Good afternoon, ladies and gentlemen. Thank you for attending today's MP Materials Fourth Quarter and Full Year 2022 Financial Results. My name is Tia, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for question-and-answer at the end I would now like to pass the conference over to your host, Martin Sheehan, Head of Investor Relations with MP Materials. You may proceed.

Thank you, Operator, and good day, everyone. Welcome to the MP Materials’ fourth quarter and full year 2022 earnings conference call. With me today from MP Materials are Jim Litinsky, Founder, Chairman and Chief Executive Officer; Michael Rosenthal, Founder and Chief Operating Officer; and Ryan Corbett, Chief Financial Officer. As a reminder, today’s discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company’s actual results to differ materially from these statements are included in today’s presentation, earnings release and in our SEC filings. In addition, we have included some non-GAAP financial measures in this presentation. Reconciliations to the most directly comparable GAAP financial measures can be found in today’s earnings release and the appendix to today’s slide presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA. Finally, the earnings release and slide presentation are available on our website. With that, I will turn the call over to Jim. Jim?

Thanks, Martin, and thank you all for joining us today. Let me start with an overview of today's call. I will begin with the highlights of the year. Ryan will then review our financials and KPIs, Michael will then provide an update on our Stage II optimization and Mountain Pass. I'll return with a brief update on our Stage III magnetics business and some closing comments, and then we'll open it up for Q&A. So let's get started on Slide 4. Since founding MP in 2017 and in our two-plus years as a public company, we have been unwavering in our mission to restore the full rare of supply chain to the United States. And we made substantial progress on our mission in 2022 and so far in the early part of this year. Operationally, the team executed. We produced and shipped record volumes again in 2022. Mining and ore delivery outperformed our updated mine plan. Maintenance teams stayed focused and relentless, which was reflected in outstanding uptimes. The Stage I operations and engineering teams continued to drive improvement in mineral ore recoveries while also increasing our feed rate into the mill. Execution at this level requires lots of unsung heroes working in tandem, taking on challenges, anticipating future ones and ultimately, thinking like owners. So to the entire MP team, we stayed safe, and we had another excellent year. Great job, and thank you. For 2022, the price of NdPr oxide and therefore, our concentrate product improved nicely versus the prior year. The combination of better realized pricing and the record volumes produced by the team resulted in a 59% increase in revenue and a 77% increase in adjusted EBITDA. The Stage I business generated $353 million in normalized Stage I free cash flow. That is a 67% cash…

Thanks, Jim. We'll turn to slide 6. And as Jim highlighted, 2022 was another very strong year of operations for the company. Our production volumes increased for the fourth year in a row to a record 42,499 metric tons of REO in concentrate. The operations and maintenance teams continue to perform with our uptimes remaining at roughly 95% for the second year in a row. In addition, we continue to improve our throughput while optimizing our mineral recoveries. We believe, there is incremental room for improvement here, but in the near term, the majority of our focus is on commissioning our Stage II assets. We shipped a record 43,198 tons of REO in concentrate during the year, a 2% increase over 2021. The increase was generally due to the timing of shipments, as a reminder, concentrate shipments have generally tracked our production volumes over time. Moving forward, there will be some lumpiness as we transition to Stage II products, which I will discuss in a moment. On the top right chart, you'll see that our realized price per contained REO ton increased 55% to $11,974, driven primarily by the strong demand for NdPr feedstocks in the market. Despite Chinese macro volatility over the course of 2022, continued EV penetration supported rare earth pricing. Lastly, on the bottom right graph, our production costs, when excluding the ramp in expenses ahead of our Stage II commissioning, increased a little over 5%. Despite some fairly significant inflation in 2021 and 2022, we were able to increase production efficiencies enough to maintain a fairly flat cost per ton for our concentrate. Note that this operational KPI, as reported, focuses purely on our concentrate business. So we will evolve these KPIs over the course of 2023, as we ramp our downstream products. Moving to slide…

