Good afternoon. Thank you for attending today's MP Materials First Quarter Earnings 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 with MP Materials. You may proceed.

Thank you, operator and good afternoon everyone. Welcome to the MP Materials’ first quarter 2023 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 quarter, including a Stage III update. Ryan will then review our financials and KPIs. Michael will then provide an update on our Stage II optimization at Mountain Pass. I will then return with closing comments and then open it up for Q&A. So, let's get started on slide four. We continue to execute well in our Stage I upstream business. For the eighth consecutive quarter, we produced more than 10,000 metric tons of rare earths in concentrate. Sales volumes were similarly strong, allowing us to generate solid adjusted EBITDA and related margin despite challenging realized price comparisons. I know pricing is a topic on the minds of investors and I will share some detailed perspective on that later in the call. Moving on to Stage II, commissioning has been making steady progress and we have begun to process a portion of our roasted concentrate through our leach circuits. This means we are closing in on the even bigger milestone of recommissioning our light rare earth separation circuits. To reiterate what we have said on prior calls, the commissioning process is painstaking with stops and starts, but we remain on track towards soon producing separated rare earths and reaching run rate production by year end. Michael will provide a more detailed update in a moment. Another important development in the quarter relative to our midstream business was the signing of an additional tolling agreement to convert a portion of our NdPr oxide into metal in Vietnam. For those of you unfamiliar with tolling agreements, towing is a process whereby a third-party processes our materials, for a fee, in our case, turning our oxide into…

Thanks Jim. Turning to slide six and starting on the left hand side of the page, you'll see the consistent level of production Jim mentioned both in our year-over-year and sequential comparisons with 10,671 metric tons of REO in concentrate produced in the quarter, plus or minus 1% or 2% of the comparable periods. In addition, we sold 10,215 metric tons of REO, which was 13% below last year and 6% lower than the fourth quarter. These variations are virtually all due to timing of deliveries. As of Q1, we had consumed only a small portion of the nearly 2,000 metric tons of work in process inventory that will be used in commissioning of our refining circuits. With continued progress, we are preparing to feed material into additional refining circuits, which we're very excited about. What that means is that starting in Q2, we would expect to process a significantly greater volume of our concentrate production through our refinery. Some of this inventory build will be in an investment in permanent work in process, while some will become separated rare earth oxides available for sale. Meanwhile, as our commissioning teams work tirelessly, we are continuing to make progress improving the stability and performance of our drying and calcining circuits. As such, nearly 30% of our sales in the quarter were comprised of roasted concentrate. Moving on to realized pricing, NdPr recovered a bit from the fourth quarter, resulting at a 10% sequential increase to $9,365 per metric ton of REO. As you know, our realized pricing tends to follow the market price of NdPr upside with an approximately one month lag. So, we benefited from the recovery in prices from December to February. Still compared to Q1 of last year, pricing was down 32%. Recall that NdPr prices hit recent…

Thanks Ryan. It was a busy quarter for commissioning and things have picked up steam into 2Q. Our commissioning, operations, and process engineering teams have taken an increasingly active role in checkouts and start up activities. In the first quarter, much of the focus was on completing the pre-commissioning of the remaining legacy and new circuits, including equipment checkout, water runs, instrumentation calibration, tuning loops, and trial operations with critical equipment vendors. And addressing the findings from these exercises. At the same time, we continued to make progress on improving the consistency and throughput of the drying and roasting assets. During the quarter, we turned these assets over from the commissioning team to our operations team freeing the former to focus their attention on the next circuits in the flow sheet. The remaining assets of our brine treatments and recycling circuits are in the final stage of commissioning before full commercial operations of the entire system begins. Importantly, we are moving closer to producing finished NdPr oxide. As we enter 2Q safely advancing through the startup of leaching and impurity removal and ensuring high purity rare earth solutions to feed separation circuits are our highest commissioning priorities. After that, product finishing encompasses precipitation of purified rare earth from solution, filtration, and conversion to oxide. It's still difficult to predict the trajectory of our ramp, but there is no doubt we are now on it. I'd like to reiterate that startup will not be a linear process. We expect a lot of ups and downs literally and figuratively. The trajectory of the curve will be determined at the equipment level by reliability and throughput. We expect certain operations to ramp throughput slowly but steadily. Others to meet run rate quickly but struggle with reliability. Others to operate reliably, but struggle with…

