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DATE

Thursday, May 7, 2026 at 5 p.m. ET

CALL PARTICIPANTS

  • Chairman and Chief Executive Officer — James H. Litinsky
  • Chief Financial Officer — Ryan S. Corbett
  • Chief Operating Officer — Michael Stuart Rosenthal

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TAKEAWAYS

  • NdPr Oxide Production -- 917 metric tons produced, up 63% year over year and a 28% sequential increase, marking a company record.
  • NdPr Oxide Sales Volume -- 1,006 metric tons sold, more than double prior-year levels and 79% higher than the previous quarter, aided by initial shipments to a new U.S. customer.
  • Rare Earth Oxide (REO) Production -- Nearly 13,000 metric tons produced, yielding a 6% year-over-year increase and the highest first-quarter output in company history.
  • Materials Segment Revenue and PPA Income -- $114.5 million, approximately double first-quarter 2025 results, including the impact of the PPA agreement.
  • Materials Segment Adjusted EBITDA -- $36.7 million, reflecting improved operational and pricing conditions relative to the previous year.
  • Magnetics Segment Revenue -- $21.1 million, primarily from magnetic precursor production at the Independence facility.
  • Magnetics Segment Adjusted EBITDA -- $9.6 million, underscoring positive performance as the segment transitions toward finished magnets.
  • Consolidated Revenue and PPA Income -- $132.9 million, a 28% increase versus the previous quarter, driven by strong NdPr oxide sales, higher market prices, and PPA income.
  • Adjusted EBITDA (Consolidated) -- $36.6 million, with the quarter's margin reflecting a shift in PPA income composition compared to Q4 2025.
  • Adjusted Diluted EPS -- $0.03 per share compared with a loss of $0.12 per share in the first quarter of 2025.
  • NdPr Oxide and Metal Inventory -- approximately 815 metric tons on hand, in transit, at toll processors, or awaiting shipment as of March 31, 2026.
  • Realized NdPr Pricing Outlook -- Second-quarter realized pricing expected to be in the low to mid-$90s/kg, with the PPA agreement to offset differences with the $110/kg floor.
  • PPA Income Outlook -- No material PPA income expected from stockpiled concentrate in upcoming quarters, as ramped midstream operations reduce available stockpiled material.
  • Magnetics Prepaid Revenue Remaining -- $62 million of prepaid magnetic precursor product revenue to be recognized over the next four quarters, declining sequentially.
  • Construction and Expansion -- Groundbreaking for the 10x magnet facility initiated, with accelerated construction planned; major equipment ordered for Independence expansion targeting 3,000 metric tons of annual magnet capacity.
  • CapEx -- $77.4 million for the quarter (60% allocated to the magnetics segment), with full-year guidance of $500 million to $600 million and an expected step-up in Q2 spending for 10x site activities.
  • Apple Prepayments -- $32 million received in February 2026, totaling $72 million in Apple-related prepayments on balance sheet.
  • Liquidity -- $1.7 billion in cash and short-term investments as of quarter-end, funding the firm's long-term capital plan.
  • Heavy Rare Earth Separation -- Commissioning of the heavy rare earth circuit scheduled to begin in Q2, with production of terbium and dysprosium targeted for later in the year.
  • Magnet Recycling Initiative -- Conceptual design completed at Mountain Pass, progressing with engineering and procurement in line with the Apple agreement.
  • Production Outlook -- A single-digit decline in NdPr oxide output expected quarter over quarter in Q2, with significant sequential growth anticipated in Q3 as new projects ramp.
  • Contracted Visibility -- Major commercial agreements in place with GM, Apple, and the Department of War, driving long-term growth and cash flow.
  • Market Position -- Management states, "NdPr oxide will remain the binding constraint for economically viable rare earth magnet production outside of China for at least the next five years."
  • Customer Engagement -- Management reports elevated engagement levels and continued expansion of the customer base, with future growth characterized as methodical rather than opportunistic.

SUMMARY

MP Materials Corp. (MP 4.84%) highlighted both record NdPr oxide production and sales, driven by new U.S. customer shipments and ongoing operational scale. The company confirmed commissioning of the heavy rare earth separation circuit for Q2, and reported ongoing engineering and procurement activities for magnet recycling operations aligned with its Apple agreement. Groundbreaking for the 10x magnet facility and the expansion of Independence toward 3,000 metric tons of annual capacity were announced, with all major equipment orders finalized. Management reiterated that major contracts with GM, Apple, and the Department of War anchor future revenues and platform integration, while current liquidity and projected operating cash flow fully fund ongoing expansion.