Thanks, Ryan It has been productive in fulfilling a few months of operation and commissioning though, of course, not without its challenges. On the Stage I operational front, during the quarter, we experienced considerable external headwinds from construction, commissioning and weather. But our teams have done an excellent job remaining focused and we were able to achieve continued improvement in mineral recovery at the mill. Circuit uptime was slightly below the prior year but exceeded our conservative estimate. We made good progress in pre-commissioning and initial commissioning activities at Stage II. This also included completing the remaining upgrade and pre-commissioning work of legacy circuits that are now already for use. We completed our first quarter operating the new concentrate filter, dryer and roaster, a great picture of which is shown on slide 11. Broadly speaking, this process is playing out as previewed last quarter, with certain expected challenges proving easily resolved, a large number of instrumentation nuisance issues that are also easily resolved, a certain proportion of known, unknown that have readily identifiable resolution timetable, a few reliability issues that will be worked out over time and then a small number of unexpected issues that generated the greatest headache. Through it all, we made great progress. The primary process equipment is running quite well, and many of the initial bugs are in the rear-view mirror. Even as we experiment with and tuned the equipment, we are able to consistently produce roasted concentrate that meets our desired specifications. The initial testing of the roasted con suggests that it should achieve the leach yield and cerium rejection that we are targeting. This is critical to our cost competitiveness and production throughput. Initially, the vast majority of this product will be sold. But as the subsequent circuits in the flow sheet have brought…

Thanks, Michael. Turning to slide 13. This is a recent aerial picture of our Texas magnet manufacturing facility. You can see a lot of construction activity, and most of that action is now taking place inside the building, given that the shell is complete. Since we last talked in November, most of the key public utility infrastructure has been installed, gas, water and with electrical finishing up shortly. We are also beginning to see some of the long lead equipment arrive, including the HVAC systems, which are now being installed. And the procurement of other long lead production equipment continues. We also now have a fully functioning magnet research lab in place, enhanced by a number of key recent hires and with more to come as we continue to expand the team. . Our magnetics team should all be able to move into the new Fort Worth facility by late summer. If you look closely in the picture at the top right of the facility, you will see where sizable office and lab space connects into the factory. Our goal is to make this site the center of the most cutting-edge magnetics efforts in the world. To update you on the market and conclude the prepared remarks, I would like to reiterate that I remain bullish on the outlook for our business. In 2022, despite an overall market contraction, global sales of passenger EVs climbed more than 50% to approximately 10.3 million units. There has been a profound global search and EV adoption and action in the United States, which has trailed China and Europe, is accelerating rapidly on the back of policies like the inflation Reduction Act and a dramatic increase in new models available to consumers. And bear in mind that EVs are just one of several downstream applications driving growth. We also see growth and opportunity in wind turbines, robotics, consumer electronics and even power tools. When you put this all together, looking out to 2035, with analysts predicting a threefold increase in demand for neodymium magnet and strong corresponding growth for NdPr. A threefold increase in NdPr demand would mean the world likely needs the equivalent of more than 15 mountain passes coming online over the next dozen years. Keep in mind that Mountain Pass is 1 of the largest producers of rare earth in the world today. Assuming such economically viable ore bodies were identified and cleared multiyear permitting processes, it would still take years and multiple billions of dollars to bring that supply to market. Therefore, even though the macro economy will usually drive short-term volatility in pricing, we remain convinced that there are huge tailwinds for our sector. MP's in-place assets are, therefore, extremely valuable. And our vertical integration strategy, coupled with our fortress balance sheet, will enable us to leverage all aspects of our platform to create additional value. With that, let's open it up for Q&A. Operator?

We will now begin the Q&A session. The first question comes from the line of Matt Summerville with D.A. Davidson. Please proceed.

Thanks. A couple of questions. I guess I wasn't aware that between Stage I output and actual oxide that there would be an intermediary product in the form of roasted concentrate available for sale. Can you talk about what sort of quantity we might be looking at over what kind of time frame? And how much value does that particular process step add to Stage 1 output, i.e., how is that priced in the market? And then I have a follow-up.

Sure. Hey, Matt, it's Ryan. I can take that, and then we'll have Mike talk a little bit about roasted con and what it means for us and our progress. As it relates to the roasted concentrate, there's not a material difference in economics in terms of selling price vis-à-vis the incremental cost of getting through the roasting step. And in fact, the way I would think about the available volumes is it's not going to be a material departure from what you've seen in terms of regular concentrate sales over the next quarter or so. As we mentioned, we should be -- and we are all preparing for incremental volumes to begin charging the downstream circuits over time. But this is a relatively short stop on the way to production of benizoxide products. Mike, do you want to talk a little bit about roasted con and what that means for the process?

