Good afternoon and thank you for attending the MP Materials Third Quarter 2023 Earnings Call and Webcast. [Operator Instructions] I would now like to pass the conference over to your host, Head of Investor Relations, Martin Sheehan. Please go ahead.

Thank you, operator and good afternoon everyone. Welcome to the MP Materials’ third 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 give you a brief overview of today’s call. To begin, I will discuss the third quarter and recent highlights. Ryan will then run through the financials and KPIs, followed by Michael, who will review operational progress. I will then provide some closing commentary before Q&A. So, let’s begin on Slide 4. I am going to start in the middle of the slide with our midstream business. We produced 50 metric tons of on-spec end-to-end commenced shipments. Producing at scale is a massive achievement. Let’s put that amount of production in context for a moment. 50 metric tons of NdPr as feedstock can make approximately 100 metric tons of neo magnets, which would power over 100,000 or so EV traction motors. In the U.S. sales of EVs are averaging a little over 100,000 units per month. So being in just the early innings of our production ramp, we are clearly already doing amounts that are significant from an economic security perspective but also with a very long runway for domestic and global growth. We expect to produce multiples of our Q3 output of NdPr in the fourth quarter and expect further step change improvements in 2024. Michael and the team are maniacally focused on improving reliability, increasing throughput and maintaining our low-cost position. They are making great strides. Michael will expand on this later in the call. MP’s NdPr will be delivered to customers in the first quarter as either NdPr oxide from Mountain Pass or NdPr metal from Southeast Asia. So our transition from an upstream to midstream or a refined products producer is officially underway. It’s an exciting time for us and our customers. As a reminder, and as we have consistently stated, commissioning processing facilities and…

Thanks, Jim. Let’s start the discussion on Slide 6. This slide has a bit of a new look from prior quarters as we’ve added NdPr production volumes to the far right. As we’ve talked about in the past, our operating metrics will evolve as we shift from concentrate production and sales to NdPr oxide and metal production and sales. So over time, you will see certain upstream-related metrics fall away with updated metrics that represent our transition into separated products. I would also point out that you’ll see slightly different revenue headings in our P&L, which will also likely evolve over the coming quarters. What remains clear is the strong production volumes for Q3 on the far left of the slide at 10,766 metric tons, is very consistent with both Q2 and last year’s Q3 production. Sales volumes dropped about 1,499 metric tons compared to Q3 2022 and 1,094 metric tons sequentially. These declines were primarily due to the work in process line fills that Jim just mentioned and that we spoke about on prior calls. As a reminder, operating equipment at each Stage 2 process circuit as well as intermediate product storage needed to be filled with upstream product. We have now absorbed all of that concentrate into these circuits and transition to converting some of that upstream volume into separated products with 50 metric tons of NdPr oxide produced in the quarter. As we’ve also previewed, our transition to separated products comes with a change in the duration of our sales cycle with a slightly longer time to revenue for separated products than with our concentrate product. Early NdPr production is primarily being used to build inventory at our tolling partners to begin production of NdPr metal, which is further extending the time to revenue on the products…

Thanks, Ryan. Turning to Slide 8, you can see some of our October production waiting to be shipped off-site. It was a solid operational quarter for our upstream business. Concentrate production was down just slightly year-over-year, primarily due to higher unplanned downtime, but both periods were generally within normal ranges. In the quarter, we produced concentrate at a record grade, which gave us an opportunity to experiment with operating at a slightly higher end of the grade versus recovery curve. We also advanced 2 exciting flotation circuit upgrade project that we believe will, over time, drive further improvements in concentrate production. First, we started up a long-awaited Frost camera and automated float control system that incorporates both manual parameters and AI to make adjustments to the flotation circuit. Like an experienced set of human eyes, we now have a camera mounted a top each flotation cell. The cameras are collecting data on flotation speed, bubble size and color and probably other things we haven’t even thought of. As we learn the system learns and our team learns how to learn from it. For now, we are still in trial operations, but we expect this trove of data and computer learning to help gradually improve flotation circuit consistency and performance. Second, we began construction on a significant enhancement to our grinding circuit. We believe this will unburden our current grinding mill while ensuring more ore is ground to the optimal particle size in basalt site liberation. Given the enormous disparity we observe in the mineral recovery of different sized particles, we are optimistic that this will produce a notable recovery uplift after it comes online next year. The Stage 2 midstream operations continued to grind out progress day-after-day. Operations are by no means as smooth and predictable as we would like.…

