That opportunity was a, you know, a pretty much an enormous home run opportunity for those invested with us at the time. So the good news is that particularly this conference feels a lot quieter this year than last year. Although I hear the attendance is record, it feels much quieter and less excited, and usually that's a sign that the capital markets have priced in a lot of the scariness that it feels out there in electrification and commodities in general. But anyway, our business in simple terms, rare earths are the feedstock into magnetics for electrification. And one important distinction with magnetics is we don't go into the battery. So magnetics, it goes into the motors in EVs. So regardless of how the energy gets to a motor, whatever the battery materials are, typically in an electric vehicle you'll have a rare earth magnet.
Importantly, for an environment like now, hybrids also utilize typically at least half to two-thirds of the incremental rare earths that an EV would use from an ICE vehicle. So to the extent that the world is now slowing down in the penetration of electric vehicle penetration and hybrids, which are, you know, going vertical in growth, that is actually bullish for demand for us. You know, in the short term it has been, you know, a tough cycle with Chinese industry, which makes up the majority of demand today while electrification is growing. And those are the sort of the typical, you know, macro-oriented industries like disk drives, HVAC, smartphones, and all of those things. And so actually just moving on, I mentioned rare earths. I'll do this really quickly. The thing about our industry is it's dominated in China. There are two producers outside of China.
80% of the supply chain is in China. I covered magnets. What's also really important here is that when we think about magnets, I want to just open up one other door and it's, you know, sort of longer dated but I think relevant to think about as we come through this reset around electrification penetration. Magnets, rare earth magnets, are really critical for any kind of electrified motion. One other use case we're seeing with some headlines around, you know, Bezos and Altman investing in a humanoid robotics company or certainly the rise of Optimus or a number of what the Chinese are doing. I guess, a few years ago we felt the glow here being in the electrification industry that that was sort of the hot thing and now obviously it's AI and AI is its own thing.
But one of the key use cases, you know, for AI, which I think will be at least some of the smartest money is betting this, will be in humanoid robotics or in, you know, artificial intelligence around robotics. And what's great for us is that if you think about what a robot is, it's really, you know, an EV is a robot on wheels, a robot is just a robot on legs, right? But the magnet content is much higher. And so as we think about coming out of this cycle, and again, I don't know if this sort of global macro pause is a couple months or a couple years, not only will the electrification and hybrid cycles come back, but, you know, robotics as well. And we can talk about some of that.
But you'll see that in the out years there really is a major supply-demand imbalance that's looming. And then lastly, before I let Greg do some Q&A, you know, this just sort of outlines our three-stage plan. We've rebuilt the business. We mine and concentrate rare earth materials. We have the ability to sell a concentrated product. We now also refine so we can sell refined NdPr oxide. That opened up our market opportunity from outside of China to also across Asia. And then lastly we have a very large contract with General Motors to be the key magnetics supplier to the Ultium platform. And so we're building a magnetics facility in Fort Worth, Texas. And that building we broke ground in April of 2022 that is now complete.
And we said on our recent call that we have a lot of work to go on the inside, but we're going to be making metal there later this year and expect to be modestly EBITDA positive in that business. So it's very exciting for us to have been able to kind of move downstream and execute in these trying times. And so with that, I will go over to you to let you fire some questions at me.
Thanks very much, Jim. You know, I thought maybe to set the stage for the conversation to start out with some of the macro or bigger picture questions before drilling into the business. But, you know, one of the key focuses of Western world companies and governments has been, you know, the policy shift to, you know, build out domestic supply chains and so forth. You highlighted MP's staged approach towards developing the business. How do you see the ex-China market evolving over, say, the next three to five years? And what are maybe some of the dynamics or factors that maybe the market underappreciates in that buildout?
Sure. It's a great question. I think one of the things as the headlines right now are that electrification is slower than certainly what we expected three to six months ago. And so and we're seeing this with projects. And that's a whole other track we can go down with Western world rare earth projects of just to the extent that there was capital raised, it's capital destroyed. To the extent that there was capital hoping to be raised, it's, you know, fearful of capital destroyed. So it's gone. But one of the things that so we can put incremental supply aside, the Chinese downstream movement is not slowing down. And so alongside these headlines of particularly in this most recent quarter of seeing resets, particularly around CapEx and growth, you're seeing, you know, stories of BYD now building a plant in Mexico.
I think we should expect that there will be two or three Chinese OEMs that will be dominant global producers. You know, we talked about this going back a number of years saying that they were moving downstream, they were moving downstream, and now it's here. I think in the West when it comes to the upstream and the supply chain, we shouldn't lose sight of the fact that although in our capital markets it feels like sort of, you know, depressing or, you know, panic's probably not the right word, but, you know, it sort of doesn't, it doesn't feel as good. Certainly there's a lot less excitement around the pace of electrification. We shouldn't forget that that might be a challenge to some of the OEMs that need to raise capital and that have realized they're not getting the pricing power that they want.
