Everybody, welcome to the afternoon session of our 43rd Annual Metals and Mining Conference. This next panel has become a bit of a mainstay at the conference, and I hope it continues to be that way. The interest has been fantastic, and to complement that interest, we have two fantastic guests. With us today, we have Ryan Castilloux. He's Managing Director of Adamas Intelligence and a true expert in the space of rare earths. From MP Materials, a U.S. champion in rare earths, we have Ryan Corbett. He's Chief Financial Officer of the company. My colleague, Kate McCutcheon, is here to share the stage with me. How we're gonna start things off is I'm gonna invite everybody on stage.
Ryan Castilloux from Adamas Intelligence is going to start with an overview of the sector, supply and demand, pricing costs, all that sort of stuff. Ryan Corbett from MP Materials will give a bit of an overview of MP, but more specifically a view of the industry from a U.S. and MP perspective. The four of us will put our heads together and have a chat about the industry. If you guys wanna come on stage, Ryan Castilloux, the podium is all yours.
Thank you, Lawson. Good afternoon, everybody. It's a pleasure to be here speaking with you today. Thank you to Lawson and the team for inviting me to participate in the Rare Earth panel once again this year. As a Canadian, it is always a pleasure to follow this conference from sunny destination to sunny destination. As mentioned, my name is Ryan Castilloux. I'm the founder and managing director of Adamas Intelligence, a global market research and advisory firm focused exclusively on the rare earth industry and home to the biggest rare earth only focused intelligence team globally, by multiples.
I thought it would be helpful today to start off with, a bit of an overview to the rare earth industry, a bit of 101 for anybody that has just tuned into the space recently, and then to provide a view of the current state of the market, how we see things evolving in the years ahead, and then lots of food for thought and hopefully discussion to follow thereafter. Can I jump ahead on this, Lawson? And, perfect. Let's take ourselves back to Chemistry 101 for a moment and that periodic table of elements on which the rare earth elements include the lanthanide series plus scandium and yttrium.
Scandium and yttrium are not lanthanides per se, but they are often categorized as rare earth elements because of their tendency to concentrate into many of the same minerals and mineral deposits. As you can see on the slide, rare earths are arbitrarily sub-categorized as either light rare earth elements or oxides or heavy rare earth elements or oxides based on their electron configurations. By virtue of being present in the earth's crust in substantially higher concentrations, light rare earth elements tend to make up the vast majority of the rare earth content in a typical rare earth deposit and thereby also make up the vast majority of total global output each year. Heavy rare earths, on the other hand, are present in the earth's crust in significantly lower concentrations and as such make up a much smaller share of total global production.
Rare earth elements are used in hundreds of unique end uses and applications that collectively fall into one of 8 end use categories. We have battery alloys, catalysts, ceramics, pigments and glazes, glass polishing powders and additives, metallurgy and alloys, permanent magnets, phosphors, and other end uses and applications. As shown in the middle, by volume, permanent magnets and catalysts were collectively responsible for 70% of total global rare earth oxide demand last year. However, by value, permanent magnets alone were responsible for over 95% of the total value of all rare earths consumed globally.
This already large share is poised to expand even further in the years ahead as both demand for and prices of the so-called magnet rare earths, which include on the light side of the spectrum neodymium and praseodymium, and on the heavy side dysprosium and terbium, as both demand for and prices of those magnet rare earths continue to outperform. When we're talking about rare earth permanent magnets and neodymium iron boron magnets specifically, it's important to recognize that there are over 80 different grades of neo magnets commercially available today, each defined by their maximum energy product or magnetic strength, which is increasing along the y-axis, and their intrinsic coercivity or maximum working temperature, which increases along the x-axis.
At the basis of all of these grades of magnets, neodymium and praseodymium, in their combined form often referred to as didymium, provide the base magnetic strength for all of these grades shown. However, as we move towards the right side of those two red lines, we often see small concentrations, minor concentrations of dysprosium and terbium, those heavy rare earths, added to the magnetic alloy to preserve the magnet strength at the elevated temperatures that it would see on the right side of that line. To add a bit of color and context to this, I've overlain this grade chart with some common end uses of neo magnets, sitting atop grades that we may find in those particular applications. I need to emphasize here that there are exceptions to every rule shown on the chart.