Thanks, Michael. Let’s wrap up on Slide 9 with this gorgeous picture at Mountain Pass. Please take a moment to enjoy this pretty view of revenue on a mountain landscape. As we look around the world though, the picture is not so pretty at all. I think it is fair to say that most of us are seeing things we never expected to see. The sad truth is that nothing can be taken for granted at such a perilous time. With major conflicts in Europe and in the Middle East, it is possible that a third theater or regional war erupts or just that things continue to evolve materially from here. We certainly hope it does not. At MP, we believe that despite her faults, America has been the greatest force for good in the history of the world. We pray that, that continues. In our industry, it has been a very difficult year, and that started before the event of October. There are concerns about the pace of electrification and EV adoption. Interest rates moved higher and Chinese industry and the global industrial economy remained challenged. Specifically, commodities prices and companies levered to the materials for electrification are out of favor right now. But despite near-term turbulence in the market, the long-term secular cycle, we believe, is largely intact and bodes well for the price of our products and the value of our company, which makes our share price at current levels as something we are very surprised to see. And as Michael and I discussed earlier, we’ve been laying the groundwork for further long-term and hunt on capital enterprise value creation at MP. In essence, it is likely that no rare earth project in the Western world would make sense again if you do not think our sub-assets demonstrate incredible and asymmetric value from here. In the meantime, recent global events remind us that what we have achieved at MP is important for America. We are proud of that. With that, I will open it up for questions. Operator?

[Operator Instructions] The first question is from the line of Matt Summerville with D.A. Davidson. You may proceed.

Thanks. First, obviously, I want to talk about the big announcement you’re making regarding Stage 1. And I guess I want to understand, as you look out over the next 4 years, is this a linear ramp from 40,000 tons to 60,000 tons? Do you think about on a commensurate basis – adding more – realizing Stage 2 still ramping, but adding more Stage 2 capability alongside that or maybe that capability is already inherent with the asset base you have on the ground. Maybe if you can just talk through that to start, that would be helpful.

Sure. Hey, Matt, it’s Ryan. I’ll start. And Michael, if there is anything I miss, please jump in. But – as it relates to Upstream 60k, we don’t expect this to be a linear progression to 60,000 tons upstream. We laid out our over 4-year time frame given that we think there will be incremental upgrades to our current production and our current mill and flotation circuit that will come to pass in the much shorter term, but there will also be the opportunity for a step change that will come a little bit later in that period. I think one of the things that’s pretty exciting about this is that some of this step change growth may actually come from let’s call it, alternative sources, if you will, material that we classify right now as waste. Some are cutoff grade. We actually have had really exciting results from that. Tailings some of these other opportunities where we expect this to be incredibly value accretive not just because we’re growing our upstream production by 50%, but also because of the sources of that REO. So we’re incredibly excited about that. I think in terms of your question on the Stage 2 capacity, what I’d say there is our focus is on delivering the 6,000 tons that we’ve committed to first. And so I don’t want to make any promises to you about exactly how and when this upstream material may get separated. But I think it’s safe to say that as we designed the circuit, the downstream circuits, we did incorporate plenty of engineering factors and things of that sort. So we will continue to look at that opportunity to add even incremental value above and beyond what we’re talking about with the upstream expansion.

Got it. And then just to Jim’s last point, with the stock price where it is, realizing you guys want to maintain a very healthy balance sheet, having said that, does that give you – does that change the way you’re thinking about capital deployment? Obviously, plenty of growth projects on the drawing board here. No doubt about it. But do you think about share repurchase differently given market conditions? Thank you.

Sure. Thanks, Matt. And yes, as I said on the remarks, I think we’re very surprised to see the share price where it is. And I think you’ve generally heard my views with respect to capital allocation on prior calls. But of course, I think it’s always worth repeating that we are owner operators. I’m the largest shareholder of the company. You can imagine that we spend every waking moment thinking about allocation of capital and how to create value for all shareholders. What I would say, I think just to sort of put in my kind of terms, what we’ve announced today with Upstream 60k, if you look at our valuation today and of course, commodities businesses are volatile, they are cyclical. And let’s say, hypothetically that you believe this is a cyclical trough valuation and we’re just around $3 billion, okay? What we basically announced today is that with modest incremental capital, we can expand over the next, call it, 4 years, 50% REO, which in theory, means that assuming we do that right, that is just a 50% increase in enterprise value, right? That should be worth $1.5 billion at trough levels. If you assume a normalized value over the last few years, that’s probably worth double out or more several billion. The point is that when we think about our assets, the return on capital is just enormous if you can invest a modest amount and get many multiples. Those are the kinds of investments that we want to make sure that we have the flexibility to make because particularly given the environment that we’re in, first and foremost, we must have a fortress balance sheet. That has been sacred to the company from the very beginning, and we’ve been clear about that. But then from there, we want to make sure that we can do all of the sequencing thoughtfully. With that all said, I kind of look at the screen here and scratch my head. And so with that all as a preface, I reserve the right to do anything here. So stay tuned. But again, just what we’ve announced today is what we believe is going to be some enormous value creation for shareholders.