It's gotten more competitive. But the Chinese OEMs are coming and they're investing and they're not stopping. And yes, hybrids are rising and it's great for us. I don't mind. But alongside, I think we're going to wake up as we come out of this and realize that, you know, they're there. And what that means for the non-Chinese supply chain is that I think what you will see is the demand, you know, there's sort of the pendulum has swung one way, but the demand upstream is going to be there. It's just, unfortunately, it's clouded right now by sort of what is happening with all these OEMs that might need to raise capital, sort of the newer upstart ones. And then what's happening with all of these? I see these lithium projects, lithium's down 90%. These guys need to raise capital.
You know, what's happening is sort of it feels very, you know, bloody for lack of a better word. But while that's all happening, you know, the demand is still developing. And so I think we'll wake up to see that because it won't just be, you know, right now if you think, why are we experiencing this? You know, I think there's some model disappointment. I think there's some range anxiety. And then the charging stations need to be built out. And then there's some realization that maybe hybrids are the right solution for others. But if we wake up in a year or two and you can, you know, the Chinese EV, which we'll go by the name Volvo, for example, right now feel is a much better product at a much lower price. That competition's still going to be there and that consumer will buy that product.
And so, you know, I don't think that things are as dire as they seem. Certainly they weren't as good as they, you know, might have seemed a year or two ago, but they're certainly not as dire. And so for the supply chain, I think that still means that there's going to be a lot of demand.
We heard from some of the other battery materials companies today about slowdowns in capital spending as they think through some of these dynamics that you just spoke about. But others had the perspective, you know, keep investing in the business and, you know, if we're investing in high quality projects that are low cost, they'll sustain themselves through the cycle. How do you think about your capital spending plans given some of the dynamics on the rare earth pricing side?
Yeah. Well, that's the existential question right now because the reality is when the tide goes out, the cost of capital changes. And, you know, you can make a lot of mistakes when things are exciting and, you know, people are throwing money all over the place and that we hope not to make those. And we're thoughtful in all times of the cycle, but particularly now. And I actually think, you know, I think that there will be there's stress, there'll be stress, there'll be distress. You know, for example, in our space, there's a project in Australia.
We mentioned this on our last earnings call just as an example, not to pick on them, but I just think it's a really good example where this is a project that was going to be aside from us and the, you know, the one other competitor to us outside of China was going to be the next big source of incremental supply. Well, it turns out their cost just went up 70% and they haven't even finished their FEED. They haven't put any steel or concrete in the ground. And, you know, the costs are going to go even higher from there when all is said and done. And so, you know, that project, if you believe, you know, any of the realities, well, that would cost a lot more than the enterprise value of our company today.
So it's like if you're an investor, what are you going to do? Buy an existing, you know, world-class, best-of-breed asset that cash flows, that has, you know, more upside and liquidity or, you know, invest in something highly speculative. And so that kind of analysis, you know, there's a disconnect there. There's, you know, clearly you can understand the risk of wanting to put new money to work for a long-dated potential IRR or whatever when you can, you know, just play for a cycle in something else. And so I think some of that will play out, but you have to be more careful. And we are thinking through this in every aspect of our business and, you know, projects.
Certainly the one main project that we have, we have two major projects going, our magnetics facility in Fort Worth, which we've said, you know, this year we expect to be sources and uses neutral because we're going to be making metal later this year and we expect to have, you know, deferred revenue come in as part of that. And then we have Upstream 60K, which we announced not this past call, but a call ago where we expect to increase our output by approximately 50% with around $200 million of spend. So when you think about the ability, whatever our enterprise value depressed is today, to grow that by 50% and then think, oh wow, actually, you know, so it's $2.5 today. And the last, you know, when prices were higher a year and a half ago it was $10 billion.
And if you can increase that by 50%, well, wow, that means that there's many multiples the next time, you know, people get excited again, whether that's two weeks or two years or five years. Wow, that's, you know, that's a very attractive return on capital opportunity irrespective of the environment. And so outside of that, you know, we'll be more methodical about, you know, any project. There's lots of projects we always would do. And the last thing I would say is, and I said it up there earlier, but I think it's really important to note, MP is a product of an environment like now. You know, we bought these assets out of bankruptcy, incredible world-class assets, but that had encountered cost overruns and poor management and all of those things that happen that get exposed at times like now.