Thanks Michael. Before Q&A, I would like to cover a few topics that are on the minds of many investors, including pricing trends, product substitution, and the potential for Chinese export restrictions around the rare earth processing and magnet making technologies. On pricing, NdPr began the year around 102, which was down from a 2022 peak of 175. The declines continued throughout the first quarter with pricing now in the low 60s. To put it bluntly, I'm surprised -- I would say I'm actually very surprised, but not shocked. As you all have heard me say many times before, commodities do almost anything in the short run. After all, oil even traded to a negative price in 2020. Some of the price action may be explained by recent economic lows for what I would call legacy sectors like hard disk drives or ICE autos. Recall that nearly 80% of the market for rare earths today still comes from uses within these kinds of products. Moreover, global EV sales for Q1 2023 were weaker than expected due to the expiration of certain subsidies in China in Europe and combined with higher interest rates likely had a significant impact. Sales in China appear to be rebounding strongly since March, however. Despite this recent blip, global EV sales penetration is still only in the low teens percentage. So, the long-term demand trend remains explosive. We believe the compounding effect of high growth in electrification will far outweigh any legacy or other short-term weakness and then some over even a moderate amount of time. What is interesting, perplexing and quite likely bullish for the medium to long-term outlook is that with NdPr where it is now, we believe that the Chinese rare earth industry will be unprofitable at current prices. Chinese data is admittedly…

Absolutely. We will now begin the Q&A session. The first question is from the line of Corinne Blanchard with Deutsche Bank. You may proceed.

Hey. Good afternoon. Thanks for taking my question. The first one would be maybe more on the financial share side. There was few adjustments to the EBITDA this quarter. Is that a trend that we can expect in the coming quarter? And then on that -- thematic as well, could you comment a little bit about the cost, like, dollar test that we can expect on the next quarter?

Yes. Hey Corinne, it's Ryan. I can take that. Thanks for the question. In terms of the EBITDA adjustments, I assume primarily what you're looking at would be start-up costs, which is a category that we've had for the last couple of quarters as we've gotten into the depths of commissioning of Stage II. I would say as we get further, and Michael gave some color on how that activity is picking up pretty rapidly in this quarter. I would expect to see those costs pick up a little bit, certainly in Q2. And I'd expect them likely to start to come down over the course of the year as we move into what we call more run rate or commercial production of separated products. In terms of your question on the cost per metric ton, as I talked about in my prepared remarks, the primary driver there is the continued growth in headcount as we get ready for these circuits to be in service. As you can imagine, we're going from operating effectively a milling and flotation facility and ancillary support facilities to adding multiple more facilities into service. So, the burden from maintenance facilities, utilities, things like that, have started to pick up ahead of entering into commercial production of these products. And so that's primarily the items that you're seeing. And so those items that are not specifically related to commissioning activities tend to flow through the cost of goods sold of our existing product. Those items that are specifically related to commissioning and not related to a salable product to find their way into the start-up cost category. As we look out over the course of this year, I'd expect a similar trend in cost per metric ton as I mentioned, on the start-up costs. As we bring these things online, certainly, there'll be an initial margin profile that will certainly look a lot different than when we hit escape velocity and hit run rate production. So, hopefully, that gives you a sense.

Yes, that's very good. Thanks. And maybe as a follow-up and shifting gears to literally the broader market. But any view on the current NdPr data processing capacity that is in Southeast Asia, maybe outside of China and Japan, that would be helpful to get a view there.