Appreciate the color. Thanks, Jim.

Sure.

Thank you. The next question is from the line of Laurence Alexander with Jefferies. You may proceed.

Good afternoon. Two questions. First, just to follow on that. Can you sort of help narrow down what you mean by incremental or sort of capital required for the expansion either in terms of the capital you expect to spend or including working capital and also – or in terms of like payback at some kind of normalized price? Can you just help people sort of frame that?

Sure. I didn’t get a great line on that. Could you repeat that, Laurence? Sorry.

Sure. how much do you expect to spend for the REO expansion?

At this point, what we expect is sort of order of magnitude about $200 million. And as we laid out this plan occurring over the next 4 years, I don’t expect that spend to be linear either. But I think that probably gives you a sense. We’re talking about a 50% expansion in our upstream production. And obviously, you’ve seen how profitable that business is and can be. And so with that level of spend, I think this sort of speaks to exactly what the point that Jim was trying to make a minute ago. And I think it’s just important for us to highlight the embedded value of our assets here being able to spend that quantum of capital to grow our business at that scale. It’s something we’re very excited about.

And then can you give a little bit of a more granular update for how your thinking has evolved around the cadence or the financial metrics for the magnet business?

Sure. There is really no change in cadence there. The thing that I would highlight is we did mention in our prepared remarks, we’re looking very closely at similar in a lot of ways to what we laid out in the upstream, a very high return on capital, potential expansion of the downstream business given the scale that we’ve gotten by making the initial investment in that facility. We see a lot of interest from customers and a very good opportunity to expand scale there. And so there is really no change in how we think about the go-forward plan or metrics on the Stage 3 business.

And then just lastly, on the regulatory front, can you just give a quick update on what you’re seeing, particularly in the U.S. around sort of any chance of movement on any of the magnet builds?

Sure. Well, we finally have a Speaker of the House, so that’s progress. I think we’re heading into an election season. And so – and particularly given what’s going on around the world, I’d be – I think it’d be aggressive to say that we expect anything in the very short-term. What I would say, I would look out for, I think one big area from the Mountain Pass standpoint would be there is a bipartisan committee in the House, the Select Committee on China, which has discussed doing something on that front. And so I do think that we will see something on this front. But again, I mean, you see the – what’s going on in Washington on both sides on all fronts. And so we’re certainly not relying on that with respect to the magnet business. But we do think that as something happens, it’s a strong possibility that something helpful there gets tacked on. And – but to get to the part of your question, just kind of adding on to what Ryan was discussing before with the magnet business, we really – we understand that we’re building a business from scratch there. And the governor is, again, making sure that we are proceeding thoughtfully in a way that is a high return on capital and that we’re managing risk with respect to building out that business. And so we aren’t just going to kind of go out and aggressively spend. And frankly, even if there were legislation as such, we are going to do things that make economic sense. We’re not waiting on government help there, but we want to continue to hit sort of base hits on that front before there is anything much larger. And of course, obviously, what we’ve got, if you see the scale that we have in Fort Worth today, it’s a pretty big start.

Thank you.

Sure, next questions.

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

Hi, guys. Good afternoon. So the question I have is you talked about potentially increasing by multiples the production that you had of NdPr oxide in the fourth quarter. And do you feel – I think Michael said that you guys feel very comfortable in reaching your guidance for – your production target for the fourth quarter. I wonder if you can maybe quantify a little bit more this narrowed range of possibilities just given how important it is the cadence of how you guys ramp up the oxide production. That would be my first question.