  • Management expects Q2 NdPr oxide production to decline single digits quarter over quarter due to the semiannual maintenance outage and project commissioning, with substantial sequential growth anticipated for Q3 as process optimizations take hold.
  • Company guidance stipulates second-quarter realized NdPr pricing is forecast in the low to mid-$90s per kilogram, with the PPA agreement absorbing any price gap relative to the $110 per kilogram floor.
  • Magnetics segment revenues will decrease as prepaid precursor revenues roll off before finished magnet ramp-up, resulting in sequential lumpiness over upcoming quarters.
  • The heavy rare earth circuit will produce terbium, dysprosium, and intermediate feeds for later separation or sale, supporting broader supply chain development and contractual obligations to the Department of War.
  • Strategic emphasis was placed on the operational moat created by the Mountain Pass refinery, cited as a critical bottleneck outside China given global NdPr supply constraints, especially as announced Western magnet capacity exceeds available upstream feedstock.
  • The chief executive officer asserts, "there is very limited uncommitted NdPr supply available," with much of Lynas’ output secured by Japanese entities, strengthening MP Materials Corp.'s leverage in securing incremental contracts.

INDUSTRY GLOSSARY

  • NdPr Oxide: Neodymium-praseodymium oxide, a key rare earth compound used as feedstock for sintered rare earth permanent magnets.
  • PPA Income: Pricing and purchase agreement-derived income, realized when actual market prices fall below a contractual floor, providing guaranteed minimum pricing.
  • PPAP: Production Part Approval Process, a standardized methodology for qualifying new production capabilities and validating product quality, often required by major automotive and electronics customers.
  • 10x: The codename for MP Materials Corp.'s forthcoming large-scale magnet manufacturing facility, central to future capacity expansion.
  • Independence: The company’s U.S.-based magnet production facility currently scaling up commercial output and supplying strategic customers.
  • Heavy Rare Earth Separation Circuit: An industrial facility enabling refinement and separation of heavy rare earth elements, such as terbium and dysprosium, critical for advanced magnet and defense applications.

Full Conference Call Transcript

James Litinsky: Thank you, Martin, and thank you all for joining us today. Building on a very strong 2025, we carried that momentum into 2026, delivering solid operational and financial performance across our platform in the quarter. We continue to scale and execute with discipline. In our materials segment, the team produced a record 917 metric tons of NdPr oxide, up 63% year-over-year and 28% sequentially. We also began initial shipments to our newest U.S. customer referenced last quarter, driving total NdPr oxide sales of 1,006 metric tons, more than double prior-year levels and 79% higher than Q4.

We also delivered one of our strongest concentrate quarters, producing just under 13,000 metric tons of REO, a 6% year-over-year increase and our highest first-quarter output to date. Importantly, Michael and the team continue to make meaningful progress on the heavy rare earth separation circuit, which we expect to begin commissioning here in the second quarter. In parallel, we meaningfully advanced the engineering design of the recycling circuit underpinning our agreement with Apple, another critical step in building a differentiated closed-loop supply chain.

Strong sales volumes, improved market pricing, and the PPA agreement combined to generate $114.5 million of materials segment revenue and PPA income, approximately double last year’s first quarter, and generated $36.7 million of segment adjusted EBITDA in the quarter. Turning to our magnetics division, we continue to make steady progress commissioning our commercial production equipment. Magnetic performance is meeting customer specifications and we remain focused on ramping the core processes with precision. Building on that foundation, we are advancing through customer validation ahead of full production. In parallel, we recently broke ground on 10x, and we are advancing every aspect of the project with urgency.

Drawing on the hard-earned lessons from constructing, commissioning, and production at Independence, we are confident that we can move faster and execute better as we scale this platform. With proven partners, and full Department of War support, we expect construction activities to accelerate throughout the year, and we will provide updates as we progress. On the financial side, as we noted last quarter, we received a $32 million Apple prepayment in February, bringing total Apple prepayments to $72 million. Alongside that, magnetic precursor production at Independence drove $21.1 million of magnetics segment revenue and $9.6 million of segment adjusted EBITDA in the quarter. Overall, we are off to a strong start to what we expect to be a consequential year.

With policy tailwinds and continued urgency around onshoring and supply chain security, we are advancing our platform with momentum, executing with discipline, and delivering durable financial performance. With that, I will turn it over to Ryan to provide a brief overview of the quarter’s financial and operating metrics. Ryan?