Sure. Thanks, Ryan. Producing high-quality roasted con may be the most important single step in ensuring the cost competitiveness of our separation and finishing assets. So The production of roasted con is important -- a very critical transition point on the Stage II. But in itself as a product itself is not the aim. But as I mentioned in the prepared remarks, the initial testing on that roasted con give us really high confidence that the yields that we'll get out of that when we proceed into leach, any yields of getting NdPr recovery and rejecting the cerium, which is a critical part of our process are going to be in the ranges that we're targeting. And this is really important for reducing reagent expense and improving the quality of the feed that goes to the purification and separation stages. They're also minor energy savings and maintenance savings from that as well. So it's an important product, but not to say, important long-term sales plan.

Understood. And then just as a follow-up, one of you guys mentioned in your prepared remarks that you're feeling more and more confident about incremental mineral recovery coming out of Stage I, but maybe taking a pause on that for obvious reasons as you're renting Stage II. Timing-wise, how should we be thinking about when you can go attack that opportunity? And I guess how much upside relative to the output you generated in 2022 could we be looking at based on your domain knowledge at this point around that?

This is Michael. I'll take that as well. I think I've mentioned this in the past before. We do have a lot of optimism that there's significant opportunity to improve the way we do things in our flotation process or beneficiation process and the results of that. We have a team, growing team dedicated to that effort. We've continued to work towards that irrespective of the progress of Stage II. So that's not hindered by the progress. Maybe some of the implementation could be impacted just by overall distraction, but we're pressing ahead with that. And I think there'll be incremental steps, incremental progress. We hope at some point, there's greater progress. But we can't exactly predict the timing. Some of it is just incremental process improvement and some is more small investments that we believe could have a significant improvement. Hopefully, that addresses your question mostly.

Yes. Thank you guys. Operator Thank you. The next question comes from the line of David Deckelbaum with Cowen. Please proceed.

Congrats, Jim, Ryan and Michael. I appreciate you guys taking my question this afternoon.

Thank you. Happy to it.

First, I just wanted to start off on the Sumitomo agreement. Obviously, a landmark agreement, trying to understand, I know it's early, but if you could give any sort of guidance around the potential volumes that could be sold here? Should we think about this as sort of consuming all of the available on NdPr oxide that you would have for sale not consumed in the Stage 3 operations for now. And then, would there be an inherent premium that you would expect in terms of pricing relative to what you would sell into China?

Sure, David. It's Ryan. I'll take that. Obviously, we're pretty excited about our deal with Sumitomo, an important step, as you mentioned, to our also market in Japan, which as you know, is the largest magnetic center outside of China. The way I think about this agreement is it's a distribution agreement. This is a relatively proven and efficient way to get to market in Japan. I think it's pretty clear that there's a growing need for diversity in Japan sourcing. And so, what we see is with their desire to grow production and our view of an expected demand-supply imbalance coming in the market. We and could assume some more confident there's going to be a fair amount of demand for our outside there. So overall, it's an exciting first step for us with a major player in the market, as we talked about, certainly an opportunity, hopefully, to expand the relationship over time. I think the other thing I'd say on the economics part of your question, as you've heard from us just a minute ago, we certainly believe in the demand picture in our market. And so, we do expect to transact on market-based prices. And so importantly, I'd say the terms that are offered to the end customers in Japan remain in our control. We haven't locked ourselves into any particular model. And so from that perspective, we'll continue to do what's best for the business.

Thanks, Ryan. And I have a maybe kind of a follow-up for you. You talked in your prepared remarks about the IRA benefits. I know perhaps 10 days ago, the treasury kind of defined what would be eligible under 48C. Can you give us a sense on the line of what you think is eligible at this point in terms of your capital being spent on expansion projects for 48C? What you would certainly see on the production tax credit side and when you might think that the timing of those benefits would be realized?

Hey David, it's Jim. So we're watching all of the 48C stuff like you are as well. It's still preliminary. There you have to -- the government is coming out with stuff and then there's going to be a period of submitting. And so, it's still early to make sort of any kind of specific predictions or thoughts or guide you as to how we're thinking about that. Obviously, we're watching it very closely.

The only thing I'd add on this 45 -- yes. Just real quick on 45S.

It's 45S, Ryan, you wanted that?

Yes. The difference there being obviously different being a production tax credit versus based on capital. And so from everything we see, I think the guidance there is a bit more clear and straightforward, and we will be producing a product that we believe clearly qualifies into the 45x framework. And so as we ramp our oxide production, we expect to start benefiting from that by default as we produce those products.

