Good morning and welcome to the first day of the J.P. Morgan Energy, Power, Renewables, and Mining Conference. My name is Bill Peterson, U.S. Clean Tech and Metals and Mining Analyst, and we're really pleased to start off our sessions with MP Materials and Jim Litinsky. We've been hosting Jim for the last two years at the conference, and I think all the questions were always about supply and demand and what China is going to do. It still is about what China is going to do, but it's a lot more than that now. Jim, I don't know, maybe you just kind of kick us off.
By the way, Bill, it's good. I feel like in the prior years we always had to at least explain what a rare earth magnet was, but I think given the state of the world, everybody knows what a rare earth magnet is.
Rare earth, raw earth, whatever it takes.
Right.
Maybe just a quick introduction to the company, the importance of what you do, and then we'll move along to our questions. We are webcasting this, so if there's any questions, please wait for the microphone, but over to you, Jim.
Sure, the real quick introduction, MP, we're America's champion in rare earth magnetics. We have a mine in Mountain Pass, California. We mine rare earths, we refine them, and then we send rare earths, refined rare earths to our Texas facility that we built to make them into rare earth magnets. We essentially have completed the full supply chain, bringing it back to the United States of America. The facility in Texas in Fort Worth, which we call Independence, we have a foundational, very sizable contract with GM. At that facility today, in small scale, we're making autograde magnets. We're ramping that facility online, and at end of year we'll be—we're actually already supplying precursor materials to GM, but at end of this year we'll be supplying them magnets. Our expectation is that facility can expand.
We can talk about that, and then we will just continue growing out this supply chain.
Great. You have been speaking about the significant amount of interest from commercial companies and governments, especially considering the chokehold that China has had on permanent magnets. Given that tariffs have at least kind of temporarily abated, are you concerned that things may go back to normal and the hype of building U.S. magnet chain subsides, or is that a ship's sail at this point?
There are two crises. There is sort of the short-term crisis that happened with Trade Liberation Day, where the theoretical threat of the shut-off of rare earths that we have been sort of screaming from the rooftops for the last number of years actually happened, and the Chinese implemented export controls. I do not think people fully appreciate—we were, Bill, as you know, weeks away from a full shutdown of our economy across the auto, aerospace, and other supply chains. This is not my words, these are freely admitted out of the administration. The key goal in the trade talks in London was to get rare earth magnets back online for American companies. They did that. They got a six-month extension from the Chinese, and they certainly alleviated the short-term crisis where we were on the precipice of a total shutdown of our economy.
Out of that, what we also got is actually a much more acute long-term crisis. By that, I mean that we are now in this world where, again, the theoretical of the Chinese control of the rare earth supply chain is now truly actual. It is a source of leverage. To get rare earth magnets, if you are any company in the world, you need to get a license from the Chinese government. They are now handing out licenses to American companies for the next six months. To get those licenses, you need to disclose a lot of information, specs on your product. They want pictures, they want contracts. It is a lot of detail. That might not be such an issue for an HVAC company or even an auto company.
When we think about our defense supply chain and we think about the future of warfare and physical AI and robotics and drones, the idea that our downstream great industrial base is going to need permission, licensing permission from the Chinese government to get rare earth magnets is obviously an enormous long-term crisis. To directly answer your question, the short term, like, are we going to fall off a cliff? How do we get magnets tomorrow? That is over for the coming months. In place of it now is a big-time crisis where we have got to figure out this solution. I do not think—I think certainly there were, and after Liberation Day, we had anyone and everyone kind of wanted to talk to us, come see the mine, come see the magnet factory.
There are some players who, now that the short-term crisis is gone, they'll noodle on it, and some of those fall aside. In its place now, there's a much more determined industrial base, and specifically defense industrial base, that knows that this is not a sustainable reality. I would actually direct you, I saw this the other night, about five days ago, Treasury Secretary Bessent did a podcast, I think it's the Miranda Levine, it's an Australian podcaster, and he said, so I'm just going to reference his words, "We will not leave 2028 without having solved this issue," specifically with respect to the rare earth magnet issue. I think that there's strong commitment from the government, strong commitment from industrial players that this is not a sustainable long-term.
Yeah. Maybe just playing the other side, you stopped selling concentrate, but now we do have a lower tariff regime. Who knows how things evolve geopolitically, but if you're still stockpiling, how viable is the stockpile on site? How long do you think this can go on for? Last year you had a pretty key initiative called Upstream 60,000. How does the stockpiling impact that initiative? Do you slow that down, or how should we think about it?
