Lynas Rare Earths Limited (LYC) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Kathleen Conlon, Chairman of Lynas Rare Earths' Board. I'm pleased to welcome you to this Annual General Meeting of the company. I'd like to begin by acknowledging the traditional owners of the land on which we meet today, the Gadigal of the Eora Nation and the traditional owners of the land in which we work and live in the Eastern Goldfields of Western Australia, the Wangkatha. We pay our respects to elders past, present and emerging. This year, for the second time, COVID-19 travel restrictions have meant that some of our directors and shareholders are unable to attend today's meeting in person and instead are joining this meeting online. I'd like to extend a warm welcome to the directors and shareholders joining us online today as well as those here in the room, and we are very pleased to be able to have some people in the room today. Ladies and gentlemen, today's AGM is being filmed and it has been live streamed via the Internet. Details are available on the Lynas website. When we come to the Q&A section of the AGM, we will take written and audio questions from shareholders joining online as well as questions from shareholders in the room today. Online attendees can submit questions via the Lumi platform at any time. Voting today will be conducted by way of a poll on all items of business. Online voting will shortly open for all resolutions. At that time, if you are eligible to vote at this meeting, a new voting tab will appear. Selecting this tab will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. You do not need to hit a submit or enter button as the vote is automatically recorded. However, you have the ability to change your vote up until the time I declare voting is closed. I now declare voting open on all items of business. The voting tab will soon appear, and I will provide notice before I move to close voting at the end of the meeting. For information on how to submit a question or vote, please refer to the Lumi platform user guide on our website or in the documents tab of the Lumi webcast platform. I would now like to introduce my fellow directors. Joining me in the room today are our Chief Executive Officer and Managing Director, Amanda Lacaze; and non-Executive Director, Philippe Etienne; non-Executive Directors, John Humphrey, Grant Murdoch and Vanessa Guthrie are participating online. Also participating online are Sarah Leonard, our General Counsel and Company Secretary; and our audit firm, Ernst & Young, represented by Gavin Buckingham, a partner. I understand that all shareholders present have registered with our share registry boardroom before the meeting. The notice of meeting was dispatched to shareholders on the 12th of October 2021, and accordingly, this meeting is deemed to have been properly convened. We have a quorum of more than 2 shareholders, and accordingly, this meeting is able to transact the formal business as set out to the notice of meeting. Before we proceed with the formal business of the meeting, I will deliver a short address after which Amanda Lacaze, our CEO and Managing Director, will deliver a presentation. We will then table the FY '21 financial statements. At that point, we will pause for any questions on Amanda's presentation and the financial statements. After questions, we will continue with the formal business of the meeting. There will be an opportunity for shareholders to ask questions on specific resolutions after each resolution has been presented. As your Chairman, I'm very pleased with the outcome of the 2021 financial year, which delivered strong results for our shareholders. Operational improvements, which were implemented in prior years, together with the continued focus on cost control, meant that we were well positioned to capture the benefits of the strength in market demand and market pricing. This resulted in a record annual net profit and increased sales revenue for the year. The safety of our team members is always paramount, and health and hygiene protocols were reinforced and strengthened at both operating sites during the year. The second half of the year was particularly challenging for our Malaysian team as the country dealt with its third wave of COVID-19. And I'd like to take this opportunity to acknowledge our Lynas Malaysian team members who put in an extraordinary effort to ensure our operations could continue in very difficult conditions. Following the end of the financial year, Lynas participated in the Malaysian government's public-private COVID-19 immunization program, and 99.9% of our Malaysian employees are now vaccinated. Pleasingly, case numbers across the country have fallen as vaccination rates have increased. Globally, the demand for electrical vehicles and wind energy accelerated during this year, and strong demand for high-performance magnets led to increased demand for Lynas' NdPr product family and mixed Heavy Rare Earths. The Lynas 2025 growth vision represents Lynas' plan to grow with the market and meet this accelerating market demand for Rare Earths. In September 2020, Lynas completed a $425 million equity raise to fund the Lynas 2025 foundation projects, which are the Kalgoorlie Rare Earths Processing Facility and the associated upgrades at Lynas Malaysia. Work on the new Rare Earths Processing Facility in Kalgoorlie progressed well during -- throughout the year, and Amanda will provide an update on this in the CEO presentation. In addition, in July 2021, Lynas was awarded a $14.8 million grant as part of Australian government's Modern Manufacturing Initiative. This grant will be used to commercialize an industry-first Rare Earth carbonate refining process that was developed by Lynas' own R&D team and will be installed in construction of the Kalgoorlie facility. We continue to see heightened customer and government interest in securing reliable and diversified Rare Earths supply for growing industries. As the only significant producer of separated Rare Earth outside of China, Lynas is ideally placed to play a role in sustainably addressing these supply chain challenges. We all -- Lynas always aims to have a positive impact on our people, our communities and the environment, and we strive to improve our performance today and set ourselves more challenging targets in the long term and provide -- also to provide to shareholders -- stakeholders, including shareholders, customers and communities the information they need to assess our environmental, social and governance, ESG performance. This year, we reviewed our sustainability reporting and released an enhanced ESG report that focuses on the key performance metrics that matter most. We adopted the common metrics identified by the World Economic Forum to make it easier to compare our performance with that of industry leaders around the world. Lynas recognizes the challenges of climate change and the role we play in the energy transition by supplying Rare Earths materials to manufacturing of green technologies like wind turbines and electric vehicles. In September this year, Lynas confirmed its commitment to science-based targets, and we look forward to sharing our science-based targets with you once they've been verified by the global body. In closing, on behalf of the Board, we'd like to thank our teams here in Australia and Malaysia, and thank you, our shareholders, for your continued support of Lynas. While the challenges of the pandemic are likely to remain in the short term, we are focused on delivering our Lynas 2025 growth vision to build value for shareholders and ensure that Lynas is well positioned to capitalize on the growing and strategic markets in which we operate. I'd now like to invite Amanda to address the meeting.