Thanks, Carlos. We’re pretty excited with the progress we’re making. I’d be reluctant to give too much clarity on what we expect. But we do expect continued progress in the fourth quarter and even more notable progress into the next year. So we are seeing more stability, more reliability, and we’re going to continue to focus on stability, reliability, longer uninterrupted periods of uptime and then focus really on throughput.

Yes. And Carlos, the only thing I’d add there – it’s Ryan. I think importantly, what we’re also focused on here is ramping production profitably and sustainably and not just chasing volume at all costs. And so I think Michael and his team have done an incredible job achieving that so far. And so we probably expect to have a few more quarters of ramp before we hit our stride, but we’re very, very happy with where we are today.

Alright. Okay. And I hear you correctly in saying that you expect to have already sales of NdPr oxide and ore metal in the fourth quarter?

What we mentioned is expecting the majority of sales even of the Q3 production to occur in Q1. So certainly not ruling out Q4 sales, but in thinking about the sales cycle and the timing of that sale cycle that I’ve laid out in the past, particularly because this initial set of volumes is building up a set of inventory and tolling partners. So this early production is a uniquely slow sales cycle in terms of the transition from concentrate to oxide or metal. I don’t expect the sales cycle to always be exactly this pace. But I think that’s important as you guys look at your models for Q4 and Q1.

Alright. Good. And then my last question is on the 200 million, give or take, that you expect to spend in the Upstream 60k project, is this – how should we think about the cadence or the pace of the disbursements? Is this something that might take maybe start next year and accelerate over the next 4 years or how do you see that disbursement?

Sure. What I’d say on that front is, I think the exciting thing about this project is there are many different pathways for us to hit that target. And so we’ve got enough confidence in the initial test work to lay out the strategy. But like I said, a couple of different ways to get there. I’d expect that the outlay may start very modestly next year and then be a bit backloaded as we likely look at those step changes towards the back portion of that guided for years.

Great. That’s good. Congratulates.

Thanks.

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

Hey, guys. Thank you for taking my questions. First, I’d like to ask about the pricing environment. And a couple of few quarters ago, Jim talked about at $60 a kilogram kind of being a bottom for NdPr prices globally just based on profitability of China Inc. It seems to be – or it seems to be somewhat pressured because we seem to have bounced off that level a couple of times despite a weakening EV market. So any update on your thinking there and whether or not we can continue to at least bounce around these levels for the time being before EV sales accelerate?

Sure. Thank you, George. I always like a question that starts with giving me credit for being patient. So thanks on that. So NdPr is sitting roughly around 70. If you think about the world today versus several months ago, it’s correct that we’ve seen a lot of – the pricing has pretty much held in, but in that time period, if you think about it, we’ve seen deteriorating trends whether – if we look at this quarter, across electrification and whether it was the OEMs themselves, both the new ones and maybe what some would consider legacy ones, the research analysts or some of the semiconductor companies feeding into the supply chain. You’ve sort of seen this feeling around a slowdown in electrification relative to what people thought. Simultaneously, you’ve seen some wind projects canceled, some major wind turbine projects canceled. And so relative to what people thought and actually, though, even with all of that, prices have held in very well. And so I think it does speak to the fact that we are – we have been bouncing around the bottom because the economics just really require – I mean there is only so long that parties want to lose money. And so certainly, it makes zero economic sense at these levels for any incremental supply really anywhere in the – at least in the non-Chinese world, outside of our Upstream 60k, which also makes our Upstream 60k so exciting because we – for very little incremental capital can create what we believe to be very large long-term enterprise value and have very attractive economics out of the gate. And so I think that will – I think, hopefully, that will prove pression as well that we have positioned ourselves to be able to make these kinds…

Maybe just as a quick follow-up to then, thank you. Can you kind of illuminate us as to what your production cost per kilogram will be as you reach steady-state production for NdPr?

Sure. George, it’s Ryan. I’ll take that one. Certainly, with our initial production this quarter and ramping that as quickly as possible and as profitably as possible, it’s a little bit early to home in on exactly what cost per kilogram will be given where we are right now. What we want to do is see operations at full scale, efficient run rate production before we start making other promises here. What I would say, though, is when we went public, we gave some rough guidelines on our expected cost of production at that point. And as you can imagine, at that point, those numbers were based on an amount of estimate as to exactly how the chemistry would work in the plant. And so I think what I’ve talked about in prior calls is we see there, we’re very, very pleased with. So we think our assumptions there will prove correct or conservative. The other thing to keep in mind, though, is Stage 2, in particular, on a variable cost basis is heavily dependent on commodity reagents. And those have seen pretty significant price increases as labor and energy. And so our hope is that as we get up and running and add scale and efficiency that those eventually offset each other, but it’s a little bit early days to give more definitive information at this point. However, I would close by saying with everything that we have seen to-date, we remain confident in our ability to maintain our position as a low-cost producer in this industry.