There is no hard and fast determinant of what grade is used in what application. It's a function of what operating temperature, what demagnetization forces, and other conditions that that magnet will see in that application. The key takeaway here is that when we look at electric vehicles, robotics, electric vertical takeoff and landing aircraft, which are part of the advanced air mobility package, and other fast-growing demand drivers, many of them straddle or sit to the right side of this red line. What that means is that as the rare earth supply side continues to tune itself to support this demand growth going forward, we need not only the NdPr for the base magnetic strength of these magnets, we also need sufficient volumes of dysprosium and terbium to enable production of those specific grades for those applications.
You can think about the rare earth market much like a Swiss watch, where the various cogs need to move in perfect harmony, or they effectively jam up the works and bottleneck demand for other rare earth elements. Looking forward at demand for neo magnets, we expect it will more than triple by 2040, led by double-digit demand growth for electric vehicles, for robotics, and advanced air mobility. If you squint and look hard to the right side of the chart, this leads us to a future where by 2040, robotics surpass passenger EVs as the single largest demand driver for neo magnets. In the decade to follow, if we were to model that out, will increasingly eclipse demand from all other end uses and applications as that fast growth captures market share.
Robotics is what we refer to as the new frontier of neo magnet demand over the medium to long term. This is our robot deployment forecast that underpins the forecast shown on the previous slide. From a market of around 10 million robot units deployed this year, we project the market will grow to around 65 million units annually by 2040. At that time, will be primarily led by humanoid robots for commercial applications, humanoids for consumer applications, and other advanced robot types. Whereas today, the market is primarily driven by low-end consumer robotics like Roomba floor cleaners, window cleaners, and other similar robots. This may look quite aggressive. It's quite a steep incline post-2030.
But I assure you, this is a very grounded and conservative forecast relative to some of the other outlooks that have been put forward. Other leaders in the robotics space, Elon Musk, you may have heard of him, is projecting billions of humanoid robots to be on Earth by 2040, and others are speaking about 10s of billions in the decade to follow, many entering space and doing exploration work in that realm. Should reality come somewhere in between this grounded conservative forecast and the very ambitious outlooks put forward by Elon and others, it would almost certainly ensure that robots do surpass EVs prior to 2040 and would absolutely eclipse and minimize demand from other end uses going forward as they increasingly capture market share.
The good news for Elon and for others that are looking ahead at this very aggressive demand growth for neo magnets is that outside of China, the magnet factories are coming. Today, there is approximately 45,000 tons of capacity operating globally outside of China, and we see another 70,000 tons potentially emerging by as early as 2030, taking into account the announcements and plans of magnet makers to date. This is a figure that month after month, quarter after quarter, continues to increase, and I'm confident that next year this time, this 120,000 tons or so by 2030 will be substantially higher. The reality, however, is that a lot of this magnet capacity faces challenges, faces bottlenecks that may inhibit it from coming to realization by 2030, if at all.
Two of the major bottlenecks that we foresee in the near term, the first being, we don't see sufficient supplies of the heavy rare earths dysprosium and terbium coming to the market in the imminent near term to support this growth. Secondly, we foresee that metallization, the midstream, the conversion of those oxides into the metals and alloys needed to produce magnetic alloys that are then machined into the finished magnets, we don't see sufficient capacity coming online to metallize all of the oxides needed to support that magnet production capacity. That is a second imminent bottleneck.
The companies that will be best positioned to navigate these challenges are those that are vertically integrated, like MP Materials, companies that own the mine production of heavy rare earths and light rare earths, that have the metallization stage in the middle, and that own the downstream magnet factories to finish up the process. Conversely, companies that are simply aiming to build a magnet factory and to look upstream and to source metals and heavy rare earths from third parties, those will be the companies most exposed to these risks going forward. That concludes the slides that I had prepared for today. I'm very happy to take any questions that you may have on this or on anything else related as we go forward. Thank you thus far for your time and attention.
Thank you, Ryan, and fantastic slides. Ryan Corbett, I'll have you jump in and we'll address both of your comments together.
Our numbers are close. They're not exact, but they're close. Thanks so much for having me. Happy to be here again, the troupe of Ryan C's giving this presentation. For those of you that don't know about MP Materials, I'll give a quick overview of what we make. Before I jump into that, I'll refer you to our SEC filings. I may make forward-looking statements, so I will have you look at those there. This is our product suite. MP Materials leverages Mountain Pass, which is one of the world's richest rare earth ore bodies in existence.