Sure. We have a lot of optionality in our business. Again, for those who do not know, the three main aspects are when you mine the product, we concentrate it. We will take approximately a 6% rare earth grade and concentrate that up to 60%-65%. We are the low-cost producer in the world of concentrate. We can sell that very profitably into China. We then refine. We are now refining more than half of our product. What Bill is referring to is the concentrate with the scale of the tariffs, the 145% tariffs, it obviously became silly to sell off our resource, and we stopped selling con. Now that the window is open, we actually took advantage of the window to sell a little bit of low-grade con. We are mainly otherwise stockpiling.
We have plenty of space on site, plenty of years of space to stockpile con to the extent that we want to. This is really sort of a short-term working capital event. I mean, we're now refining more than half on a run rate basis of our product, and as we fully ramp up refining, we'll certainly not be stockpiling con, and then we'll work down those stockpiles over time. Again, though, we really look at it as there's optionality in our business model. We can certainly sell off a concentrated product for profit, but from the very beginning, the goal of the company was to restore this full supply chain, be a low-cost producer of refining and ultimately of magnetics. We're really focused on refining everything that we make and then ultimately turning those into magnets to solve the issue.
One of the things you've been really pointing to, even over the last few years, and I think it was sort of less understood by the market, is your full vertical integration, which should really kind of come to fruition, as you pointed out, when you start shipping full-scale production. I want to talk about where do we stand in the journey with the refining, I guess what you've been called stage two. How does the flow work? What can you support from a volume perspective on stage two? Presumably, you want to improve your yield and throughput and so forth so you can take on more of your existing stage one. Stage three, obviously, where do we stand in that journey as of right now?
Sure. As I said before, our goal is to refine everything that we produce, make magnets for everything that we produce over time. We certainly have gotten our cost structure to be the lowest in the world from everything that we can tell in concentrate. We have substantially lowered our cost structure in refining. We are ramping up refining. We took that business from nothing to now refining north of half of what we produce in concentrate, which when you see the scale of these sites, and Bill, I know you have, but for those who have not, the best way to think of a rare earth refinery, I mean, these are really like an oil refinery. I mean, these are enormous multi-billion dollar chemical facilities. You do not just flip a switch and then say, "I want to refine and refine everything overnight." There is a ramp period.
There are bottlenecks in the process. There's certain equipment that doesn't perform the way you want it to, and so you'll make changes, et cetera. We're in that journey of bringing all that online fully ramped, and we've already seen a reduction in our cost structure, and we'll see that continue. We referenced on the last call, we actually had a nice chart showing where our current cost structure was and where we expected to get to. We expect to get to the mid to low 40s on an NdPr basis, which would put us as a low-cost producer to the world. We're not there yet, but we're making great progress on that front. On magnetics, the downstream business, the initial stated capacity of Independence is 1,000 metric tons of magnets. Just order of magnitude, the Chinese industry is a couple 100,000 .
This is a rounding error relative to the global market. There is certainly an enormous amount of demand that we could scale up to fill. The Independence facility, we have stated that our expectation is that we could triple the capacity or roughly triple the capacity of that facility. Obviously, I am sure we will talk about it, but industry and government are pushing us hard to accelerate that as much as possible. From there, though, I think we want to rinse, repeat. There is not even in Chinese industry, just to put this in perspective, because I think when we have been public now for almost five years, we had this sort of vertically integrated strategy. Certainly in the beginning, there were many who criticized us, "Can these guys really bring a mine online?" We obviously debunked those doubters. "Can these guys refine?
Can they build a magnet facility?" Each step of the way, we have debunked that. We will continue executing all aspects of this business. I think what is really important is that, again, even in Chinese industry, there is no one company that has all of this expertise in-house. The ability to mine, refine, and make magnets is really an incredible thing to have in a national champion that is MP. The last piece on that that I do not think is maybe fully appreciated by the market and what is sort of a real advantage for us to have that vertical integration and why we felt very strongly about this strategy in the magnet manufacturing process, and it depends on what kind of product you make, whether it is a smartphone or an auto magnet or a wind magnet.
There are different amounts, there are different sizes of the magnet, and when you finish that magnet, you typically cut off some of the material. In the manufacturing process, you'll lose material. There is this idea of swarf or product that you will recycle, that you need to recycle. There can be anywhere from 20%-50% of the material that's going through your process that will fall off the line that needs to be recycled. The idea that an independent standalone company could have any success selling magnets in the United States of America when the Chinese currently sell magnets for not much beyond the price of raw materials, when you're losing 20%-50% of your material that has to be sold back to China, it's just really difficult.