Thank you.

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

Hi. This is Kailash on behalf of Abhishek Sinha. So, we saw the recent news on Malaysia’s export of metals, and we just wanted to know what your outlook is on that and if you sort of want to ramp up production based on that supply squeeze.

Well, the Malaysia news, I think just had to do – I think there are still a lot of headlines. I think actually, the Malaysia news had to do with the Malaysian Government wanting to capture more of the value chain. Aside from just sending some material, they wanted to kind of have actually more of the industry. But obviously, we don’t operate in Malaysia. That really doesn’t impact how we think about things over state side right now, we’re – so I really see no impact with respect to us from that.

Sure. As a follow-up, we just wanted to know what premiums you sort of experienced with NdPr oxides over NdPr ore?

I am sorry, can you repeat that?

We are curious to know what premium you experienced for NdPr oxides over NdPr ore.

Got it. Yes. I assume you are talking about sort of the bridge from concentrate to oxide. I think the way we think about the uplift in moving to separation is it’s not just a focus on the price and the revenue side. The focus for us, obviously, is on incremental margin dollars. And so obviously, both con and oxide are quoted in the market. And so you guys can kind of do the math there. But as we ramp the plant, and get what we expect to be a fairly insisting cost of production once we hit target levels, the amount of NdPr in our con is about 15.7%. And so you can sort of do the math there on expected cost of production for the oxide versus con. But putting that all together, we are very pleased with what we expect to be a nice uplift in both revenue and profit dollars as we move to separation.

Thanks. That’s helpful.

Thank you. The next question is from the line of Corinne Blanchard with Deutsche Bank. You may proceed.

Hey. Good afternoon guys. Could you maybe talk about the shipment time and delivery time for the NdPr oxide and the timing of when revenue would be recognized for the shipment?

Sure. Hey Corinne, it’s Ryan. I will take that. I would refer you back to our comments in the last call and what we talked about a little bit earlier, which is that these initial shipments of oxide, particularly the Q3 production as well as early Q4 production, we are prioritizing building an inventory level in the tolling channel. In order for tolling to start in earnest, there needs to be a visibility to consistent inventory on site to get the electro winning process started and running efficiently. And so what that causes for us is given the fact that we maintain title of the oxide all the way through the production of metal, it really just slows the recognition of revenue because we will sell it for our purposes once it is turned into metal and at the port or location of delivery after being converted. And so that’s why we have said for these Q3 shipments and Q4 shipments, early Q4 shipments, we don’t expect to see much impact until Q1. You can expect – certainly, our intention is to also sell oxide as oxide. And so there are a variety of different contracting structures we have. Some are a little bit shorter term, some are longer term. But this transition as we go from effectively selling 100% of our con to consuming a significant amount of our con and then needing to get through this initial filling of the channel is what’s driving this change. And so if you think about why it takes as long as it does, I will just give you sort of a rough walk. If you think about getting it to port from Mountain Pass could spend a week at port, it’s probably about three weeks at sea and then it needs to get converted if we are talking about metals. So, that could take up to a month. And then we got to get it to the customer. So, that’s 2 months to 2.5 months. Once we fill that channel though, that impact for us gets lapped very quickly. So, that’s what’s occurring in the background right now, and we look forward to getting that channel filled, so we can start showing you some oxide metal revenue in the P&L.

Alright. Thank you. And then maybe as a follow-up on the expansion, and maybe you touched on this before, I apologize if you did, but where do you think you would be placing the volume? Meaning, like, how does that fit that expansion with the demand?

I apologize, Corinne. Can you ask that again?

Yes. For the expansion that you were talking about, like 50% expansion by – over the next 4 years, just wondering what the capacity of the market to absorb those additional volumes. So, just high level, like how do you view this?