Ryan S. Corbett: Thanks, James. At the consolidated level, the company generated $132.9 million of revenue and PPA income, representing a 28% sequential increase from the fourth quarter, along with $36.6 million of adjusted EBITDA. These results were driven by the record NdPr oxide sales volumes, higher market prices, and PPA income. These factors also drove adjusted diluted EPS to $0.03 per share compared to a loss of $0.12 per share in the first quarter of last year. On a sequential basis, adjusted EBITDA declined modestly, primarily reflecting the composition of PPA income in the prior quarter. As of March 31, we had approximately 815 tons of NdPr oxide and metal on hand, in transit, at toll processors, or waiting for shipment.

Regarding pricing, most contracts continue to price on approximately a one-quarter lag to prevailing NdPr market prices, with shipment timing driving some puts and takes. Based on our current view of sales mix and timing, we expect second-quarter realized pricing to be in the low to mid-$90s per kilogram, with the PPA agreement mostly offsetting any difference between our realized price and the $110 per kilogram floor. As concentrate production available for stockpiling continues to decline with the ongoing ramp up of our midstream operation, and with NdPr market prices remaining close to or above the $110 per kilogram floor, we do not expect to generate a material amount of PPA income from stockpiled concentrate in the coming quarters.

Turning to magnetics, as James noted, the segment delivered another solid quarter of revenue and EBITDA performance. This leaves approximately $62 million of prepaid revenue to be earned for magnetic precursor products over the next four quarters on a modestly declining basis quarter-to-quarter. Once this prepayment is fully recognized, we would no longer expect to produce such products for external sale and instead will dedicate metal production capacity towards our needs for the manufacture and delivery of finished magnets. We continue to expect initial magnet revenue in 2026, beginning with modest deliveries as capacity ramps over the following several quarters.

While financials quarter-to-quarter will be impacted by the eventual roll-off of precursor product deliveries, the early scaling of magnet production, timing of certain product testing milestones at our customer, as well as investments in our team and product development capabilities in the short term, we are setting the stage for scaled manufacturing and strong financial performance from our marquee contracts with GM, Apple, and the Department of War. We remain very pleased with the progress from the team and the significant strategic and financial opportunity in magnetics, where our scaled vertical platform meaningfully sets us apart. Regarding cash flow, CapEx in the quarter was $77.4 million, with about 60% attributable to the magnetics segment.

Second-quarter CapEx will step up meaningfully as we acquire the 10x site, break ground, and accelerate construction. We continue to expect full-year CapEx of $500 million to $600 million. Lastly, we ended the quarter with $1.7 billion of cash and short-term investments on the balance sheet. Together with strong operating cash flow, this fully funds our long-term capital plan and preserves our fortress balance sheet. With that, let me turn the call over to Michael. Michael?

Michael Stuart Rosenthal: Thanks, Ryan. As discussed, we delivered a solid quarter of production at Mountain Pass, with concentrate recovery and grade performing particularly well. That performance stands out even as we continue to experiment with new processes across different components of our ore body. These efforts are yielding valuable insights that are informing operational optimizations, and we are encouraged by the potential to translate those learnings into sustained performance gains. In our midstream operation, prior process enhancements contributed to strong NdPr production during the quarter. Importantly, we see meaningful opportunity for improvement across roasting and leaching and product finishing circuits. Over time, we expect these initiatives to increase production volumes and reduce costs.

As planned, we successfully concluded our semiannual maintenance outage in April, which included installation and commissioning periods associated with several projects. These projects caused a slightly slower resumption to normal production and, as such, we expect to achieve a single-digit quarter-over-quarter decline in NdPr oxide production in Q2, followed by significant sequential growth in Q3 as the benefits are fully realized over a full three-month period. Following the commissioning of the remaining commercial-scale process at Independence in Q4, we are now focused on ramping the facility, driving throughput, improving yields, and ultimately stabilizing operations. This is detailed, painstaking work that takes time to fully optimize, but we are making good progress.

We have a strong and growing team in place, and the core processes are translating effectively from development into production. Magnetic performance of our commercial magnets is meeting customer specifications, confirming that the system is operating as intended at scale. In parallel with the commercial ramp, our product development efforts are advancing. This includes new magnet grades and specifications with improved underlying chemistry, including materially reduced heavy rare earth content. This work is aligned with customer programs including Apple and the Department of War.