We were hand to mouth turning these things around. The DNA of our company is surviving times like these. That's actually when there are great opportunities to be had. So I have no doubt that those kinds of opportunities are, you know, upon us again. So we feel really good. Unfortunately, it doesn't feel great. The last thing I'd say is it doesn't feel great to see how well we've executed as a public company over the last nearly four years. Unfortunately though, the pendulum swings, the price of the commodity is down, you know, 70% from its highs a year and a half ago. Of course, that's not going to look good in the stock price. But when it comes to actually the fundamental value of the business, I think we've grown, you know, tremendously.
You'd briefly touched on the history of MP in your opening remarks. You know, as a brownfields operation that you've been working through, advancing, it's benefited obviously from the historic investment that the prior owners put in. How does that, you know, help create barriers to entry for other new entrants to the industry?
Yeah. Well, the predecessor is many years ago at this point. And so I think we've over the years put quite a bit of investment and now, you know, we're refining at Mountain Pass, which I think, you know, first when we now have over six years, I think many doubted we could even get it going. We got it going. Many doubted we could refine. Many doubted we could do magnetics. We've, you know, obviously we like to have naysayers. It drives us. But I think at this point, you know, we've really; there's been a lot of our own investments that we've made that I think we have the benefit of today that aren't necessarily fully reflected and appreciated. And so I think the takeaway from that, that answers your question is in this space in particular, it is really hard.
I see tons of projects, you know, everyone and their sister and their cousin has a rare earth mine. If you have a backyard, you have a rare earth mine. But these are hard projects to execute. There's cost overruns. It's, you know, it's really like a specialty chemical. Separating this stuff is challenging. And so a lot of times you see a promoter or someone, you know, with good intention comes and says a project costs X and the discount rate is Y and therefore it's worth Z. And then inevitably it's, you know, it costs 3X. The discount rate should be Y plus something. And so the value is Z, you know, a lot less than Z.
And so that's also what I think gives us a lot of confidence is when we, you know, when we see sort of what we think is still incredible medium- and long-term demand in our space, lots of use cases that aren't necessarily around the EV, but we're still excited about that. But lots of further growth use cases where, you know, we think the strategic value of what we have remains. And when we know how challenging it is, it just makes for extremely volatile cycles, you know, to the upside. And we, you know, we got that a couple of years ago. I expected it to go longer. You know, fortunately we made sure that our balance sheet was not matching those expectations. We maintained a conservative balance sheet because you just never know when it comes to commodities.
I have no doubt, you know, we'll get the next one. Then I think people will be, you know, surprised because a lot of these projects they expected to come online, they just aren't.
Maybe shifting to some more company-specific questions. You know, 2023 was a pretty transformative year for the company. You've advanced the work on stage two. We'll touch on stage three in a moment. You know, stage two is the rare earth separation component and you're looking at ramping that up to 6,000 tons a day of production. Can you discuss some of the modification and optimization work that the team has undertaken to get to the point now and what some of the next building blocks will be for stage two?
Sure. So with our stage two, obviously to go from a concentrated product to a refined product, you know, the real challenge to get that right, one of the many challenges, you know, is really around efficiency. There's a lot of energy and reagent usage, you know, throughout each of the solvent extraction processes. We've gone from, you know, leaching all the way down. When we think about what we did differently, the assets that we inherited, you know, fought tooth and nail for years and suffered a lot of pain. So I think we earned them to some extent. There wasn't, and this is getting sort of really specific in rare earths, but there wasn't the roasting step. And the roasting step allows you to handle the cerium much earlier, which is obviously in big abundance.
It's a low item, low value item rare earth in big abundance in, you know, any light or medium ore body where we're able to then reject that upfront so that we have, you know, a lot less material going through the process down the way. And so the energy and reagent usage every step of the way. Making sure that you, you know, another thing we added was a crystallizer to process water. There were a number of these process steps that we did. We could, you know, go on and on and about them. But every single one of them boils down to you obviously want to get as much as you can going through the process, have as much uptime and recovery.
But while you're doing that, making sure that you're keeping your cost structure down because I think, and by that I mean maximizing recovery, not just sort of at the end game, but at each step of the way so that energy and reagents are not hurting you, you know, sort of each step of the way. And so that's kind of the key things that we're focused on. And then, you know, product finishing, just getting product on spec is not easy, right? We made a tremendous amount of investment in building out finishing circuits to make sure that we could be meticulous about on spec product and packaging and all of the things that make for a salable product. Those assets, you know, previously didn't exist. And so there's been a lot of historical investment. Now that's all past us.