When you hear of these what I call subscaled players that are not vertically integrated, there are fancy business plans. It sounds exciting, but the math is just really tough. What we have at MP is we have the ability because there are two places in the world to refine. You can refine in the Chinese sphere of influence, China, Malaysia, or you can refine in the United States at our site. Having that refinery gives us the ability to have the full stream to really take advantage of bringing that material back through. It positions us actually to be a low-cost producer, an efficient producer in magnetics to work with customers as a one-stop shop. I think the last point on that, the team that we have built at Independence is just outstanding. We have that business now has almost 130 people in it.
We have 40 engineers, nearly 20 PhDs. We've really become the center of IP and magnets in really the Western world. I think we're going to continue to make gains in that business, and I think we're really well positioned to significantly scale that business. Last point, given the way the world has changed, as I've said, people are really pushing us. Everyone wants us to move faster. We've invested north of $1 billion in this business since we went public. Obviously, putting this entire capability in one national champion has been an extraordinary achievement. We still have a long way to go, but we're trying to be very thoughtful about how we accelerate the downstream to make sure that it is most attractive for our shareholders.
To the extent that we're going to accelerate that business, it's going to require substantial capital and/or contractual commitments so that this is going to be transformational change for the value of our business. Last, I guess one more last thing is those deals take time, but I'm very, very confident that you're going to see some exciting stuff from us.
I do want to talk a little bit about heavies, but maybe picking up that last point because I think they're probably related anyway. What could funding look like to, I mean, support an expansion, something like a heavy separation or an expansion of Independence or somehow procuring more heavies to be able to even expand it? What does government support look like or maybe an offtake agreement through a customer relationship?
Yeah, absolutely. That is always there are those out there. There are always people who want to take shots at our model, and we love that. That is what makes a market. That is great. The question around heavy is there has historically been MP does not have any heavies. No, that is not true. We have heavies.
Smaller amount, but you have.
We have a smaller amount. The analogy I always like to give, if you look at our ore body, it's 60,000 parts per million. You'll get these, for lack of a better description, I'll call them like penny stock type sites that are promoting, saying, "Oh, we have a higher percentage of heavies than MP." What they don't tell you is they have 600 parts per million. What would you rather have? 10% of 600 parts per million or 1% or 2% of 60,000 parts per million? You don't need a calculator to do that math. We always laugh at that. There's no question that if we're going to significantly scale our magnetics business beyond Independence, we need more heavies. That's for sure. What people also might not know is we have a heavies project underway.
We are building heavy separation at Mountain Pass as we speak today. We're bringing that online next year. That'll obviously feed our Independence facility. We're building that with the capability to take third-party feedstock from around the world. If you are a site, and we want to see significant development around the world in rare earth sites, if you are a site and you make, whether it's a clay or anywhere in the world that you have an ore body, if you're going to make a mixed rare earth oxide or a concentrate, whatever you're going to make, you need to have it refined. Your choices are China or us. I think we're going to have some really good opportunities to scale up our heavy separation business with third-party feedstocks from around the world.
We're building that business out to have that capability. Our refinery is a big advantage there, but there's no question we want to get more material.
When I think about your ability to take on that project with the heavies, I think you mentioned in brief that recycling is a key component there as well. What kind of core competency do you have in this and how much is the work you've done on the lights pretty fungible or at least the know-how or transferability to your heavies program?
Sure. It's very similar. I mean, ultimately, when you're separating, you're going down through a series of tanks. We have an incredible team out there. Obviously, we've brought refining online at scale and lights. There's no material difference between lights and heavies from a sort of a technological understanding standpoint. We obviously have a pretty extensive lab where we've been at this for quite some time. That project's underway. As we speak, the equipment's on site. We're installing it. We are very confident we'll bring Dy/Tb online next year, the two main magnetic heavies, to feed our magnetics business. That's just sort of the standard blocking and tackling of our refining business.
Maybe taking a step back, heavies are generally speaking used for more higher-end applications, high-temperature applications. I think really the vast majority or a lot of magnet applications really do not need that. We have seen the industry just evolve and use less heavies in general. How important is it for you, for your business? I guess, as I said before, you are setting up your refining. Recycling is an important part. Ultimately, how much could you expand the downstream or how much do you really need it just given that maybe lights are frankly more important?
Yeah, it's a great question. For those who do not know, when you have a NdFeB magnet, the primary rare earth is NdPr. That's the main light. Then there are little doses of these heavies, Dy/Tb, that allow the magnet to withstand higher temperatures to maintain their magnetism in higher temperatures. In an auto application or maybe a drone or a satellite, you may need to withstand much higher temperatures. In other applications, it's actually less necessary. The important thing, and we think about this with respect to our business all the time, in auto, there's a constant push. When you hear of people engineering out rare earths, they're typically talking about engineering out the heavies, getting the percentage of heavies reduced. We've done some extraordinary work on that front.