As our magnet recipe roadmap expands, we are positioning the platform to address a broad portion of the commercial market, including emerging applications such as robotics, drones, and defense, with meaningfully reduced—and in some cases no—heavy rare earth content. Back in Mountain Pass, we expect to begin recommissioning the first phase of our chlor-alkali capability in short order, representing an important resiliency and efficiency opportunity. While our primary reagents—hydrochloric acid and sodium hydroxide—are available domestically and are not directly impacted by recent global supply chain disruptions, chlor-alkali provides a compelling opportunity to further reduce dependencies, lower our environmental footprint, and reduce costs over time.

Our heavy rare earth separation circuit remains on schedule to begin commissioning in Q2 and to produce terbium and dysprosium later this year. In addition to those products, the circuit will generate two intermediate feed streams—mixed samarium/europium/gadolinium and holmium-to-lutetium plus yttrium concentrate—that we can either store for future separation or sell to third parties, supporting broader supply chain development. Under our agreement with the Department of War, we are committed to producing high-purity samarium oxide, and we continue to make steady progress on plans for that product alongside the potential for gadolinium oxide production and other attractive HRE product capabilities.

Separately, our magnet recycling line in Mountain Pass, developed in support of our Apple agreement, has completed conceptual design and is further advancing engineering and procurement. This line represents both an important strategic asset and a compelling business opportunity, closing the loop on our end-to-end capabilities and creating an incremental source of third-party feedstocks containing both light and heavy rare earths. In addition to breaking ground at 10x, our expansion efforts at Independence towards 3,000 metric tons of annual magnet capacity, also in support of our Apple agreement, continue to advance. Design is nearing completion, all major equipment is now on order, and we remain on track to achieve our targeted start-up production dates.

Overall, this was a very solid quarter of execution across the business. We delivered stable upstream performance, continued to advance our midstream operations, confirmed the viability of our commercial magnet processes, and made steady progress across a broad set of growth initiatives. As we move through the remainder of the year, our focus remains on disciplined execution, applying what we learn, and converting that progress into higher output, lower costs, and an increasingly integrated operation. With that, I will turn it back to James.

James Litinsky: As we have discussed today, 2026 is off to a strong start. As we look ahead, the strategy is clear: scale to capture demand, complete the integration of our platform, and execute with discipline. We are the national champion with a unique platform grounded in real assets, real production, and real customers. Moreover, as I have consistently said, I continue to believe that access to NdPr oxide will remain the binding constraint for economically viable rare earth magnet production outside of China for at least the next five years. During the quarter, we saw the Japanese government and industry secure nearly all of Lynas’ NdPr output under long-term arrangements.

As a result, there is very limited uncommitted NdPr supply available to support what Adamas Intelligence research projects to be more than 60,000 tons of existing and announced Western magnet capacity over the coming years. A useful rule of thumb in the industry is that every ton of magnet output requires approximately one ton of NdPr oxide feedstock. Put differently, bringing online a 10,000-ton magnet facility ultimately requires upstream mining and refining capacity on a scale comparable to Mountain Pass—an industrial capability that would likely require over five years and substantial capital to replicate, even assuming such a resource were identified today.

We believe this reality strongly validates our vertical integration and positions MP Materials Corp. exceptionally well as the market continues to evolve. Importantly, we are doing so with substantial contracted visibility across the platform, including our partnerships with GM, Apple, and the Department of War. These agreements provide durable, long-term growth and cash flow with meaningful upside as we continue to scale. We are confident in the path ahead and grateful to our team and partners for their continued support. We will now open the call for questions.

Operator: Thank you. At this time, if you would like to ask a question, please click on the raised hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please accept, unmute your audio, and ask your question. We will wait one moment to allow the queue to form. We will take our first question from George Gianarikas with Canaccord Genuity. Please unmute your line and ask your question.

George Gianarikas: Hi, everyone. Can you hear me?

James Litinsky: Yes. Hey, George.

George Gianarikas: Hey. Thank you for taking my questions. James, you just addressed this, and I am sure you have noticed, but there is now a lot of momentum outside of China to build magnet capacity. Beyond the 10,000-ton target, how would you characterize the knowledge or operational moat you have built through Stages One and Three? And specifically, if you are a greenfield competitor today, what are the primary set of barriers to catching up?

James Litinsky: Sure. Well, thanks, George. There is a lot out there. I think capital formation is generally helpful. We want to see more in this supply chain, so it is good to see a lot of projects out there. With respect to heavies, for example, it is great to see capital formation on that because from a heavy standpoint, we are focused on a diversified feedstock supply chain. We are not necessarily as interested in upstream project ownership, so we want to see a lot of capital formation out there.