Sounds good guys. Thanks you.

Thank you. The next question comes from the line of Corinne Blanchard with Deutsche Bank. Please proceed.

Hey, good afternoon. Thank you for taking my question. Just trying to understand better maybe what could be 1Q and maybe the cadence of production, sales and EBITDA for the year. And I know you don't give defined guidance, but maybe if we go from consensus, how comfortable do you feel with the straight at minimus flat price I think you mentioned obviously going through a transition and having maybe lower margin towards the end of the year. So just trying to frame our cadence for the year?

Sure. Corinne, this is Ryan. I'll take that. What I would say is our expectation, obviously, that we laid out in our prepared remarks was that you should expect us to begin the transition to oxide sales in the back half of the year. Obviously, there'll be a little bit of a gap between as we bring production online versus when we're recognizing those sales into the P&L. And so we wanted to importantly make that distinction. I think to your point, as we look out at the way several folks have modeled the business, one of the reasons we flagged to you all the margin profile is, certainly, we feel, as Michael laid out, after the results that we've seen from our roasting concentrate, we're more confident than ever and what our eventual yields and results will look like as we get to run rate. But the important thing to keep in mind is just we've said this over and over again, 2023 is a transition year. So you can't expect our first kilogram of oxide to come out at the same cost profile as the kilogram that's coming out once we get run rate. So from that perspective, hopefully, that gives you a little bit of color. I'd say that while we make the transition, certainly, we've got our concentrate business and the roasted concentrate business in the background. But we'll continue to build the team and get operators online, ready for production and commercial production of Stage 2 as we get further into the year. So those are sort of the puts and takes from a production and sales perspective.

Great. And then sorry, if I missed it also, but did you provide any commentary on the market itself, like in terms of like China pricing and kind of maybe where you think it could go over the next six, 12 months?

Sure. I'll take that. Hey, Corinne. So we don't typically provide any commentary on pricing just because it's -- ultimately, it's a commodity, and it is volatile. I think China has been -- it's been really tough as it always is to read the tea leaves in China because it's China. And in particular, given the opening post-COVID as well as Chinese New Year and all the moving parts. And I think if we look at the markets over recent months, there was sort of some excitement just in advance of the Chinese opening with the expectation that there would be sort of an explosion of growth out of that and then sort of a pullback around New Year and maybe a settling in as far as the world figures out what it means. My guess is that some of the things driving pricing in the very short-term are probably the non-critical areas for the long-term. And what I mean by that is -- and I just think you might find it helpful, Corinne, if you listen to -- if you remember in my prepared remarks, I referenced analyst research that talked about the market for NdPr in magnetics being three times the size it is today by 2035. And that's actually for people who are interested, it's -- that's not my data that's an Adamis Intelligence research report looking at the rare earth magnet market outlook. What's really interesting about that and the reason I mentioned it is that if you look at the market today for NdPr demand in the growth -- what are the current high growth areas, which, of course, there will be some others, but in EVs and wind turbine. That today is only a little under 20% of the overall demand, and the rest…

Great. Thank you for the color.

Thank you. The next question comes from the line of Carlos De Alba with Morgan Stanley. Please proceed.

Yeah, thank you very much, and congrats on the progress. A couple of questions. Just coming back to the Sumitomo agreement, is there any color that can give -- is this agreement take or pay? Are there any specific volumes attached to the deal? Any color that you can provide there would be useful. And then, my second question, it is around CapEx. So $300 million guidance for this year, similar to 2022. I think, I remember you mentioned that $700 million was a comprehensive CapEx that you saw for Stage II and Stage III. How do you see then the overall $700 million balance, is it still remains in place, or has there been any shift on that number?

Hey, Carlos, it's Ryan. I can probably hit both of those quickly. In terms of the Sumitomo agreement, this is a pretty standard type of distribution agreement. And so volumes and pricing is going to be market based in consultation with our end customers. As I talked about, clearly, there's a desire and need for incremental volumes and diversity in Japanese sourcing. So we are confident there's a fair amount of demand for our upsides there. And so ultimately, as I think you're probably referencing some of our existing distribution agreements, ultimately, over time, we're going to have different contract terms and contract types. And so ultimately, that's the most efficient way for us to sell into the Japanese market at this point. As it relates to your CapEx question, what I would say there is in terms of the overall $700 million guide, which you are right, that was an all-in number thinking about the completion of Stage II, bringing online the Fort Worth facility as well as the heavy Rora separation facility at Mountain Pass. And so if you take that $700 million that we guided you to, I guess, almost exactly a year ago, I would say, in terms of what we see in those projects, other than sort of the normal inflation that I think everybody has seen from materials and things like that, there are no material departures from that guidance. So we still – we still feel good about that number. And so you saw that of the CapEx we reported this year, about $308 million was growth capital for this year. We're talking about another $300 million in 2023. And so we continue to expect to be on track with the investment program that we communicated to you guys.

