're seeing fantastic momentum and strong execution across all of our business units. I would say led by our Rare Metals Division, the critical material elements of what we do. The reality is really, really strong momentum.
We're seeing the combination of good macro tailwinds and demand, strong pricing, and outstanding execution across our team that we've been working towards for years, and we're really seeing the fruits of that labor now. We've raised our guidance multiple times this year. We started the year at $75 million-$80 million. We raised to $100 million-$110 million. This is our initial investor presentation. More recently, we actually just raised our guidance again a few weeks ago, and we're now sitting at $140 million-$150 million of EBITDA for fiscal year 2026. This would be, again, a record year for the company if we're able to deliver within that range. You go to the components of our business. At a high level, you can think of the two divisions, Chemicals and Oxides, and Magnequench sitting within the rare earth value chain.
We're not a mining company. Where we start is within midstream separation. We do separation, sits in our Chemicals and Oxides Division. We have a suite of advanced rare earth products that sits in Chemicals and Oxides. The biggest use of rare earths is magnetics, and we have a standalone division called Magnequench that has 30 years of history and is one of the original founders of the NdFeB bonded magnet. Like I mentioned, Rare Metals, which has been outstanding over the last couple of years, and especially in the last few quarters, is not within the rare earth value chain, but does other critical elements, other what we call high heat refractory metals used in super alloys, semiconductors, superconductors, et cetera. Really, really fantastic business. If I were to summarize the investment thesis, I think you understand the top, the macro trends, right?
The reality is the products we produce enable all of the critical technologies of the future. This is what makes it so important. You combine that with the geopolitical and public policy tailwinds. The reality is, a lot of these elements are constrained. You have some of these markets being dominated by China. You have barriers being put up, and you have governments spending billions of dollars attempting to support long-term localized supply. The way I describe it is billions of dollars are being invested to basically, from startups and from new entrants into the space to replicate capability that Neo has today. That really gets to the top right-hand corner, which is to talk about our deep history of rare earth separation, metal making, and magnet making, and again, doing this both inside of China and outside of China.
Our history is long within the space. When you look at the macro tailwinds, I would describe this as the permanent magnet itself is critical because it enables highly efficient conversion of electricity into motion. This is why when you think about electric vehicles, drones, robotics and automation, cooling systems for data centers, you'll find magnets sit everywhere. Some of these themes we're bullish on in the near term. We'll talk about our magnet growth plans, and you'll see a lot of our initial businesses within automotive, where we have longstanding customer history there. However, longer term, I think for folks who are bullish on humanoid robotics, this is another place where there's going to be kilograms of bonded and sintered magnets sitting within humanoid robots, creating another major demand vector for the industry.
This is why, again, we're so passionate about the opportunity long term here. As we flip to our unique capability and expertise, I've mentioned this a few times, but a couple of things that I want to highlight outside of or beyond the technical capability and the history and experience that we have, I think it's also very important to note we do have a global manufacturing footprint. We operate in Asia, in Europe, in America, in the Americas as well. We've been talking about geographic diverse sourcing, providing parallel supply chains. These are all talking points that we've been messaging for years. We have that really strong global manufacturing footprint.
Then you combine that with one of the strongest and most capable technical sales teams in the world when it comes to rare earths, not just permanent magnets, but the whole basket of rare earths. We have a really strong R&D and technical team that produces products, but also a commercial sales team that's capable of selling these products globally. That is a major part, not just the strong sales team, but also the deep customer relations that we have within automotive, within robotics and automation. We already have customer relationships and are qualified today. This is an important page. This shows you the demand trend, the top right-hand corner is third-party data showing the growth in permanent magnets in metric tons. You can see the massive growth curve for all the drivers that I mentioned.
The bottom right-hand side is very important. It shows a subset of the data above, and it shows the demand based on where the motor integrator is, which is the customer of a magnet maker. There's a couple of takeaways here I think you can see. One, I think folks are generally surprised that if you look at the 260,000 ton market, the U.S. today is roughly 10,000 tons of that 260,000 ton market, so a pretty small portion of the global market. Europe is actually two and a half times the size of that. It's about 25,000 tons. It's one of the reasons why our first plant is located in Europe that I'll get into on the coming pages. Really, the demand profile is important to understand, but also where that demand sits today and where we believe it's growing in the future.