Sure, yes. I think one of the items that we talked a bit about in the prepared remarks is our tolling arrangement for some metal capacity. There's a variety of potential options for metallization in Southeast Asia, maybe six or seven in different facilities out there. We're obviously very pleased with our ability to get dedicated capacity. As you can imagine, with the Japanese magnet industry and the growth that they expect, they are seeking the ability to purchase both metal and oxide. So, with the ability to do tolling of oxide into metal that just broadens our market opportunity for our products. And so I would expect that this announcement we had this quarter is hopefully the beginning of many -- we continue to evaluate other metal tolling facilities through our Sumitomo relationship and otherwise. And of course, this is in addition to our downstream strategy in the United States. And so putting all of that together, we're excited about the potential for a significant amount of our oxide to make its way through that sales channel, which, again, is just a great way for us to continue to broaden our market opportunity.

All right, thank you, Ryan. I will jump back in the queue.

Thanks, Corinne.

Thank you, Ms. Blanchard. The next question is from the line of Carlos De Alba with Morgan Stanley. You may proceed.

Yeah, thank you very much, gentlemen. So just in terms of the headcount ramp up as you expand the operations and Stage II and Stage III, what are you on that process? You're maybe trying to calibrate from the prior question also, what the cost will look like in the coming quarters. That'll be my first question. And then my second question is just coming back a little bit to the prepared market inventory, just wanted to make sure that I understood. Two-thirds of your sales will comprise of roasted concentrate in the second quarter already, or more like in the second half of the year. And then the level of inventories that you currently have is around 2,000 tons of inventory that will be consumed in the coming quarters in the separation circuit.

Okay, Carlos. It's Ryan. Let me take the second part of that first, and then I'll flip it to Michael to talk about staffing. What we mentioned on the inventory and thinking about how we consume our current products into the downstream circuits, I'd note that the point we're trying to make is this quarter you did not see a significant departure of production versus sales. As we move into Q2 and into Q3, we'll see an increasing amount of our production of REO being consumed into the downstream circuit. I think the other question that you asked is about the amount of roasted concentrate that's going to get sold or was sold. And just to clarify, I think you might've had the numbers backwards. It was about 30% of our sales this quarter was of roasted concentrate. The rest was of our standard concentrate product. As you know, what we plan to feed the downstream circuits with is the roasted concentrate. And so I think the two things to keep in mind that we wanted everyone to be sure to understand as they model the business over the rest of this year is you will start to see that detachment of REO sold versus REO produced as we consume that over the next couple of quarters and we flag up to about 2,000 metric tons of REO that will find its way into the downstream circuits and certainly that 2,000 tons will be made up of roasted concentrate. Hopefully that answers your question. Mike, you want to jump in on staffing?

Thanks, Ryan. We've had a significant number of the Stage II staff on our payroll already for several months or for more than several months in training, in cross-training, in cleaning up, working on commissioning activities, re-commissioning activities. So we've gotten probably through at least three quarters of the total hiring, perhaps even a little bit more. We will see a slight increase in some of those staff over the next quarter or two that may be offset by some third-party contractors which will be not including the construction but third-party contractors which will come off so I think overall the cost structure already includes a significant portion of that burden.

All right. Excellent. Thank you, Michael and Ryan.

Thanks, Carlos.

Thank you. The next question is from the line of Matt Somerville with D.A. Davidson. You may proceed.

Good afternoon. This is Will Jellison. on for Matt Somerville. I wanted to start out by asking you about Stage III. Looking a bit further into the future, do you expect to use a building block approach to further capacitization beyond Texas, or will the success of Build-Out potentially be considerably larger than what you're starting out with in Fort Worth today?