We think that having our existing refinery is really a significant advantage, at least for the foreseeable future—five-plus years—because any of the projects that we see around the world, if it is a non-China supply chain, is ultimately very likely to come into our refinery. We do not necessarily need to be involved in those projects to grow our business, but we can certainly benefit from them. These projects are really hard—having done this for a decade now, there is a tendency to look at projects and say p times q equals this, and that is the cash flow.

The reality is these typically take a long time to bring online, are often more expensive than you think, and take several years to ramp. You do not just build a facility and turn it on. Often, when you look at the potential of a deposit versus the reality once you get through the processing challenges upstream to get recoveries, what you find is the theoretical opportunity is not necessarily what the resulting opportunity is. We take a careful view about where we will commit capital. You may have heard me say this before, but there is that famous Bezos expression, “Your margin is my opportunity.” We view it as, “Your investment is our opportunity”—the Litinsky corollary for MP.

We want to see a lot out there, but we are a little skeptical that people will be able to bring projects online as quickly or get the pricing they think, and when the fantasy story becomes reality, it is different. It is good for the supply chain. It is great to see governments excited and capital formation. Ultimately, it is beneficial to us because we control our fate here. We continue to execute. Our cash flows are contracted with GM, Apple, the Department of War, and the growth of our business through 10x, having that business contracted and being financially protected. I also reiterate that NdPr oxide is the binding constraint.

I would recommend people look at the Adamas Intelligence research. Over the next 18 months to two years, we see roughly 60,000 tons of magnet capacity in the non-China world growing to something north of 100,000 tons. The only real scaled material out there is MP and Lynas, and Lynas is spoken for with Japan. We will be able to feed our magnet facility. I see all of these magnet businesses out there, and I am just wondering where the feedstock is going to come from. It positions us really well. We do not want to discourage investment in the space, but it is going to set up some amazing opportunities for us.

George Gianarikas: And just one quick follow-up. How are you adjusting, if at all, your metallization strategy as you ramp production in magnets? Thank you.

James Litinsky: Oh, sure. Michael, do you want to cover metallization?

Michael Stuart Rosenthal: Sure. Thanks, George. Our view is to have a hybrid approach where we continue to operate and expand our capability at Independence. We will have capability at 10x, and we are talking to domestic and international partners on further metallization. We currently utilize certain toll processors, and we expect to continue to use that while we look at other low-cost metallization options around the world.

Operator: Our next question comes from Brian Lee with Goldman Sachs. Please go ahead and ask your question.

Brian Lee: Hey, guys. How is it going? Thanks for taking my questions. I guess first question I had was around the materials segment EBITDA margins. They were pretty healthy here, maybe ahead of expectations. Would you say that is fair? And is that related to better price, or are you seeing anything on the cost side as well? Maybe walk us through some of the puts and takes, and then how to think about EBITDA margins off these levels going forward as volumes ramp?

Ryan S. Corbett: Hey, Brian. Thanks for the question. As we look at performance in the materials segment, we were pleased with Michael and his team’s ability to continue to ramp production ahead of expectations. We also had a very successful sales quarter. As we have talked about in the past, there are always quarterly puts and takes on shipment timing as it relates to sales recognized in that three-month period, but with the exciting new partner we announced last quarter, we were able to start deliveries into that contract, driving incremental strength in sales volumes. We continue to see a clear path to pulling costs out of that business as we get to run-rate volumes and stably operate at run-rate volumes.

We have work to do, but the path is quite clear. I do not think there is anything in this quarter that caught us materially by surprise. We are heads down in execution mode continuing to move towards our ultimate targeted throughput and targeted cost structure.

Brian Lee: Okay. Great. Appreciate that. And then maybe bigger picture—on the customer development side, I know last quarter you announced a new customer. I know it is not reasonable to assume a new customer every quarter, but can you speak to where the engagement activity levels are and how you are looking to secure more offtakes, and maybe what types of customers you are most engaged with here?

James Litinsky: Sure, Brian. Engagement is very high and remains extraordinary. We are having a lot of great conversations. What we see around the world with the change in warfare points to an increasing recognition that the world has changed. Given all of the excitement we see in physical AI and what that means, already NdPr is a binding constraint in the magnetics business, and as we see that growth, people—particularly in some of these growth verticals—are recognizing that as well. It positions us really well. Our business is contracted. Independence is going to be essentially for GM and Apple. When we look at 10x, we will take our time to thoughtfully build out the customer base.