All right. Great. Thank you very much, Ryan.

Thank you. The next question comes from the line of George Gianarikas with Cannaccord. Please proceed.

Hey, good afternoon, everyone. Thank you for taking my questions. So recently, China, according to certain press reports has begun restricting the export of several technologies related to SEB magnet production and rare earth refining. And I'm curious as to whether you think that will impact your ability to make magnets here in the United States.

Sure. Hey, George, so no, we don't think that will impact our ability at all. We've been focused on this mission for quite some time. You certainly see the pictures of where we're at, and we have a long way to go, but we've got a really incredible team. And I think if anything, it just speaks to the importance of what we're up to and how important it is to have diversity in the supply chain for no other reason in that single point of failure risk. And – but to directly answer your question, there's no specific magnetic technology that we're counting on out of China or anything like that. So it should have no impact on us.

Thanks. And as a follow-up here, I'm sure you've noticed that, there have been, it seems like every day, there's an announcement of some OEM or some larger company taking a stake in outright buying mines related to lithium or other metals. And I'm curious as to why you think – we haven't seen that flurry yet when it comes to rare earth material and whether you think that's possibly on the comment. And I won't give you some credit here that this is something that you talked about over the last couple of years is happening and it's finally here, but we haven't really quite seen an impact of your sector yet. Any thoughts there would appreciate it? Thanks.

Yes, sure. Great question. I mean, as you know, I've kind of been talking about this for a while, what I call the AOL Time Warner moment of the auto supply chain where people realize that these worlds need to collide. I think it's still early innings. So when you say it's here, I mean, I think that this is sort of a just beginning process. I would argue, as far as rare earths, I mean, the practical reality is that there aren't that many parties out there, Lithium is pretty widespread around the globe. So our copper, nickel, some of the other commodities that you might think about. But with rare, you know who the key players are. And I think we executed our definitive agreement with GM about a year ago. And so certainly, GM is now -- has recognized the space and it's very early. And as I've said repeatedly, we've had conversations with lots of OEMs. Our deal is not exclusive, and we expect to build a bigger, broader magnetics business. But -- so I think I think the answer to your question is it has touched the air state. I think what's a little bit unique about us is that we have a remarkable asset that we are cash flowing today. So in some of these other deals, you have essentially greenfield sites that need a lot of financing. They need to get potentially government capital, other equity capital. And so some of the deals that you may see are offtake/financing type deals, and every deal is going to look different. But so for ours, we're obviously very proud and excited of the deal we have with GM. And I think you'll see a ton of -- a big variety of deals in this space. And yes, certainly, you're seeing some of the same rumors that we're seeing. But I think all roads lead to -- it speaks to the value of the franchise that we're building. So we're obviously excited to see all that. And obviously, it feels really good to have predicted something happening and seeing it come true. And I'll continue by saying that I just -- I think that you're going to see a lot more of that.

Okay.

Thank you.

Next question?

The next question comes from the line of Ben Kallo with Baird. Please proceed.

Hey, guys. Along the same lines that I just Jim, I guess, for you. How do you think about offtake agreements. I know that you guys want to maximize the value before signing offtake agreements. But just with the volatility you saw this year and all the OEMs coming in locking up lithium or other materials. Has anything changed in your view on the long-term agreements?