Sure. Yes. Sorry. We were just having a little trouble hearing you first. But I think you are asking about the expansion and where we expect to sell those volumes. I think the important thing to keep in mind is as we transition to selling oxide and metal from concentrate, those volumes, that over 40,000 tons of production that we are making today, historically has been sold primarily into the Chinese market and no longer will be as a con product. And so there is absolutely separation capacity for an additional 20,000 tons. We have no concern about that. And then we are also pretty pleased with what we have seen in terms of development of various ex-China sources. And so we feel very good about the ability to place that volume. And just given all the dynamics that Jim touched on given the timeframe that we are talking about, we feel very good about bringing that incremental volume to bear into the market.

Okay. Thank you.

Thank you. The next question is from the line of Bill Peterson with JPMorgan. You may proceed.

Hi. Good afternoon and thanks for taking my questions. I wanted to come back to the market that Jim was describing as related to the question around pricing. So, you – yes, clearly, EVs and wind is challenged, but I think you have also kind of seen some challenges in even kind of the more traditional uses, which I think accounts like you talked about 75%. So, assuming that’s still week two, where do you see pricing being held up? Do you see pockets of supply coming offline? And then I guess looking ahead, your peers recent permanent expansion in Malaysia, do you think that could lend – lead to further supply discipline for China as they think about first half ‘24 quotas?

Well, as far as quotas, I would tell you that it’s always difficult to read tea leaves in China. And we try to do our best, but I don’t have a view on that for next year. I do think – I have said historically that. And I think that their behavior has followed this, but if you think about the evolution of the electrification world, specifically EVs, and you see there was a big BYD price cut announced in some markets just – I think it was today or maybe it was yesterday. But with the Chinese having moved downstream, I think that you are seeing a transition – a strategic transition to focus on making sure that there is supply growth to feed their downstream industry, but not enough supply growth to subsidize the Western competitors. And so I do think that, that speaks to, again, sort of continued discipline, but for discipline around, they will make sure that there is a reasonable amount of supply for their own producers and those producers are growing quite substantially. As far as – and hopefully, this – it’s a great question, Bill. I think as far pricing now with all of these headwinds, I view that – you have to take this with a grain of salt because I run a rare earth company, but I view that as very bullish in the shocks that this market has absorbed this year when we think about the vast majority of demand still being the straight GDP industries that have been severely impacted in China and when we think about the slowdown in recent months with EVs and the wind turbine projects canceled. And so I think though it does speak to the reason you asked me what the reason is. And…

Thanks for those insights. I wanted to ask about Stage 3 with my second question. So, I guess how should we think about this progress on the construction and equipment setup? I may have missed it, but are you still expecting to begin alloy production by the year-end this year? And I guess what are the key sort of milestones we should be looking out for with Stage 3?

Yes. No, great question. So, things are going really well in Stage 3. We have made a lot of progress. One point of note for those who don’t know, there is – the big pieces of when you take oxide, the big pieces that get to a magnet are metal, alloy and then magnet. And actually in working with our primary customer and other discussions, we actually shift the focus to metal, internally produced metal, because that’s really more of a salable broader product. And actually, we are making in pilot scale metal today. So, that is a big achievement for the Stage 3 team. So, we are on track. And then certainly, with respect to alloy, that’s never sort of a long-term business, the goal is magnetics, right. The goal is to make magnet. Metal and alloy are just intermediate products that are nice. It’s nice to get revenue to satisfy customers and broaden the market of people who can receive things, but the goal is magnets. On that front, our magnetics team is about 60 people. We just moved into that. As we said earlier, we moved into the building. We have a – and it’s really an incredible site because what we have done is we have set up the research and engineering to really be connected to the factory. And so we are just going to have a lot of great interaction between our research, our engineering and the operators. And so that all is happening, it’s going to take us a while, obviously, to be producing magnets and to be doing it at scale. But I am very pleased with how that’s been developing. And of course, with the caveat that with anything we do, particularly in building a business from scratch, these are painstaking things and we want to make sure, particularly because it’s our capital risk that we are doing things methodically and thoughtfully and it’s going well.

Thanks again for the color and insights there.

Sure.

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

Thank you, operator and good evening gentlemen. Thank you for fitting me in. I appreciate it. I wanted to ask about heavy separation, and I am hoping you will be prepared to provide a little bit more specificity around the heavy separation project. I wanted to be clear, is this designed to process only ore from Mountain Pass, or is the idea that it will take both Mountain Pass and third-party ore? And then to get a little bit more to the specifics, when do you expect the expansion to be complete? How long do you expect it to ramp up? What would be the main products? And what’s the expected CapEx? Thank you.