Sure, I'll take that. So as you know, with Fort Worth, Fort Worth really represents below 10 percent of our current expected output out of Mountain Pass. And so we really view that as the initial magnetics facility. We're obviously working we've made clear from the beginning that we're really taking a buy, build, and or JV approach here. We're maniacally thinking about return on capital and the most creative, thoughtful, lowest risk ways we can build out that business. And so that's a long-winded way of saying that anything and everything is on the table as we build out that business. But you can certainly expect that that business should grow substantially because the current forward facility will really only represent a small percentage of our upstream output. And we obviously want to make sure that we focus in the near-term on executing that well. And we do expect to have some good lessons from that experience that will help dictate how we pursue the continued downstream build out.

Understood. Thank you, Jim. And then as a follow up, I wanted to ask about capital deployment. To the extent that there is capital available to do so, and I certainly understood if there isn't, but given the stock, where it is today, I'm wondering how you think about potential for share buybacks as being an opportunity to deploy capital for shareholders. Just curious about that, given where the stock is today.

Sure. I thought I might get that question. Well, I'll give you the really short version, but then I'll give you a longer expanded version. You know, I'm the largest shareholder of the company. We have set up an owner operator culture. We're very focused on creating value for shareholders. It's in our DNA. We think about, we're trying to earn capital and capital allocation. I mean, that really drives everything that we do in the business. So you can imagine that, you know, I'm spending pretty much every waking hour thinking about that. So if, when, and if we do something, we'll certainly, you know, do it. We wouldn't telegraph it. But let me give you sort of a longer view into my psychology, which is, you know, we really believe that, you know, I really think of the world in probabilistic terms. I think it's pretty clear if you look at the enterprise value of our business and what we expect to be doing over the next decade that, it wouldn't shock me if our business is, you know, earning more than our enterprise value today in a handful of years out there. So certainly there's an enormous amount of value. That said, it's also a probabilistic world. I've made clear that the capital structure really has to reflect the underlying volatility of the business, as well as the stage of the business. We are in the early growth stage. And lastly -- lastly, we really, and I think we've made this clear, so I don't think this will surprise any shareholders. And certainly for our long-term shareholders, they should think of it this way, or we're not the right company for you, but we're really country-first capitalists. This is a very unique set of assets. We think there's an enormous opportunity. This is also something important that has to happen. And so we really want to make sure that we take a conservative and thoughtful approach to make sure that this platform has the firepower to do the variety of things that we want to do over time. And so when you add all of that up, that's kind of what's going on in our heads as we think about these things. It doesn't necessarily serve us to do something small that creates some single value. We're long-term focused folks around here. And so when we do something, we want to think about it. As you've heard me say on these calls before, we really want to take a Henry Singleton type approach here. And so hopefully that gives you some window into how I'm thinking about it.

No, that's certainly very helpful. Thank you, you.

Sure.

Thank you. The next question is from the line of George Gianarikas with Canaccord Genuity. You may proceed.

Hey, good afternoon everyone and thank you for taking my questions. I'd like to start off maybe just focusing on Fort Worth and just trying to understand any update there. You know, you're due to start production there by the end of the year. Wondering how the hiring is going, how the early indications on production are going, and any kinks you need to continue to work out of the system to get to production by the end of 2023?

Sure. Well I think if, George, hopefully you saw the, we recently tweeted a picture of the facility, you know, the sort of the April 2022 versus April 2023, where you know we essentially broke ground there. I mean, this was a bare piece of land a little over a year ago, and now the shell of the factory is done and we're already at work on the inside. I would say that in this past quarter, there's been a lot of work, not just in the facility, but also with the team. I mean, we have a really impressive team and that team continues to grow by the day. We've made a lot of progress on that front. And so I would say that, it continues to go really well. This is not easy stuff. I mean, we are building a magnet making business from scratch. So I certainly don't want to downplay the scale of the challenge that we've taken on, but certainly we have an incredible foundational customer in GM, and we continue to have a lot of great customer conversations, and we're hopefully taking a methodical, risk-managed approach to this process. And I guess that's a lot of qualitative ways of telling you that you know it we you know we continue to work really well on that front and we're you know we think we're on track and you know just continuing to execute.