Sure, Ben. I think it connects into -- and I think I can expand on what I was saying a little earlier. But offtake, there's a variety of offtake agreements. And so I think some of the – the recent deals you might be seeing, it's always hard to tell what component of that offtake is a financing versus what component of that offtake is just offtake, right? And I think the good thing about the strong position that we're in with the fortress balance sheet that we have is that we don't need to view offtakes as any form of financing, right? We can be totally agnostic as far as that goes, we can look at in offtake or any kind of structure as what is the highest return maximizing value option for shareholders. And so as I've said from the very beginning, we'll continue to do that. And we're in a really good position. And I think, particularly in our space, and maybe I should have touched on this earlier, but we'll -- because of the platform that we have, I do think -- and maybe it's a little early but maybe not. We're going to have some exciting opportunities, given our platform to be in situations where maybe, sort of, earlier expectations of things didn't work out so much and we can kind of come in and provide solutions. And so, I think, that's sort of an exciting opportunity for us, but we're seeing such an early stage of growth in the space that, who knows. But I would also just say, obviously, I kind of say this repeatedly, and I appreciate the odds, but we'll -- we're not going to telegraph those before they happen. So if we do something, you'll see it announced, we're not going to sort of say, 'Hey, we're pursuing this offtake or that offtake or whatever, we're going to -- you can imagine behind the seams were having conversations, just trying to do the best that we can do to create value. And it's exciting.

Thank you. And, Michael, you mentioned the leaching a couple of times, but if we think about the flow chart from the triroasting to separation, the leaching in between, I think, is there one more difficult step than other? I think you said this in your opening statement there, but I think separation gets people tripped up. Is that wrong, or what do you worry about most, I guess.

I think it's important that we do the leaching right, if we want the other parts to be stable. But I don't think I would say one part is easier than another. Obviously, they all ultimately have to work the way we need them to. We're optimistic about all -- we're very excited to be proceeding with leach the way we think it should be.

All right. Thanks, guys.

Thank you.

Thank you. The next question comes from the line of Lawson Winder with Bank of America. Please proceed.

Thank you, operator. Good evening, gentlemen. Nice quarter. Maybe just one question for me. The research center. I mean, developing a cutting-edge magnets research center in Fort Worth, in a matter of years sounds very, very exciting and also potentially very expensive. Maybe you could give us an idea of what like the annual run rate cost of running a cutting-edge research center would be? And then -- are there challenges in the staffing? Thanks.

Sure. Well, the good news is there's nobody positioned really in the Western world, really outside of China to lead in this effort. So unlike a lot of areas that might be sort of more competitive out there in the world, given our set of assets. We have that unique position where we can, as I like to say, talent begets talent, scale begets scale, we're sort of in the early days of this. And so, it's an extraordinary opportunity. As far as where the -- getting the talent, I mean, the good news is, if you're in metallurgy or magnetics, MP is the place to be, right? We are -- we had a lot of talent that's reached out to us. We've brought some incredible talent on board. We'll continue to do that. And lastly, what I would say is, I mean, with this cost, it is nothing compared to the opportunity. And I hope that we've at least earned the right to have you believe us when we say that we are maniacally focused on shareholder value. And we're not looking for a research project. We're looking to create a magnetic champion. And so everything that we do is geared towards that. And when we think about research, these are not -- this is not like a think tank. This is research oriented towards creating a franchise that's going to be enormously valuable in the decades to come. So it's a great question, because we do ask ourselves that question. Every person that we hire, every penny that we spend, but it is a commercially focused resource organization. And I'm very confident that, over time, will yield extraordinary returns from that investment. But it may take some time, right? This is very long lead stuff. And so you'll -- those impacts are in the company today, they'll be in the company in the near term, but I'm very comfortable that they're going to pay off in many, many multiples and be -- we'll be glad we did it.

Okay. Fantastic. Thanks, Jim.

Sure.

Thank you. The next question comes from the line of Abhi Sinha with North Capital Markets. Please proceed.

Yes. Hi. Thanks for taking my question. I think Ryan touched upon this, and I apologize if I missed it. I just wanted to get the production cost in terms of dollar per ton, the $1,928 figure, how should we think about like how keep up as we move on 2023 as you get better efficient CHP or how should that flow? And what should be looking at the run rate for the production cost as we move forward?