I think you'll hear from us on that front in the coming year or two as we bring Independence online and getting heavy content down for auto magnets. Auto magnets are really kind of the hardest magnet to make. The really exciting growth use case as we think about over the next three to five years, the physical AI, humanoid robotics, what you really need in a humanoid robot is high torque density. You need to have a lot of power for a small space in your magnet, but you don't necessarily have ultra-high temperatures. Obviously, that industry doesn't really exist yet outside of a lab and sort of some trial.
When we talk about a world that Jensen Huang or Elon Musk are talking about, about hundreds of millions or billions of robots, it's highly likely that, if not the vast majority, a significant percentage of those will be neomagnets that won't necessarily require any heavies because you just don't have the temperature needs. I think that business will be able to position for that growth without thinking necessarily as much about heavies as if instead, if we were to solely focus on auto, we might be thinking more about heavies. I think that there's going to be enormous opportunity for us to grow our magnetics business without sort of commensurate growth in the heavies, if that makes sense.
Maybe just picking up on that, what is the kind of comparative? And Ryan spoke to it yesterday. What is the comparative growth rates would you think on lights versus heavies? Meaning, is this question around heavies just overstated?
I guess it depends on your assumptions of what are the growth industries. If you think that humanoid robotics, like a lot of the AI leaders say, is going to be the largest industry in the world, if we believe that's coming online over the next three to five years, the scale of that demand is so enormous relative to, frankly, the NdPr and the magnet capacity today, I actually think that the NdPr demand is going to explode relative to heavies. Now, if you said to me, "I'm not a believer in physical AI, I think that's going to be a decade or two out, and my expectation is auto is going to be sort of a bigger use case of growth near term," then I would say certainly the heavies are going to grow commensurate with neo.
In all scenarios, the demand backdrop for NdPr looks very bright. I mean, the demand backdrop for heavies as well. I mean, the demand backdrop for rare earth magnetics is exciting. It's high. If you're a believer in sort of the physical AI use cases, I wouldn't overly get hung up on heavies because I think you're going to see most of that industry shift to probably non-heavy usage.
I'm going to pause for questions in a moment, but before that, I want to talk about M&A and what role that could play in an environment maybe to address the growth, maybe to address heavies. I guess moreover, it feels like there's opportunity for partnerships if we think about also your announced partnership with Maaden. How to expand your existing footprint, what's the best way to do it, and how does M&A play a role?
Yeah. I mean, the short answer is we're opportunistic. I mean, we're trying to grow our business as thoughtfully as we possibly can. Obviously, we consider a lot of things. There are lots of ways to get access to material. If the question is around heavies, you don't necessarily need to buy a company. You can do offtake. You may want to buy a company. I'm, in general, very skeptical of sort of allocating a lot of capital to new builds. I mean, I'm here because I cleaned up somebody else's mess. Their predecessor invested billions of dollars. They failed. Now here I am, unexpectedly.
We could talk about that for 30 minutes or 40 minutes this other way.
I think being a national champion that has capability across the stream puts us in a very unique position to partner. You mentioned Maaden. I mean, think about this, and this is sort of publicly stated, but from the Saudi perspective, they sit at the crossroads of sort of a geopolitically competitive world between the U.S. and China. They certainly saw the value of, wow, if we could bring online a fully integrated rare earth mine refinery and magnetics facility, that would be pretty extraordinary for our position. There are others like them as well. I think there are a lot of people out there trying to figure this out.
Again, I go back to there is no company in the world, including the Chinese, that has all this expertise in-house that can holistically work with a nation, a country, a company, to provide this full solution. I think it opens up a lot of opportunity for us. Again, I think as you've seen with us, we're going to do this thoughtfully, and we're not in a rush. I think there are lots of ways to go about this. I would rather, if you look at our GM deal or you look at how we built this business, doing something of consequence that's lasting and profitable takes a lot of time, and you want to get this stuff right. Rather than kind of throw our hat in the ring towards everything, we want to make sure that we're focused.
We have a lot to focus on, but we want to execute this stuff right. When you see stuff out of us, I'd like to think that we're doing stuff that's really built to last and that's going to be, again, transformative for our value. That's what we're really focused on.
I want to pause and see if there's any questions from the audience. Just wait a second. There's one up here in the front.
Hi.
Hello.