As a follow-up you're going through this transition this year, moving to Stage II, and just as luck would have it, we've seen a massive reduction in the spot price. And you talked about allocating some of your production to inventory to Stage II, but how do you manage profitability in that scenario? I guess my question also is we're getting close to a point, I think, where you might be hitting the edge of dipping into EBITDA negativity as opposed to profitability. So how do you manage that scenario? Is it your goal to stay EBITDA positive even if the spot price reduces further? And you maybe don't allocate some of your volume to inventory? Or do you just kind of focus on the task at hand and continue to move to Stage II throughout the year despite what's going on at spot?

Sure. Well, first and foremost, we wake up and pray for higher prices every morning. I'm kidding, but it's a challenge. As we sort of the theme of this call, and we believe in both fronts of our business, well, in Stage I, certainly in all Stages II and III, we're executing really well. Those are the things that we can control. It's tough being in a commodity business, unlike some other businesses where you can, make a lot of great progress and it, maybe 80% of that converts into the financial result. Whereas in a commodity business, you can do an incredible job and maybe 20% converts and the rest is sort of the inherent volatility of prices that maybe make you look not so smart in down price times and probably much smarter than you deserve in up price times. But the reality is that we, there really is not much change in the sense that we're always focused on capital allocation. I mean, we're thinking about these things every step of the way. And when prices are high or higher than here, not necessarily as high as we think they're going, we're always aware that prices could be much lower. That's why we set up the capital structure the way we did. And when prices are very low, if you look back to some of the comments that I made, I mean, that, of course, plants to some of the comments that I made, that of course plants the seeds for the next huge price spike. And so we try not to be too impacted by that volatility and just focus on the things that we can control. But Michael, if you want to touch on any aspects of what you see out at Mountain Pass and kind of how you're thinking about commissioning, if you, if you want to chime in here right away.

Thanks, Jim. Thanks for the question. Yeah, I think we're very prudent in how we're going about commissioning and we always have been thinking of this as a you know, maximizing value to shareholders as well as our long-term success of our operation and our ore body. Particularly in this period of time with lower prices, we want to be especially careful to avoid any major mistakes, obviously any safety issues, but also think about how and when we optimize the ramp for maximizing efficiency of circuits as we commission them versus the speed of commissioning. And so we'll probably be a little bit more, even more thoughtful about that as we proceed. So obviously our Stage I business still is a very low-cost producer, and we'll look to keep that stable and profitable and see where we can eke out additional profitability from that.

Thank you. The next question is from the line of David Deckelbaum with Cowen. You may proceed.

Hey, Jim, Michael, and Ryan, thanks for the questions this evening.

Hey, David.

I was curious, just one on the tolling arrangement with the Vietnamese radar toller. I guess, the Sumitomo, I guess, was responsible for negotiating some of this. But I guess in terms of qualifying your own NdPr oxide, should we think about it as the -- I suppose I haven't had any of your NdPr oxide to work with you either qualify. But is the assumption that, that would be like a fairly seamless process to convert the oxide to the middle.

Yes, David, it's Ryan. Just to clarify, this opportunity with Vietnam or company is separate from our Sumitomo relationship. But we certainly view Sumitomo as an incremental outlet where we expect to do very similar things. So this is just a further broadening of our market opportunity. In terms of qualification, I think certainly, we feel very confident in what our specifications of our product will be in order to properly convert them in an efficient way in electro winning for metal making. I think importantly, in this tolling arrangement, we will maintain title to the product throughout the process. And so through that, we will maintain responsibility, frankly, for the quality of the end product as we interface directly with our end customers. And so we're deeply involved in the requisite conversations to ensure that we're making a quality product at this tolling facility. So we feel good about that.