Yes. Sure, Abhi. What I would say, we don't provide specific forward-looking guidance, but just to give you some color on what's in that number. So looking at the reported metric that you mentioned a moment ago, the largest drivers there, as you'd expect, are costs related to Stage II that find their way into COGS even at this point before we're producing. And so for example, certain personnel expenses as we build the team, you mentioned at the combined heat and power plant that is running sub-optimally until we've got the full Stage II power draw. One of the things we talked a little bit about last quarter was our gas hedge position and a significant portion of that did not come into effect until January 1. So we were exposed on some gas prices and California gas prices with all the weather there for a good portion of our burn in Q4. And so that had an impact that we don't expect to repeat. I guess, pulling the onion back a little bit more and just trying to pull out the cost that I just mentioned that are not related to Stage I. The Stage I standalone costs were closer to $1,600 in the quarter, a little bit higher than what we normally see in the $1,400 -- $1,500 range and that was predominantly due to two items that showed up in the quarter. Firstly, an impact from just really timing of maintenance. As we've talked about, we take our biannual plant shutdown in the fourth quarter. And in addition, in this fourth quarter, we incurred some costs in relation to maintenance activities on our crushing facilities as well as our mining fleet. And so those just kind of happened to hit all at once with enough scale to kind of be noticeable in the quarter. But when you look at the frequency and scale of these events over time, the cost burden of those are generally captured and what is kind of our more normal run rate cost. So if you look at the adjusted Stage I only cost growth year-over-year over the course of the whole year, which is in that mid single-digit range. I think that is much more representative of the Stage I business. But as I mentioned, of course, the cost related to Stage II, as we get closer to Stage II ramping, will continue to pick up a bit as we bring new heads on board new maintenance team members and things like that. So Hopefully, that gives you some color on the moving parts and what you expect.

Sure. Thank you. And then just one more, if I could. You talked about in terms of production volumes. That was like being adversely impacted by some lower feed grade and mineral recoveries. I just wanted to get some color on that, if you could elaborate like where you're getting lower feed grade and mineral recoveries. What's about that?

Yeah. I think maybe you might have misheard part of that. What we saw in the quarter actually was slightly lower feed grade but improvements in mineral recoveries. And so I would say when you put all of the moving pieces together obviously, looking at the results, there was not really a meaningful or material change from our overall sort of production cadence. And so, we don't expect anything particularly material to change here over the next year or so. Michael gave a nice idea of the various items we have in the hopper hopefully, tackle mineral recovery and improve what we believe it certainly won't last levels over time, but nothing really material to report there.

Right. Sure. Thank you very much. That's all I have.

Thank you. The last question is from the line of Laurence Alexander with Jefferies. Please proceed.

Good afternoon. Just a couple. One is, can you talk a little bit about how you expect staffing to evolve over the course of this year and then over the next few years and where that would take your SG&A to once you have the magnet production up and running once you finish the vertical integration? And secondly, as you've been discussing with various customers about to move into magnet production, is the expectation or the baseline for discussion about any potential agreements that you would have a return on capital at current magnet prices or that -- current market to get an adequate return on the capital you will be investing?

Sure. I can take that. So in terms of the growth in staffing, I wouldn't attribute all the growth in staffing certainly to SG&A. What I would say is that a significant portion of the staffing that we expect to bring online for Stage III as we get closer to production, we'll eventually find a way in production cost. In the early days, there'll be -- they won't find their way into COGS. But to give rough numbers, in hiring plans at Stage II. So at Mountain Pass, we'll probably bring another 60 to 75 people on board over the next year for Stage III, it will probably be shy of 100 incremental folks. So hopefully, that gives you just a rough sense, but I would just caution on attributing all of that to one particular line item in the P&L. On your second question, Jim, do you want to start off on that one?

Yeah, sure. Yeah. I mean I'll just -- hey Laurence, point blank, and very clearly, we have said consistently over time that we look at the Stage II and III businesses as separate businesses that certainly benefit that we're on the same platform, but that we have to make sure that incremental investment has a very attractive risk adjusted return on capital. And so -- we have no interest in shifting money from the Stage II business to the Stage III business and lose capital as I like to say, we're not going to rob Peter to pay Paul. What is great about our platform, though, is that it does allow us to think holistically about the verticals. And ultimately, where we -- where and how we choose to structure whatever deals may be, we're going to think about the fact the baseline of, okay, well, we have a commodity in Stage II that we can sell at a market price, how should we think about this incremental opportunity? And if that incremental opportunity is attractive, that is how we're going to think about it. So I want to reiterate that that is of the utmost importance to us because we -- as you've heard me say, we think like owners, we're large shareholders. So we want to make sure that any growth in the business is driving value. We're not in it for charity.

Okay. Thank you.

Okay.

Thank you. I will now hand it back to the management for closing remarks.

Yeah. All right. Well, thank you, everyone. Congrats team, it was great quarter and a great start to the year, and we will get back to work. So have a great night, everyone.

That concludes today's conference call. Thank you. You may now disconnect your lines.