We've rebuilt that asset to be one of the world's largest global producers of rare earth content, in the form of this high-grade concentrate that you see here, and since 2023 have been ramping a world-class and world-scale refining facility to make NdPr oxide. Today, we're producing on a run rate basis approximately 4,000 tons a year of NdPr oxide, and getting to our target nameplate capacity of 6,000 tons by the end of this year. To Ryan's earlier point, the strategy that we've employed here has been one of vertical integration from the outset. I do think that certainly there is a lack of focus and understanding from a lot of market participants and observers of the steps in between. You don't go from an oxide to a magnet.
You have to make high-quality NdPr metal. You need to be able to make alloy flake. Interestingly, you know, some of the initiatives that we'll talk about in a moment in terms of our ability to bring down the utilization of heavy rare earth oxides within our magnets relies on high-quality production of NdFeB alloy flake. The microstructure present there and the compositions are sort of the other growth vector within magnet manufacturing that allows you to reach higher temperature, maximum operating temperatures and higher performance with a lower mix of heavy rare earths within that finished magnet. For those that are a bit more familiar, I'll just do a quick rundown and an update on the status of MP Materials. We reported our first quarter earnings a couple of weeks ago.
Last quarter, we delivered about 917 metric tons of NdPr oxide, significant growth year-over-year and sequentially as we continue to ramp the Mountain Pass refining facility. We also achieved record upstream production for a first quarter for us as we continue to grow our upstream business as well. Given the change in market dynamics that have come into play since our July 2025 announcement of a public-private partnership with the Department of Defense, we've seen the NdPr market in particular, as well as the remainder of the magnetic heavy rare earths and the other heavy rare earths change drastically from a pricing and supply-demand perspective, and that has flowed through to the financial performance of the business.
As Ryan also mentioned, from a vertical integration perspective, we have been pursuing a downstream magnetics initiative since 2021. We're at a pretty pivotal and exciting time in the development of MP Materials' magnetic segment, where we've just commissioned the commercial equipment at our inaugural magnet facility in Fort Worth, Texas, that we call Independence. That facility was initially targeted for 1,000 metric tons of NdFeB magnets, primarily going to our foundational customer, which is General Motors. We have since announced an expansion of that facility to 3,000 tons of capacity with our anchor customer for that expansion being Apple. On top of that, we have announced a new magnet facility that we refer to as 10X, as that facility, combined with our expansion, will take us ultimately to about 10,000 metric tons of magnet capacity.
That facility, we just broke ground, is in North Lake, Texas, about 10 miles from our existing facility. The exciting thing about where we are in the magnet business right now is you saw the chart that Ryan put up there in terms of the demanding nature of the magnets that would go into an EV traction motor. We're making one of the hardest types of magnets that you possibly can, and we are doing it with an incredibly quality-focused customer like GM in the automotive space, where we've had to build out the, you know, technical depth and know-how to make it through the production qualification process to get into automotive traction motors for EVs for GM. We are in the process of doing that right now.
We have discussed that we expect to be generating revenue from magnet products in the second half of this year. We are currently producing and selling NdPr metal out of that facility to GM as well, driving the current financial performance of that segment. I think the concept that, you know, we're in violent agreement on with Ryan is that there are critical bottlenecks to enable the growth of this industry. Certainly, we see the same growth drivers that were just discussed, robotics, EVs, frankly, ICE vehicle, you know, production. Really anything that's in your pocket or that you drive or that flies has, you know, NdFeB magnet content within it.
I think the thing that we see is as all of this incremental Western magnet capacity gets announced, the scale of NdPr oxide production required to support these facilities is astronomical. You know, I'll kind of give a rough sense of where we shake out on this analysis. A lot of these numbers are pretty close to Ryan's, and some of it, you know, we, with his permission, utilize some of his research with a bit of ours on top. If you look at the current ex-China market, we're effectively in balance right now on supply and demand for scaled production of ex-China magnet manufacturers and ex-China NdPr capacity. The thing that I think is underappreciated is as we at MP move through our vertical integration strategy, we will become effectively nearly fully vertically integrated over time.