It is not for lack of interest or demand. We will approach that methodically. Some customers are extraordinarily sensitive and will not want to be named, and others will. The discussion continues, and it is going to be attractive for us. Stay tuned for things we announce in time.

Operator: Our next question comes from Corinne Blanchard with Deutsche Bank Research. Please go ahead with your question.

Corinne Blanchard: Hey. Good afternoon, guys. Thank you for taking my question. Can you talk about the cadence of production you are expecting for the rest of the year? And then a second question—your general view on the Middle East conflict: any change in customer approach or demand?

James Litinsky: Michael, why do you not take the first part, and then I will do the second part?

Michael Stuart Rosenthal: As I mentioned in my prepared remarks, we expect production of NdPr in the second quarter to be down slightly quarter-over-quarter. We expect the third quarter to show a material improvement, and then continued progress towards reaching our 500-ton-per-month run rate by the end of this year. No real change to what we previously discussed.

James Litinsky: On the Middle East, expanding on the theme we have observed over the past few years with Ukraine and developments around physical AI—the use of drone and robotic warfare—the events in the Middle East have accelerated and magnified the perspective around drones and robotics being the future of warfare. The importance of this supply chain was already widely known, but it is further recognition and may be pulling the timetable and the scale of demand forward. It is very likely the future of warfare will involve millions, eventually billions, of robots and drones working in cohesion, which is a huge demand accelerant for rare earth magnetics.

Operator: As a reminder, if you would like to ask a question, please click on the raise hand button, which can be found on the black bar at the bottom of your screen. We will take our next question from Lawson Winder with Bank of America Securities. Lawson, please go ahead with your question.

Lawson Winder: Thank you very much, operator. Good evening, gentlemen. Nice quarter. Great update. With Independence, the ramp up appears to be going extremely well. At this point, I expect you to be somewhat close to knowing a sensible timeline to reaching nameplate capacity of 1,000 tons on the first phase. Is that something you could start to guide us to now? And then I have a follow-up.

Ryan S. Corbett: Hey, Lawson. We are incredibly pleased with the performance of the team. There is plenty ahead of us, though. All of the commercial equipment is commissioned, and we are in the product qualification process with our foundational customer, GM. As we have noted before, PPAP is rigorous and not just about making the part. It is about a detailed quality management plan, testing run-rate scenarios, and taking validation parts made on commercial equipment, putting those parts into motors, doing regulatory testing, and so on. There are a lot of puts and takes over the next couple of quarters. Deliveries will be modest and then grow over time.

We have guided that we expect to be in production for our second marquee customer there towards the middle of next year for Apple. As you layer those volumes on, momentum builds. We are pleased with our progress.

Lawson Winder: Follow-up on that—thinking about 10x and the second part of Independence with Apple. How would you frame the timing of the next phase and then 10x, given the first-of-kind learnings you have had at Independence?

Ryan S. Corbett: We have learned a lot of lessons building this business from scratch. Our first magnetics employee was in 2021. The progress has been amazing, and there is a tremendous set of learnings as we move through the process that build our operational moat. Each incremental customer is hopefully easier than the one before. We have given rough guidance on 10x timing. We are moving with extreme urgency to bring that facility online in line with our partners at the Department of War. It is all hands on deck from an execution perspective, getting those ramped up as quickly as we can.

Operator: Our next question comes from William Chapman Peterson with JPMorgan. Please unmute your line and ask your question.

William Chapman Peterson: Hi. Good afternoon. Thanks for taking the question, and nice job on the quarterly execution. I want to ask a few follow-ups, but with some more precision. On the cost side, a year ago, you had a cost bridge outlining a target to drive cost from over $60 per kilogram down to $40 on higher utilization, fixed cost absorption, as well as benefits from the chlor-alkali. You discussed chlor-alkali earlier, but as a snapshot, where are you on that journey, notwithstanding the second-quarter impact from downtime, and your path to get to that prior target?

Ryan S. Corbett: Sure, Bill. With all of the inputs we put into that guidance, we do not see any meaningful deviation from our ultimate plan. Taking a snapshot in time—making roughly 1,000 tons last quarter—there are different ways to make 1,000 tons; some are lower cost, some are higher cost. As we move towards stably producing at our run-rate target, that will unlock the operating leverage we have discussed. Within any single quarter, there are moving pieces: we are investing in debottlenecking, and one current impact that obscures standalone NdPr costs is that we are investing ahead of revenue—ramping staffing for the heavy rare separation facility and ramping team and tools for the chlor-alkali plant ahead of it being online.