And now it's a question of just optimizing all of those in place. And, you know, we said we've been refining now, you know, going back into last year and you've seen us scale last quarter. We did three times the amount we did the prior quarter. And so we've now been operating at scale for, you know, a good six, seven, eight months now, admittedly significantly subscaled to where we'll ultimately be. And so we want to make sure though that as we scale, particularly in a low pricing environment where there's not a lot of uplift and we can kind of talk about that from the next stage, that we're really optimizing those costs. And so we feel very confident that all of the assets that we have, you know, can operate and do operate at scale.
The name of the game right now is getting the costs down.
I thought there was some good discussion on your earnings call the other day about, you know, the fine balance between optimizing yields of stage two versus, you know, concentrate that could be sold to the market versus that being used for stage two processing. How are you thinking about striking the right balance and, you know, that mix that will drive the right, you know, amount of investment and profitability for the business?
Yeah, that's a great question. And we spent some time on this and the purpose of it was to just highlight how unique of a business benefit we have that we have this upstream saleable product and it allows us to generate profits. Obviously we generated profits for years, very attractive profits just in that business. What it means is that as we move downstream, and this goes for every aspect of our business from stage two to stage three to whatever else we do in the future is, you know, we think about the incremental business opportunity as an incremental business opportunity. And so this is just a really rough example we gave. It's not guidance, but it's just sort of like an example to conceptualize.
If you have a $35 cost per kilo of NdPr and the market price is 50, you know, and you don't get 50, you lose a little with, you know, sales have a cost and VAT and other things if you're selling to certain markets and what and taxes and whatnot. If you look at that spread, the majority of the profit is captured upstream stage one by going from mining to a concentrated product. There's then a huge opportunity to go to refine, but that's very levered to price. And so in a time of very low prices, that incremental opportunity is very small. And so if your cost structure is $2 or $5 a kilo higher, you know, it might not make sense to fully ramp if you want to be partially ramped and you save many millions of dollars, for example.
And so the point was just, and in particular when you think of flow through effects, it wasn't in any way, you know, guide one direction or another. It was just we have a very unique business model that way where we think we can survive a lot of environments and we are structurally thinking about these things always. And we think about it with our magnetics business as well where, you know, we obviously have a great foundational customer in GM. And as we think about all customers, we contribute the product to stage three at market or if it's not at market, whatever cost that was is a cost to that business. So every business, every stage of the business has to be thought of, you know, that way. And so that was sort of the point of that.
And I think what it allows, and we're unique in that way. We have an integrated mine refinery at Mountain Pass. And then, and so, you know, even in China, the mines and the refineries are separate. And so, and then our other competitor in Australia is separate. And so our integrated business model allows for us to actually survive really lean times, hopefully better than others. It doesn't mean that we're not hurt by low prices like we are today. You're seeing it in the numbers, but it just means that we think, you know, we know we have some better downside protection in the business that, you know, we appreciate and try to take advantage of when we can. But we hope that that's a very short period of time. And obviously, you know, when prices recover, we want to be positioned to maximize benefit.
Stage three of the business is an evolution towards more of a highly engineered, customized magnetics product. Can you touch on some of the in-house capabilities and expertise that you've built out over the last couple of years to reach this point and how you see that developing?
Yeah. And so great question. Because when, you know, when we went public in the fall of 2020, we actually didn't have a single employee in our magnetics business. And we said it was aspirational. We said this is aspirational. Think 2025+. But one day we think we can move downstream into this business. And here's why. Fast forward to today, we have 70 employees in that business and we have a world-class team, metallurgists, materials science experts, you know, this business that we've built, really an incredible group of people. And we've gone from, you know, we broke ground in April of 2022 of this facility and now we have it built and our team is in there. And obviously we said, you know, the business is going to be sources and uses neutral. Really proud of that this year. That's an enormous achievement.
So we have a—you know—we have a ways to go before we're making qualified magnets for GM and other customers. But we're being very thoughtful about the cash. You know, I think it's one of the things. I think you look for babies with the bathwater in this kind of environment, but you know, we've invested a lot of capital and effort in that business. We've generated—you know—some interesting intellectual property in our view. And that business is sort of fully equitized with—you know—customer contract that—you know—in theory should have contracted cash flows. And so there's real value there. And if you look at our business today, you know, we don't get credit for that value. In fact, we get significant negative credit for that value. And so that's obviously something that—you know—we think about constantly.
But, you know, however we choose to handle that, we choose to handle that. But the point is, is that there's been actually some remarkable value creation in that business with respect to the team that we've built, the assets that we've put in the ground, and, you know, we've capitalized it with just, you know, capital on our balance sheet. And so, you know, there's a lot of hidden value there.
Great. Thanks very much, Jim. I think that concludes our time, but appreciate the discussion. Thank you.
Thank you. Thanks so much.