Our 6,000 tons of NdPr capacity will be used to feed our downstream initiative. The other only scaled producer of NdPr oxide in the world is Lynas outside of China, and the vast majority of their output was just spoken for in a deal that had some similarities to our deal with the U.S. Department of Defense, but with Japanese industry to support the Japanese magnet business. 7,200 tons of their NdPr capacity is dedicated to the Japanese market. If you look at what that means, the announced capacity of Western magnetics players is such that the increase in NdPr capacity needed to support them is gigantic. Certainly we see the same dynamic that Ryan described as it relates to heavy rare earths, particularly in the short term.
Some of the comments that we made on our earnings call I think got a little bit of attention on what our view of the ultimate key constraint being, given the fact that some of the very exciting growth cases and growing end-use cases of magnetics are in robotics, HDDs that go into the data centers that are powering, you know, the physical manifestation of AI that we're all talking about. You know, a lot of them do not require any heavy rare earth content. I think our point really is if you look at the growth trajectory that you see here of magnet capacity, we expect that the NdPr required to feed that to grow in line, if not slightly above that trend line.
Whereas what we see from a heavy rare earth perspective is we have just MP, but the industry writ large have made tremendous steps forward on thrifting of heavy rare earths within the high-performance magnets that were on that chart. As an example, the formulation that we expected to go into production with for EV traction motors, for initial production, when we looked at that in about 2022, 2023 versus where we are actually going out and locking production today, we've reduced heavy rare earth content in that formulation by 60%. That's, you know, us starting from a greenfield.
You know, I certainly believe that the head start that we have as a company in this space is a tremendous competitive advantage for us and a major component of the moat that we have, in addition to the fact that staring at this, there's a real capacity issue from an NdPr perspective. That's one thing also that being vertically integrated allows us to pursue our growth ambitions in a secured way. I think our view is as you see buyers of magnets start to embrace the fact that they need to diversify their supply sources away from just China, which has 90%-plus market share in this space today, depending on Chinese NdPr to feed those facilities is not a business case. Something's going to have to give here.
I think the great thing about the strategy that we've employed is whether it's fewer, you know, magnet facilities end up getting built because they can't access this NdPr, it really speaks to the strategic value of our magnet business. On the flip side, of course, if you do see a supply reaction to feed this ultimate growth that we see in the magnetic space, that indicates, at least in our estimation, significant potential price growth in NdPr, where we'd benefit on the upstream and midstream side of the business. We feel great about the way we're positioned. Obviously, a lot of execution ahead to bring all these initiatives into play, that's MP in a nutshell.
That was really great. Great slides too. It's the first time I've seen a few of those.
We'll, we'll roll them out soon for everybody.
Yeah, please take a seat. Where I'd like to start this conversation is with the pricing environment on NdPr in particular. After two years, three years of the Chinese price hugging that like U.S. $60 per kilogram level, the Chinese benchmark priced for NdPr astonishingly reacted to your Department of Defense agreement and within a very short period of months rose to $110 per kilogram, the minimum built into your agreement with the Department of Defense. What are the mechanisms that would have led to that reaction? What should we infer about the nature of the Chinese-based benchmark given that reaction?
Is that for me?
I'll let you take it. You seem ready to go, but I'd like to hear from Ryan Castilloux as well. Go ahead, Ryan.
Okay. Look, I think the fundamental view from our perspective is I think it speaks to the mercantilist policies that have been put in place focused on this industry from the Chinese side for many decades, driving the price to a position where the view was you could not have scaled ex-China volume enter the market. When the incentive for the Chinese to flood the market effectively disappeared, particularly now that you have the 2 only scaled producers of this commodity with a price floor, you've seen pricing react in a way where I think it is getting much closer to a rational place.
I don't think it's anywhere near the incentive price to drive the supply reaction that I think we will need, but it certainly speaks to, I think, the fragility of what the market price had been, when sort of denominated by the Chinese producers.
Yeah, agreed. I think the only thing I would add is that, April last year, China restricted exports of a handful of important rare earths, and at the same time, MP halted exports of concentrate to China, which were a very voluminous source of supply for China's processors. I think in addition to the fundamentals catching up in China, on the price side, they're also seeing tightness with respect to upstream supplies and that is contributing to the price levels that we're at today as well. Yeah.