Hi. This is Michael. I will start with that one. So, first of all, we are very pleased to be producing high-quality SDGs, the key feedstock for our heavier separation facility. But the facility is designed to accommodate third-party feedstocks as well. Perhaps even a majority of the feedstock would be expected to come from third-party feedstocks. In terms of the progress, the engineering work is advancing through detailed engineering. Certain separation equipment is on sites and a lot more is on its way. Continuing a theme from earlier in the call from a procurement and build-out standpoint, we are committed to delivering the project in scale and flexible capacity in the most capital-efficient way possible. So, we are really looking at that very, very carefully. Yes, we believe we are very well positioned to deliver the project more efficiently and more quickly than any other projects outside of China.

Yes. Lawson, and in terms of – I would just add – I was just going to add, we mentioned this on the last call, but when you think about – I think this is just relevant so you can sort of understand thought process here. But if we go back to 2022, the DoD actually made awards to both MP and Linous [ph]. And then there was a substantial follow-on award earlier this year, and we made clear on the last call that we had requested a level playing field and had every expectation [Technical Difficulty] the government moves at their own pace, and it’s never as quick as we would like. But to reiterate Michael’s words, we certainly think we are positioned to be the quickest online.

And Jim, just to complete the thought I missed. The priority products are dysprosium and terbium from that, although we will produce other heavy earths as well. And our biggest priority is to support our Stage 3 customer and the customers of our Stage 2 business.

Okay. Thank you for taking my question. Nice quarter.

Thank you.

Thank you. Our last question today comes from David Deckelbaum with TD Cowen. You may proceed.

Thanks Ryan, Jim and Michael for taking my questions today. Maybe just to put a pin on everything in this conversation, I am curious just, Ryan, if you could kind of put bookends just how we think about capital progression or spending progression in the ensuing year. You guys highlighted a lot of projects that appear to be of low capital intensity and high return on capital. When we think about the $300 million or so of growth CapEx this year, in the foreseeable future, should we think about that as a peak year of growth capital? And I guess how much do you see that stepping down in the years ahead?

Sure, David. Yes. So, the one thing I would flag just to highlight one change in our guidance for this year is I did mention in the prepared remarks, and you will see it in our filings tomorrow that we expect to spend $270 million now this year versus the $300 million that we had previously expected. That’s primarily from some of the initiatives that Michael talked about just trying to be as capital efficient as possible as we progress these projects. We obviously have continued to earn a pretty nice return on our cash on our balance sheet. And so we just want to be thoughtful about timing and pacing of capital. You are absolutely right that we talked about a lot of exciting relatively low capital intensity, high-return projects. It’s a little bit early for me to provide multiyear guidance or specific 2024 guidance. We do intend to provide 2024 guidance on next year’s earnings – next quarter’s earnings call, excuse me. But what I would say is this year’s capital plan includes a pretty significant chunk of Stage 3 CapEx, which is quite a big project. And so I think that’s important to think about what a normalized spend profile would look like. We just want to reserve our rights to do other very high return on capital projects, and I have spent a lot of time with Michael out of Mountain Pass trying to find those, and there is a pretty long list. So, we will continue to keep you updated on that. But certainly, we are very focused, as Jim laid out in terms of our alignment here on making this a very high free cash flowing business. And so we are always stacking up our projects and potential organic projects and making sure they meet a pretty high return threshold.

Thanks Ryan. I appreciate that. And I just wanted to confirm, Michael, as you guys think about targeting this expansion to 60,000 tons a year on the upstream side, is it fair to say that you don’t necessarily intend to become a concentrate producer or rare earth concentrate producer and distributor that you would be doing this with the visibility of being able to convert that material over time?

I think our mission will remain the same, which is to support the ex-China supply chain. And we will look at the most efficient way of achieving that, including optimizing our existing capability at Mountain Pass. But it’s certainly several years in the future and we want to be focused first on ramping up Stage 2 and developing this the Upstream 60k project.

Thanks so much.

Thanks David.

Thank you. That concludes our Q&A session. Thank you everyone. I would now like to turn the call over to Mr. Litinsky for final comments.

Well, thank you everyone for joining us. I know it was a long call, but it was a lot of exciting developments with MP, albeit we are in a tough environment in the global economy and certainly in our sector, but we feel very excited about our business, and we will keep executing. And so everyone stay safe, and we will talk to you all next quarter. Thanks.

That concludes today’s conference call. Thank you for your participation. You may now disconnect your lines.