Over the next several quarters, as we reach targeted throughput and bring these operations online, you will see the leverage flow through.

William Chapman Peterson: Thanks. And then clarifying magnetics revenue trajectory for the balance of the year and into next year—considering declining precursor sales ahead of the finished magnet ramp for your customers—should we assume overall revenues in the magnet segment decline at some point in the back half or early next year before ramping as finished magnets ramp?

Ryan S. Corbett: Getting through the PPAP process unlocks moving into revenue on the magnet side. We are producing behind the scenes; we need saleable PPAP status to start recognizing revenue. The remaining deferred revenue on precursor products will roll off and start to decline sequentially. We are working as quickly as we can to pick up the delta on magnets, and we will keep you updated as we get through the next couple of quarters. Zooming out, there will be lumpiness in the next several quarters. The magnetic characteristics of our parts are performing extremely well; we have proven we can scale what we did at smaller scale.

It is a matter of time to layer increasing volumes once through PPAP and then bring in our next set of customers. Over the next several quarters, the financial model will start to play out.

Operator: Our next question comes from Analyst with Baird. Please go ahead with your question.

Analyst: Hey. Good evening, guys. Thank you for the time. I appreciate you taking my questions. I wanted to start by going back to one of the parts of Lawson’s question on 10x. Could you expand on how learnings from Independence might make 10x more efficient on a dollars-per-capacity basis or timeline, or any other metrics on how version 2.0 might be better than the first?

James Litinsky: Michael, why do you not go ahead and take that one?

Michael Stuart Rosenthal: Certainly. We have learned a huge amount over the last couple of years in designing, building, and then ramping new facilities. There is a lot of engineering that can be, to some extent, copy-and-paste. We do not need to reestablish certain vendor relationships. We have leveraged existing knowledge, so the design process will be a lot faster and less prone to mistakes, change orders, and rework. The pace of engineering, design, and construction will be a lot faster. The ramp of Independence starting last year and through this year and beyond gives us tremendous insight into producing great magnets and driving cost down, and that will be applied from day one into 10x operations.

The fact that our teams can travel between the two sites enables us to leverage knowledge without having to rebuild it all. We expect 10x to be significantly smoother in start-up than Independence. Of course, at larger scale and with additional product complexity, there will be challenges as well.

James Litinsky: Adding one point Michael hit that is really important—about equipment vendors and how we think about our magnet business. When we started the magnet business about five years ago, we focused on a non-China equipment sourcing strategy. Even when the world was in a different state, it would be odd to argue for a non-China supply chain for rare earth magnetics but be reliant on Chinese equipment. We built that facility from day one with restoring the supply chain all the way through the equipment. The last piece is mapping and understanding the IP landscape, specifically around grain boundary diffusion. Chinese and Japanese industry are very effective at advancing IP and making the best magnets for the buck.

We were focused on that from the beginning. We have taken the MP team to the cutting edge and believe over the next few years we will leap ahead from an IP standpoint. One goal I have set for the team with 10x is that by the time that facility comes online, MP will leap ahead to be the best magnet maker in the world from an IP standpoint. We are already thinking about everything needed to leap ahead technologically; it is not just about building a giant box and putting equipment in it.

Analyst: Thank you both. One more housekeeping question, probably for you, Ryan. Could you talk about contract adjusters or any other inflation protection mechanisms you have to mitigate the impact of increased shipping and logistics costs, or whether this will manifest in a longer-than-typical sales lag, or any other considerations?

Ryan S. Corbett: As it relates to the materials segment, shipping and logistics costs of fulfillment are extremely minimal relative to the cost of the product, so even with inflation in logistics, we do not expect that to be a material driver. On cost structure, we have heard other producers relying on sulfuric talk about challenges there. We are fortunate those are not the materials we use. We are not immune from general inflation—gasoline and diesel are used in our mining fleet—but that is a very small proportion of the cost structure. Overall we feel pretty good. Magnetics is different in contracting approach; without getting into details, we have been thoughtful about protecting ourselves from raw material price increases, wherever they come from.

We feel good about how we have contracted around that.

Operator: We will take the next question from Analyst with Wedbush Securities. Please unmute your line and ask your question.

Analyst: Hi. Can you guys hear me okay?

James Litinsky: Yes. Hey, there.

Analyst: James, with your framing of NdPr oxide as the binding constraint for non-China magnet production over the next five-plus years—it is compelling with 60,000 tons announced scaling towards 100,000 and limited feedstock, with Independence essentially spoken for between GM and Apple, and 10x building out—how are you thinking about the right balance between locking in additional long-dated offtake agreements and also preserving optionality to capture pricing and margin as the supply-demand balance tightens?