Let's pick up on the incentive price comment. As equity investors, when we think about $110 a kilo as being how we should think about projects. Two questions. Is $110 as good as it gets? Where do you see prices going to, Ryan? Then perhaps the second question is, where do you see that incentive price level?
Yeah, sure. I don't believe it's as good as it gets. Medium to long term, our view is $150 per kilogram for NdPr is a price point that makes sense in terms of how we see demand evolving, elasticity to price evolving, and just supply-demand fundamentals evolving. But we may have some ups and downs in between where we surpass that level, or maybe where we dip slightly below, but $150 is what we think makes sense.
You know, I think from our perspective, with commodities, you never know. I think the thing to really keep in mind is when you look at the potential projects that are slated to be developed, most of the time, we sort of have an internal joke of, you know, you go out to get three bids on an EPC contract to build a facility. Generally, you add those three up, that's what it actually costs to build it. You know, timeline is maybe not 3x, it certainly is longer than you think.
From a capital intensity perspective, and a scale perspective of all of these individual potential projects, I think there needs to be a very significant price reaction to drive the sort of volume that I think this market will need over the long term. You know, short and medium term, it's anyone's guess. But undoubtedly, I think, you know, up into the right is where prices need to go to support some of these projects coming online.
Ryan, as you alluded to, MP's CEO, James Litinsky, captured the attention of investors and the rarest market on the Q1 2026 call when he declared that he wouldn't be surprised to see prices of the two heavy rare earths, terbium and dysprosium, decline from here.
Yep.
I mean, the conventional view is the only direction for those is up.
Yep.
What would cause prices of terbium and dysprosium here today to actually decline? What are the risks that they actually increase?
Sure. Look, I think from our perspective, zooming way out at a very high level, I think the view internally is if you look at the charts that we put up, if you trace what we expect magnet capacity to look like, NdPr will track that chart and that trend line either exactly or plus a bit, you know, maybe 1.05, you know, to that line. Heavies, on the other hand, we think will grow at a much slower rate given what we've seen from the technological innovation that we've been able to bring to bear, that we see the Chinese bringing to bear very aggressively within their market.
Then also looking at the mix of use cases with robotics eventually being the largest driver, there's a significant portion of the robotics market that with today's technology, forget tomorrow's technology, does not require heavies within the magnet composition. You combine all of that, and I think our view is just that the demand curve is much less attractive in the magnet heavies, if you will. On top of that, if you look at the structure of the market, in the same way that, you know, we think metal overall is somewhat underappreciated as a bottleneck in this space. You know, people talk about heavy rare-earth ore bodies and, you know, sources of heavies. They forget that it's billions of dollars to build a refinery to actually turn those into usable products.
The interesting thing is you're seeing similarly to the concentration and benefits of scale that you see on the light rare earth side, I think the only 2 scaled Western separators of heavies at this point are going to be ourselves and Lynas. From that perspective, I think we are in a place where, you know, a lot of upstream capacity is potentially available that is richer in heavy rare earths. I think the refining complex is relatively tight and very capital-intensive. It puts everyone in a position where, if you forecast out, you know, many, many years, you're looking at a price differential ex-China versus in China right now of nearly 4 times for dysprosium and terbium.
When I am able to compete from a willingness to pay perspective with my heavy rare earth separation capacity online, that allows me to bid a different way, you know, for these feedstocks. Ultimately, I think there will be real convergence. Assuming that terbium is $4,000 forever, I think is not a great bet to make.
Yeah, that's very fair. Ryan Castilloux, in your presentation, I mean, you mentioned I think a fairly bullish comment on terbium and dysprosium. I think that was more short-term, can you clarify?
Yeah. Yeah, it is short term. Agree with Ryan. MP and Lynas are likely to be the near-term suppliers of heavies. Today, those supplies are just coming into their own, and it will be a seller's market. I think there's ample demand given the magnet factory capacity that's coming online, that Ryan and Lynas can set prices as they see fit. Completely agree, the $4,000 that we see today, that big differential is going to compress. That's very much part of our own forecast for DyTb. Yeah, not much else to add other than that. I think your answer was very solid.
Let's talk about demand for rare earth magnet, maybe Ryan Z.
Sure.
We like to think on the sell side that we're very good at forecasting demand, but in reality, those expectations for EVs and wind turbines probably disappointed. Yet today we're still in a balanced market, as you pointed out. What subsectors of demand have picked up the slack and surprise to the upside?