Appreciate that. Jim, I go back to one of the conversations earlier about substitute products, you raised, obviously, the conversation around Tesla's aspirations for building a non-rare earth magnet. In your conversations with other OEMs, we read it too is a sort of like bringing the alarm for a constrained supply chain. Are you seeing the same sort of concerns from some of the other domestic OEMs, obviously, of a partnership or arrangement or customer arrangement already? But is there a palpable concern around the supply chain for installing rare earth magnets and EV deliveries in the future?

Yes, David. Well, you hit a really good point about bringing the alarm. It was, in a sense, kind of like a commercial for this issue to a very broad audience of just sort of the scale of what is unfolding here and how much more material is going to be needed. As far as sort of sense of urgency, I would tell you that we've really sense a sense of urgency with the OEMs at least going back a couple of years, this -- the -- if you kind of rewind probably pre-COVID, there was less of a sense of urgency. Everything was sort of theoretical. And then when people saw the health care stuff and the semis and that was like sort of the big wake-up call where all of a sudden, this became sort of something down the road to existential. And I would say that, that's maintained. I don't think I've seen that much different. Although, what's interesting, I mean there's -- here and there, we still hear of the supply chain things that pop up. I think Ford had an issue the other day, and so I would say that across the industry, and it's not just the autos, I mean, it's in other areas, sort of other standard industry areas that people focus on this. So I would say, I wouldn't necessarily say it's increased or decreased in the last couple of months. It's been pretty intense for the last sort of two years -- almost three years now. It's really just -- the one thing I would say, though, is you probably over the next year or two, has a lot more, at least in the EV space, a lot more models are coming on to market. And so even though the planning has happened, the physical build haven't yet happened, right? And so I think you're going to see -- and then again, I think that goes back to kind of this past quarter with spot -- anything can happen in the very short-term, but as these -- as this stuff really starts to come online, maybe there'll be a sense of urgency. And again, you've -- David, you've heard me say this a bunch. Going back a couple of years now, I still believe -- I think we will see at least one, but probably a number of household name global OEMs fail or meet a bailout due to supply chain issues around critical materials or critical items. And so I still think that, that is all ahead of us. But admittedly, the last quarter or so, China has been a lot weaker than I think people expected. And so that sort of works its way through the system, but the macro trends remain very strongly intact on that front.

I appreciate the color on that, Jim. Just the last one. That was helpful. Maybe on…

Yes, go ahead, David.

I'm just curious, have you guys tested the functionality of every part of the separation circuit or Stage II circuits at this point? I know like as you described the commissioning process, we're moving from one part of the flow sheet to the next. But I guess -- are there still elements that have not been tested to-ate?

The vast majority have been tested in one way or another. Certainly, they've all been touched in some sort of pre-commissioning. Not all of them have flown a material through them. But that answer will change quite quickly.

Thanks for the response guys.

Thanks.

Sure. Thanks, David. Next question.

The next question is from the line of Lawson Winder with Bank of America. You may proceed.

Hey, good evening gentlemen. Thanks for fitting me in. I wanted to ask about -- I have a couple of questions on costs. One, you spoke to costs during your prepared remarks. And I wanted to get your view on where you think the global cost curve is relative to the pricing now in the low $60 -- like what percentage of NdPr oxide production now is underwater?

Well, the data in China is really tough. So -- and remember that the industry -- it's not necessarily consolidated. You can have miners, refiners and so depending on -- and a lot of them are affiliated -- they're all affiliated. So depending on the month, the money can move around to different buckets. But as I said in the prepared remarks, I -- every indication that we see, I think it's fair to say that at these prices, I think we'll see Chinese industry is just not profitable. And so I think that, that's obviously something that we view to be a bullish dynamic at current prices.

Yes. And so my question gets to the fact, do you mean like the entire industry?