James Litinsky: It is 60,000 over roughly the next 18 months, which implies approximately 30,000 tons of NdPr demand. Already it is blindingly obvious that NdPr is the binding constraint over the next year or two, and that number of 60 is supposed to go to over 100 over the next five years. All of those will not get built, but if you are building a magnet business today without certain, dedicated feedstock at scale that is demonstrable, I do not see how you can produce a magnet. To your question, from the foundation of the company we have viewed the midstream and downstream as distinct businesses even as vertical integration is critical.

We want to maximize returns and not rob Peter to pay Paul. We do not want to subsidize magnets by taking bad pricing in the midstream. For the most part, the magnet business should get material at the equivalent of market, with some puts and takes on contract structure, and then expect attractive returns from there. We will benefit from exposure to NdPr price, which I expect to go up. I do not think so much for heavies; versus market expectations, I would not be surprised to see dysprosium/terbium prices decline quite substantially from here because they are secondary now to the binding constraint of NdPr. Because we have the feedstock, customers will want to come to us.

If you want to buy a magnet, why risk an unstable supply chain? We can sit in front of customers and, because we have the feedstock, contract long-term attractive business at incremental attractive margins in the magnet business, on top of benefiting from the commodity price.

Analyst: Great. To follow up, you framed physical AI—drones, robotics, autonomous defense systems—as a step-change demand accelerant. As you talk to customers across these emerging verticals, how are you sizing incremental NdPr demand from physical AI relative to established EV and traditional defense channels, and how does that reshape 10x capital allocation and the pace of expansion?

James Litinsky: Great question. It ties into why I think Dy/Tb prices may decline materially. In physical AI, our expectation is the vast majority of robotics and some drones will use neo heavy-free magnets. We are pushing the boundaries today—our ability to produce magnets at required specs with very little or no heavies is advancing rapidly. It is central to how we will build out 10x. The physical AI boom is critical from both national security and economic opportunity perspectives. We have seen in other AI supply chains where an advance happens and then you see cascading effects—things go parabolic when there is a technology breakthrough and you need more of X and do not have it.

I think at some point, as humanoid robotics becomes reality, rare earth magnetics—along with chips and manufacturing capability—will be recognized as the key item. We want to position the business for that vertical when that day comes.

Operator: Our last question comes from Carlos De Alba with Morgan Stanley. Please go ahead and ask your question.

Carlos De Alba: Thank you very much. Can you hear me?

James Litinsky: Yes. Hey, Carlos.

Carlos De Alba: Great. Given the discrepancy between supply and demand you alluded to and a very strong outlook for NdPr, have you assessed what the incentive price would be for NdPr capacity or supply to possibly respond to the demand we see ahead?

James Litinsky: It is a great question. Once you have identified an orebody and worked through the challenges of what you can really get out of it, and you have figured out the refining piece—whether you are selling to a refiner or building a mine and refinery—there is a big time component. Building a big refinery takes a lot of capital, and then ramping takes time; you do not just hit a button. Linus took over a decade. We did it much faster, but any of these take time. The industry often multiplies a reserve basket by a price and thinks you can build it for X and NAV is Y.

The reality is you will not get the full basket, recoveries are not perfect, it takes years longer, and the cost of capital changes. These things are harder and more difficult to get online. The “your investment is our opportunity” corollary applies—we have benefited from investment that we have come in and fixed, and I think we will see more opportunities. To directly answer, the incentive price is materially higher than people think when you add up geology, mining and refining, and time to get online. Capital is the easy part if you have an attractive project; geology and process define it. It is certainly materially higher than today’s prices.

Carlos De Alba: That makes sense. Maybe one more—cash from operations surprised a bit to the downside. How should we think about the coming quarters so we fine-tune our model closer to reality?

Ryan S. Corbett: In general, Q1 tends to be our weakest working capital cash flow quarter. There are a lot of prepayments for certain things that occur in the first quarter—employee compensation and similar items—that are a drag in Q1 and are not repeated throughout the rest of the year. Other than that, it is puts and takes and timing. There are significant sales we are starting to collect on as we speak. It is a timing issue in working capital.

Operator: This concludes the question and answer portion of today’s call. I will now hand the call back to management for closing remarks.

James Litinsky: Thank you, everyone. It was an outstanding quarter of execution. We are going to get back to work and look forward to seeing you next quarter.