Yeah, great point. Off the top, I guess I'll acknowledge that all forecasts are wrong and some are useful, and that is where we aspire to exist all the time. There's a lot of decimal places that you have to predict to be absolutely right. Certainly there's a variety of drivers of demand as we saw on the chart that I showed. Basically every avenue of demand that I plotted is continuing to grow. Whether that growth is double-digit, whether it's GDP plus a couple points, growth is happening across the board. There are very few sectors today where demand that use rare-earth magnets, where that demand is declining.
I think consumer Hard Disk Drives is one that comes to mind, but they're few and far between. The EV space has not performed as was perhaps projected or expected 5 years ago, I think the devil is in the details on that. What has really not performed as expected was full battery electric vehicle sales and deployment, we now see automakers refining their own strategies to incorporate more hybrids into that mix. What has picked up the slack there is largely plug-in hybrids, soon will be Extended-Range Electric Vehicles, so-called EREVs. Looking at the market in China, EREVs over the past 2-3 years have been extremely popular.
They were the fastest growing subset of EVs, and in a typical EREV, it not only has the powerful motors needed to drive that vehicle forward, it also has a generator to convert power from a gasoline engine and charge the battery as it moves. It sounds archaic on the surface, but it's a very popular technology that addresses that range anxiety. In China, with the popularity of those EVs, it ultimately became a net positive for neo-magnet demand, given that an average EREV in China has a combined motor generator power maybe 2 times that of an average battery electric vehicle. When we look ahead at what is coming in the West, the EREVs are coming in full force.
We continue to see major OEMs announcing new models that will hit the roads in the next 2 or 3 years. That is a net positive that is pulling up the slack. Another 1 quickly is that all types of vehicles, whether electrified, whether internal combustion engine, have a variety of micro motors and sensors and speakers throughout that also use neo-magnets. As we move over time, the number of micro motors, the number of electrified functions in a vehicle continues to expand, and that too is pulling up the slack where battery electric vehicles have somewhat disappointed.
One mental model for thinking about demand, and Ryan Castilloux, I'm gonna direct this to you first, but Ryan Corbett, of course, if you have any views, I'd love to hear it. One mental model for thinking about demand is GDP growth level, the end uses, and then the really high-growth stuff, and that's electric vehicles, it's air application, it's robotics and defense. I mean, today where do you see that split? Over the next five years, so just in the short term, where do you see that split going? How are those traditional sources of demand going to either contribute or take away from that? Do you see them being a net positive or net negative?
Great point. There are few demand drivers in the rare earth space that track GDP on a one-to-one. Almost every growth, even industrial consumer electronics, is GDP plus, and in some cases they're accelerating for a variety of reasons. Today, the market is approximately 40% legacy applications that are relatively price sensitive. In 2015 it was a split between 50/50, as we look out to 2040, it is going to be approximately, I think it's 76% driven by those high growth end uses, robots, EVs, wind, energy efficient appliances, industrial applications, versus 24% that will be driven by price sensitive ubiquitous gadgets and electronics, where the price of magnets makes up a significant portion of overall cost.
That leads us to a future where we see demand being less sensitive to price than it is today and than it was in the past, because that lion's share of demand in the future will be within applications where there is a system level benefit that the rare-earth magnets provide. To add some color on that, if we consider an EV today that uses a permanent magnet motor, that is the most efficient motor available, thus it uses the least amount of battery capacity to do a unit of driving range. That allows an automaker to in turn thrift the size of their battery, which translates into a very material savings, thereby there is a lot of wiggle room for prices to go up before it would ever make sense to switch to a rare-earth free alternative.
The same goes if we consider an HVAC system in a hotel, probably one of the biggest spends of the operation annually. Consider open-aired fridges and freezers in grocery stores, also a massive spend. In those cases, they use permanent magnet motors to power compressors for HVAC, for fridge, freezer, and that induces a massive savings over a year of operating, and again, allows for a lot of price increase on the rare earth side before it would ever make sense to switch to an alternative.
I think the systems level point is so important because I think you think about it from the perspective of, you know, huge growth vectors in the U.S. economy being, you know, the build-out of data centers and AI and things like that. Your point on HVAC is a critical one. If the binding constraint for the growth of that market is power.