Pretty much, I mean, the industry is -- maybe I can expand on it. And again, this is just our guess from reading the tea leaves, the data is always opaque. So I mean, I'm trying to be caveat this as much as I possibly can, but -- and remember that this is all consolidated ultimately into a couple of players. And so certainly, money can move from various buckets of the up and downstream, if you will, and things can show profitability or losses or whatnot. But that's kind of roughly what we believe.

Okay. Well, that's a big statement. And very helpful color. I wanted to ask about.

We're surprised we're here.

Yes. Yes. Thanks a lot for that color. It's very helpful. And I wanted to ask about one cost item of yours, and that would be nat gas. And to start off with, could you remind us just what percentage of your overall cost is nat gas? And then have your nat gas costs fallen in line with Henry Hub? Or is there still a pretty significant premium for West Coast nat gas? And then thinking about the hedges that you guys put on, how effective have those been? And then for how long are those going to be in place before they roll off? Thanks very much.

Sure. What I'd note is certainly the -- and this is Ryan, by the way, the proportion of our cost structure that's natural gas is going to change as we bring the rest of the circuits online and obviously have an incremental power draw from our CHP. But I'd say, we haven't given specifics on exactly the percentages, but let's call it, single-digits. We have seen certainly our hedges that we've put in place be quite effective this quarter. You can actually see that manifest, Lawson. And when you look at the proportion of the cost that we call out specifically related to incremental Stage II costs, in our cost per metric ton framework in KPI in the deck. You can see that, that went down sequentially. That's primarily due to effective hedging. We have hedges close to similar levels that start to roll off in 12 months and then more roll off in 24 months. And we're constantly sort of looking at potential opportunities to continue to lock that in, given where we are in California, we don't very closely follow Henry Hub. There are very specific transportation dynamics in terms of where we sit. And so I would say NYMEX or Henry Hub is probably not a great proxy for us. I would be looking at the California delivery point certainly to give you a sense. And you see when certain storms happen or certain parts of the transportation infrastructure are offline, that tends to get quite volatile, which is why in certain. Just like our commodity price on the revenue side, in certain quarters, we're going to feel like geniuses in certain quarters, we won't feel quite as smart. But overall, we're trying to approach this very methodically to minimize volatility in our cost structure.

That is fantastic. Thank you very much.

Thank you. The final question is from the line of Abhishek Sinha with Northland Capital Markets. You may proceed.

This is Kailash filling in for Abhi. I was just wondering about your outlook for permanent magnet -- I was just wondering about your outlook for permanent magnet generators and winter vines since Tesla's recent announcement on EV is not requiring rare earth metals. I was just wondering about your outlook on wind turbines and where you see that going?

Sure. So, we covered quite a bit of that on the call. So -- but I'll just -- maybe I'll again, on the first part of the question, we're very confident in the demand outlook for our industry, for our products. I mean it's -- rare earth magnet motors will continue to be the most powerful and efficient option. So, in the variety of -- Kailash, you asked about wind turbine specifically, offshore wind turbines?

Yes.

Everything that we see remains extraordinarily intact. I mean, there's really been no change. The key thing with offshore turbines. If you go with an alternative option is there's a dramatic change in your maintenance because you might have to replace earlier. And so when people look at the total cost of ownership of an offshore wind turbine, the math of a big difference in your maintenance cycle is enormous relative to the cost of a permanent magnet. So, the -- I don't have the exact number in front of me, but it's above -- just like EVs, it's above 90% for offshore. And we've seen no indication other than that remaining intact. And those are very long lead production items. So, even if you saw something change, it would probably wouldn't impact demand for several years, but we've seen nothing but increased demand on that front.

Sure. Sure. Thank you.

Sure.

Thank you. That concludes our Q&A session. I'd like to turn the call back over to Jim Litinsky, CEO, for concluding remarks.

Well, thank you, everyone, for the call today, and we will get back to work and look forward to seeing you next quarter. Have a good night.

This concludes today's MP Materials' first quarter earnings call. Thank you for your participation. You may now disconnect your lines.