Okay, this is another important page because it shows the rare earth value chain right from mine to magnet. There's a lot that I could share on this page. I think the couple key takeaways. One, if you look at the bar chart at the top, it shows the breakdown of the value chain and how much is China versus rest of world. You can see, for example, in mining, about 60% of the world's mining is done in China when it comes to rare earths. 40% is done outside of China. That's actually not a bad balance today. The bottleneck really happens when you move to the right, where you'll see separation's about 85% China, 15% rest of world. Metal making is 90% China, 10% rest of world, magnet making is 93% China, 7% rest of world.
This is, again, where Neo operates, separation, metal making, and magnet making. This is the real bottleneck, and this is where all of our experience lies today. On the right-hand side, you can see if you look at the existing producing players within magnetics outside of China today, it is a very small ecosystem of players who have experience today. Again, Neo would be one of them. Neo has globally roughly 10,000 tons of installed capacity for magnetics, with 4,000 tons of that being outside of China. 4,000 tons being 2,000 in Thailand and 2,000 in Europe today. When you look at the success factors in order to be a capable magnetics player, I think a lot of people are focused on access to raw material supply, which we would argue is just one component of it. The reality is, technology is important.
There's massive regulation. China making sure that rare earth technology and magnetic technology is not moved outside of China. That means if you do not already know how to operate within the magnetic space today, and you do not already have the technology know-how, it's very hard to access it. We do have the technology and know-how. On top of that, you look at the strong operating track record. We've done multiple capital projects, delivered them on time, on budget. We have high accountability on what we say and what we deliver. The customer relationships are probably something that I don't want to underwhelm. It really matters the fact that we already are automotive certified and have relationships within the automotive supply chain.
This is important when it comes to who's going to be successful in the future and who has a track record of success with some of these major players. One of the questions we get a lot is why did we start with our first magnet facility in Europe? This gets a little bit into that. I think I mentioned the demand dynamics in Europe versus the U.S. I also think when you look forward to the future demand drivers, when you think about things like electric vehicles, Europe still has a mandate around renewable energy. Then robotics, very interestingly, robotics is a space that is getting a lot of focus. In fact, Europe produces 34% of the world's actuators today, so they're massive, which is the primary component that will use a magnet within a robot.
Today, that motor and magnet technology and capability sits within European players. It shouldn't be surprising because if I were to ask you who are the preeminent and strongest motor makers in the world, many of them named would be in the top right. It would be Bosch, Schaeffler, ZF, Brose, all of these being major European players, and some of them, of course, customers for Neo today. This really gets to, again, the underlying thesis and long-term plan for capital deployment and growth in the company, which is to grow our permanent magnet business. We've started with 2,000 tons of capacity that we deployed and opened September of last year in Europe. We took roughly $75 million of capital to build that facility. Our long-term plan is to expand that facility, add an additional 3,000 tons. That's what we call phase I-B.
Over the course of time, do a sequential 5,000-ton deployments in other jurisdictions around the world. This is our long-term capital deployment plan. As we look at that first phase I-A, the 2,000 tons, we are going to be working on hitting commercial production later this year on two to three programs. We have, again, hit many of our milestones that we've articulated to the public markets, which is important. This next page shows us delivering qualification magnets out of the facility earlier in 2025. This was a major moment for the team because it was being able to deliver spec'd magnets, going through the qualification process, but doing it off of equipment that would have commissioned just months prior. This was a major event for the company.
Like I said, we keep hitting our execution and operating milestones. We're on track to be able to hit commercial production for two to three programs this year. This is actually a picture of our European separation asset. This sits further up the value chain from the magnet making. It is about 14 miles away from the magnet facility I just showed you. This is a facility that has many decades of history. You can see the campus on the top right there. It's a massive infrastructure, multiple buildings within our separation facility. It has probably one of the most advanced rare earth labs in the world. We have light rare separation capacity, roughly 3,000 tons, and we've recently added a small-scale heavy rare earth production line. The major data point here is Neo has, again, the knowledge and know-how on separation.
We have the chemist. We were able to deploy our heavy rare earth capability in Europe, which is a major data point, and we're really excited about the future opportunity within separation. This is another example of, again, sound use of capital and meeting our milestones. This is a facility that we completed in late 2024. We are a market leader in mixed rare earth oxides for emission catalyst. We were able to build this facility, highly automated, strong environmental standards. You can see the picture of the control room in the bottom right. We installed 50% additional capacity. The reason this is important is it's a strong business, really strong cash flows, capacity to grow, and we've been able to grow it in 2025 and continue to grow in 2026.