Yep
You have to focus on ways to reduce power consumption.
Absolutely.
The way to do that is introduce, if you haven't already, permanent magnet motors within those various use cases. It just all of these trends sort of converge in a way where, you know, these products are so critical to grow.
Folks, if there's anybody in the crowd that would like to ask a question, we do wanna give you a chance to do that. Jack, I'm not sure if you saw the hand go up here, but there's a question right here.
Thanks very much. Sean Milan from VanEck. Ryan, can we talk about just recycling? You've got the recycling magnet concept with Apple.
Sure.
Maybe can we also just talk about swarf and what's the sort of cycling process on that, please?
Sure. Yeah. One of the elements of this industry that further solidifies, I think, the criticality of vertical integration is the fact that from a material yield perspective, going from, you know, a magnet block to a finished magnet, oftentimes best case is you get 70% material yield. You have to, you slice, grind, and shape the magnet to its ultimate final shape, you know, to fit into a rotor. You lose a significant amount of the material in that process. That material that's from the cutting and slicing and grinding is called swarf. That's a great example of, you know, what we'd call post-industrial potential recycling opportunities for us to bring back into the fold at Mountain Pass.
The other example, of course, is, you know, with Apple as our foundational customer in that recycling business, you know, end-of-life iPhones. Granted, in any individual iPhone, the magnet content is quite small. I think that's why it's actually a fairly attractive business to your point on price elasticity. At the end of the day, there are billions of devices, you combine that, and it can be a real driver of potential, you know, recycled feedstock. I think the thing that's so interesting to observe is in order to have a competitive magnet business, what you really need is, an integrated ability to recycle your swarf and ultimately, you know, to be as competitive as possible, bring in end-of-life products into that, into the fold.
We are building out a dedicated recycling circuit at Mountain Pass. You know, we think that that's a huge competitive advantage, and having that integrated with the scale that Mountain Pass brings to the table and sort of the base load supply, if you will, of the virgin feedstock, it allows us to be able to accept such a wide range of potential feedstocks because any one piece of the puzzle within the scale of Mountain Pass is small enough that we have more degrees of freedom to be able to operate efficiently and recycle efficiently. Certainly that is a big portion of the market in China. Most of that product right now that's post-industrial is consumed back into the production process, given they have not necessarily vertical integration within one company, but certainly within country.
I think we really are the only ones that are bringing to bear vertical integration within one company and certainly within the U.S. to be able to achieve that.
Ryan, can I sneak in a question here? If you think about the ecosystem that's needed for the rare earths mining and the refining and the magnets, what are we missing in the West versus China, for example, which has had a big head start? Like, I know Lynas is having issues with power, for example, at Kalgoorlie. What's missing in the ecosystem?
You know, I think that, at the end of the day, if you're looking at a purely Western supply chain, it starts with the ore body. You know, we've, you know, been in this industry for long enough that we've looked at, you know, most every opportunity out there. At the end of the day, one of the biggest competitive advantages that we have is the scale and quality and mineralogy of the ore body at Mountain Pass, then combined with the fact that we have co-located and optimized refining for that feedstock. In the Western world, there is nothing of similar quality or scale available, what we need is scaled incremental supply. Certainly to your point on, you know, the Chinese may have larger scale, for example, in commodity chemical reagents.
We're a large consumer of hydrochloric acid and caustic soda. Certainly, they are able to procure those materials cheaper than we are. We have ways to address that. You know, we certainly are able to compete from a cost perspective. At the end of the day, if you don't have quality feedstock, it's all for naught.
Ryan, unless you had any further thoughts on that.
Not really, no. I think Ryan hit the nail on the head with that. The bottlenecks that we foresee in the imminent near term, I pointed out in my slides, heavy rare earth production, metallization, and that's at a holistic view for all of that capacity to be realized. Beyond that, I think it's an important point Ryan made about the whole ecosystem that surrounds the industry to provide reagents, to provide acids and bases, is in its infancy because the rare earth industry is also in its infancy outside of China. That I think presents a massive opportunity for people to capitalize on the rare earth industry's growth outside of China by becoming suppliers of some of those key chemicals, reagents, et cetera.
I think this is a good point to leave it on. Gentlemen, thank you for being here. Everybody, thank you for your attention today.
Thanks.