Just a question again on the heavies. If you wanted to source them outside of your own, the small piece that you have at your mine, where would you source them? Is it primarily out of China still, or are there other sources where you would find Dy/Tb ?
Oh, sure. There are sites around the world, no question. I mean, they're everywhere. Rare earths are not rare, as the expression goes. It's just getting them to be economic is the big question. There are sites around South America, Africa, all over Asia. Right now, the lion's share of heavies in the world come actually not from China, but from Myanmar, just over the border. Obviously, they go into China. Obviously, I'm not going to share our exact playbook with how we see, but to directly answer your question, they're all over the world. It's just a question of the economics of the project that you're looking at.
Got it. If you wanted to expand, I guess, the magnetics piece, you have no concerns about sourcing the heavies?
Of course, I have concerns about all aspects of expanding, but concern about availability is not a concern subject to making sure that the investments make sense. We want to expand that business thoughtfully. Again, I go back to our position by having a refinery allows us to be in a very unique position vis-à-vis others investing. This is something you've probably heard me say at this conference over the last few years, but we essentially bought MP, what became MP, Mountain Pass, at pennies on the dollar. We want to be thoughtful about, as we look at projects around the world, making sure that we're taking advantage of our position and not risking too much capital. Ultimately, it's just a trade-off of capital. I mean, there are lots of sites around the world where these exist.
It's really just a question of the pace of investment, how we want to do it, not like, are they there?
Got it. I should have said Craig Gilbert, Linden Advisors, we own the converts.
Yeah. Okay.
Thanks for that.
Which one's the 30s or the 26s? Yeah, the 30s, yeah.
Congrats.
Congrats. You've done well. Yeah.
One of the things that we've talked to you about, and I think you've mentioned, and I'd be curious to get your thoughts now given the geopolitical situation, is around bifurcated pricing. You just sort of hit it. Things need to make sense for you to proceed with projects, and it has to make sense. How should we think about that?
Yeah. That is a great question. I think that is going to come down to, to some extent, that's going to come down to government because what has happened in the last two months is very different. We've been at this. We've been out in public for five years, as you know. This idea of export controls has totally changed the landscape. Again, I'll reference again for emphasis just because it's a public thing that I can easily cite. Go watch that Bessent podcast. There's a few minutes where he talks about the trade deal in London, the inability to have rare earth magnets, and the commitment from this administration to solve this issue before they leave office. There are lots of ways to solve this issue, but all roads lead to recognizing that the existential issue of this industry is Chinese mercantilism.
I mean, that's the existential issue. If prices were multiples of where they are today, I think you would see a lot more investment. Ultimately, people want to know that the market's there. I do think you're going to see government and industry work towards this issue. I would say stay tuned on that. I think there's a lot of ways that that could ultimately be resolved. I'm confident that the intent is there. We're working maniacally towards figuring all of that out. That's really the challenge of the industry: how do we get proper free market economics into an industry that is critical for our national security and, frankly, for trillions of downstream investment. Last thought on that, I mean, it really is amazing. I mean, I look to you guys, the investment community.
I'm actually in shock that this isn't a bigger question across the board to Jensen Huang, Elon Musk, all of the people that you hear talking about AI. We're bidding up these stocks around AI, and we're talking about trillions of dollars of enterprise value, and we're talking about robotics. We think about the fact that there are hundreds of Chinese robotics companies, thousands, and they've made clear this is publicly stated that they're going to use their supply chain to make sure. This isn't necessarily even we're going to cut you off. This is we're going to use our supply chain to make sure that our companies have an advantage over yours. How are the questions not being asked of defense tech or AI of how are we going to solve this issue? Obviously, they're starting to be asked.
Every time you see a defense tech company or an exciting AI company or an auto manufacturer out there talking about all the exciting things happening in AI, the first question should be supply chain. Because it's not that the supply chain is so hard, but it's that your competitors, the Chinese, are focused on this. It is sort of like a tiny deep seek equivalent. It's like here you are spending all of this money, and you can just be disrupted so quick you do not know it hit you overnight out of nowhere. That question is not being asked enough. Obviously, we have screamed from the rooftops on the rare earth issue since we've been public. Obviously, now people are paying much more attention over the last two months because of what's happened.
Let me give you a new scream from the rooftops. This has gone from a short-term crisis to a long-term crisis, but the crisis is much worse because it does not need to be about geopolitical challenge. It can just be about competition. The Chinese are going to dominate physical AI if we do not solve this problem.
That was a good way to wrap up. We covered a lot. We could have covered a lot more, but Jim, really appreciate you joining the conference and sharing your insights.
Sure. Thanks, Bill.
Thanks.