Another very fantastic asset, but an example of us completing a capital project, doing it on time, and actually came in under budget in a really good show of the team's capability and operating discipline. Just a few more pages, this one shows the. I've talked a lot about the rare earth value chain and magnetics. This gets into the rare metals division and the other critical materials that we do, primarily recycling, like I mentioned. The suite of products that we produce, gallium, hafnium, tantalum, and niobium, all of them have had really strong runs in pricing. They share many of the same themes where they're critical elements when it comes to going into applications such as industrial gas turbines, commercial engines, space applications, niobium used in superconductors and MRIs, tantalum used in capacitors, gallium used in semiconductors.
You can see strong themes and important applications. You have government policies, things like Project Vault , which would name many of these elements as critical and being focused on stockpiling these elements. You have Neo's assets. I'll just talk about two really important assets. One, gallium. We're the only gallium recycler in North America capable of upgrading to semiconductor grade, and then we're the largest and only hafnium recycler in Europe. Two fantastic assets, and being in the recycling value chain also gives us that green element as well. I talked about the supply and demand dynamics in these industries, you can see it playing out in prices.
This is something I could spend a lot of time on, maybe I'll touch in the Q&A, but you can see the price charts between strong demand, geopolitical barriers being put up, export controls being put in place, stockpiling initiatives, et cetera. You can see the demand curves really driving up price here. The last couple of pages, I think what I would leave you with is we have a strong base business that has many macro drivers that are going to cause us to grow. We have the European permanent magnet facility that we've deployed and are ramping phase I-A. We're planning and starting to purchase capital for phase I-B. That business will grow. It's not in commercial production today, there's capacity to grow into there.
We have other longer-term opportunities, which is to say, like I mentioned, our phase II sintered magnets, adding separation capability, and continuing to grow our legacy bonded business globally. These are all major growth opportunities, some of them underway, some of them still to come. Again, grounding you in what to expect in 2026, I think the key things, we have already commissioned our heavy rare earth separation line. That is complete. We are in process of launching two to three commercial programs in our new sintered magnet facility. We will continue to win awards and grow our pipeline, both automotive and not automotive for the magnet business. Really the capacity expansion and planning is important for phase I-B, something we have discussed recently and will continue to add clarity on in the future.
With that, I am going to start to open it up for Q&A. I will leave it on this investment highlights page, which summarizes much of what I have talked about. I will now open it up for Q&A. Please do get your questions in. I will start with the first question, which says: phase I-A is targeting 2,000 tons and infrastructure up to 5,000 tons. What level of contracted volume do you need to green-light phase I-B on an accelerated timetable? The way I would describe it is we term this phase I-A and phase 1B on purpose. The idea being we wanted to be thoughtful with shareholder capital. Just because installing the facility quicker would not make us ramp any faster. We are trying to ensure that we time capacity coming online for phase I-B timed appropriately when we are ramping phase I-A.
The reason I give you all that context is it is really a statement of when, not if, we are going to be doing phase I-B. Our recent equity raise already contemplated advanced purchasing of capital equipment for phase I-B. We have a really strong and healthy commercial pipeline. I think it is just a matter of taking the appropriate steps and being thoughtful about the ramp curves, rather than really waiting for contracted volume, for example. That is not necessarily a gating item, is the ability to contract volume. We have an unbelievable pipeline of opportunities. Just to clarify, the gating item is really it is challenging and a long process to go through the qualification steps. We have this idea of being thoughtful about the ramp curve, and that is really what decides how fast we go.
The next question is, what about the impact of U.S. tariffs for Neo? There has been a lot of evolving tariff dynamics and responses coming from China and other jurisdictions around the world. Luckily, we have been pretty insulated and had fairly minimal impact. The positive part is much of our magnetics division-- I will just give you a couple data points. Much of our magnetics division that we do in Asia does not import into the U.S. That is just because, like I said, the U.S. magnetics market is not all that large. A lot of the motor integration happens in Southeast Asia. That is usually where Europe and Southeast Asia is where the customer base generally is. The biggest product that we do import would be hafnium. We import hafnium from Europe into the U.S., and that is and was tariffed.
The reality is there's not a lot of alternative options, and generally, we've been able to pass that tariff on to the customer as well. Those have been the kind of couple data points, but not overly material for the company. Okay, the next question says: The company doubled adjusted EBITDA year-over-year. What's the internal hurdle for incremental capital deployment before you would consider another dividend increase? Yeah, that's an interesting question. I would say, yes, our adjusted EBITDA profile has been very strong. It was $37 million of EBITDA in 2023, $64 million in 2024, $76 million in 2025, and now we're on track for, like I said, $140 million-$150 million. We've had very strong EBITDA growth. Like I mentioned, and we do pay a dividend, and we have paid a dividend since our IPO, as the question asks.
We also have a lot of growth ahead of us. The reality is that, as I described, there's a lot of growth and a lot of opportunity. I think many of the folks we talk to would say that that's the best and important use of capital. Obviously we review our dividend policy every quarter, and our board reviews it, looks at it, but I don't know if an increase to the dividend is necessarily the top use of capital versus all the growth opportunities I mentioned. The next question is, "What does the new heavy rare earth separation line in Estonia unlock strategically for Neo?" Another fantastic question. I would say heavy rare earths are the primary gating item when it comes to feedstock and upstream capability within the Western supply chain of rare earths. Really heavy rare earths are the gating item.
You can really only get heavy rare earths today at commercial scale from China. The important data point here was we know how to separate heavy rare earths, and we were able to bring that capability into Estonia. The reality is we only created a small-scale line to be able to get our chemistry and technology folks comfortable with the chemistry because it is a different chemistry, comfortable with the flow sheet. We are waiting for new deposits to come online before we're comfortable producing a full commercial scale line to support heavy rare earths long term. Really the gating item or the trigger would be new mines producing something that we could separate.
If and when that happens, that's when you have the real unlock of value for Neo versus right now. The capability is really great that we got it in there, but it's not going to move the needle when it comes to financial performance in the near term. The next question says, "What kind of customer pipeline are you seeing for European magnet platform in the second half of 2026?" I'd say our facility is now the only facility capable of supplying the European automotive market with EV-grade permanent magnets. That is an important data point for what we are providing. We have a massive pipeline of automotive opportunities as we look out to programs in 2027, 2028, and 2029 for electric vehicle platforms. We're also seeing a massive pipeline of opportunities across other sectors.
Here's where you can see everything from robotics to power tools to renewable energy. All of these end markets are now interested in geographic diversification, which means we have a healthy pipeline of opportunities. Like I said, the gating item is not the pipeline of commercial opportunities at all. The next question says: "Given your vertically integrated footprint and strengthening balance sheet, is there a point where Neo becomes a natural consolidator of Western rare earth assets?" As you know, we are vertically integrated. I don't think we're overly interested in necessarily tying ourselves or getting into the risk profile of a mine itself. However, there are players that are now new entrants into the separation and the magnet-making space. We are monitoring developments.
The reality is we want everybody to be successful because if there is an ecosystem of players, it means that customers and OEMs will be more willing to deploy opportunity to all of the capable players out there. We want everybody to be successful, but the reality is today we're watching the landscape. Today, obviously, valuations are pretty rich, and people have pretty strong expectations on the value of magnet players, and there's also not much capability that I think we would necessarily be acquiring today because we have the technology know-how, and the ability to access capital as well. I think we have the pieces of the puzzle, but who knows? We're always watching what's going on around the magnetic space.
With that, I do see a handful of other questions, but I'm roughly up on time, and we are going to do our best to scan through the questions and to follow up with folks. I do encourage everyone. I appreciate your time. I encourage you to reach out to the company. We're happy to spend time, and this was obviously a high-level intro to the company, but we would love to share more details and tell you more about the long-term vision. With that, I would leave you with the fact of this is a massively important space, this area of permanent magnets and critical materials. I think Neo is a very unique asset. It has fantastic capabilities, and that comes with its 30-year history.
I would think of the 30-year history as gearing us up for this moment to be able to take advantage of this opportunity, and I think we have a very strong and capable management team, all the right components to be able to continue the strong earnings profile, the strong growth profile, and to be able to capture and support this market long term. With that, appreciate your time and I'll end the call, but hope to engage all of you in the future.