Hello, everybody. It's so nice to see so many familiar faces in the room, especially you Tim. Because Tim's not very well this year. So I'm really pleased to see him. And this is my eighth, I counted it up, AGM. And I think maybe despite the fact that we don't have so many people here, my best ever. Because what a year. I mean really, despite so many external challenges, it was our best ever year. And I know many of you stay well abreast of what's going on in the Rare Earths market. I'll talk a little bit more about that. Suffice to say that the market settings are overwhelmingly positive. Strong demand is leading to sustained improved pricing. I know that many of you will recall, 2016 maybe not as acutely as Pol and I do when we were selling NdPr at $29 a kilo in August of 2016. We can remember the date even. So it's a delight these days to be looking at much improved pricing. And seeing that it's not just a result of speculation. For many of you who have been shareholders in this company for a decade or more, the 2011 bubble was a lot about speculation. Today's pricing really is built on the back of sustained increased demand, which we see as very positive for our business. The market is -- you will have seen many as people or firms that aspire to enter the market. To them, I wish best of luck. I think we all know here that Rare Earths are not for the faint hearted. But the market is so strong that there is room for many winners, but some will win more than others. And you will not be surprised to hear that it is our intention that we, at Lynas, plan to be the ones who win more than others. And we can do this because we are already match fit. Our task is to enhance our current position to accelerate our growth plans and to continue to deliver on our promises to our people, our customers, our communities and to you, our shareholders. We are match fit because our assets are in place and already delivering. We have what is recognized as the premier deposit in the world at Mt Weld. It's a true Tier 1 resource, and we are continuing with our exploration program. We had the world's largest single Rare Earths processing facility in Malaysia, and we know how to optimize our asset utilization. We have a plan for growth, and we are funded with proven execution capability. So just as a reminder, FY '21 was good for us despite a lot of curveballs, mostly delivered by the ongoing pandemic. Record profit, increased sales revenue and strong cost control, which may be the thing of which I am most proud because mining companies have a bit of a reputation. When times are good, add to the cost line, and then when times are bad, take everyone and cut costs. I would like us to take a more sustained and sensible approach to our cost structure. Record profit and revenue, and we finished the year with cash and cash equivalents of $680 million, which once again is also much better than those days when I wake up at 3:00 in the morning and think "Oh gosh, can we put coffee in the staff room this week." So this is also the first year that I got my very own troll on social media. So I'm quite proud of this. And so amongst the various insults was the fact that I was a mad dog feminist with a handbag husband. And I'm not quite sure on what basis say that this was an insult. Anyway, my handbag apologizes for not being here this morning. He has a dental appointment. But I would like to take this opportunity to recognize all the spouses and families for the people who work in Lynas. They do have dealt with a lot particularly over the last year and particularly in Malaysia, where we've had our people have been tested for COVID every 3 or 4 days, where at times, we've had them isolated. And we certainly have done everything we can to provide care packages and those sorts of things. But it's not only been our people, but it's been their families as well. So for all the handbags, I say thank you as well, and I recognize them. I wonder if my trial will come up with something else like, "She really likes to win nice clothes." That could be another insult, I don't know. So just looking at some of the operational highlights, we're still not operating at Lynas NEXT rate despite our best efforts to manage all of the various complexities that have come with the pandemic. Logistics still remains the single largest issue for us. We've been taking concentrate from Mt Weld to Malaysia for 8 years. We know how long it takes. Well, we thought we did until we had a pandemic. Today, the amount of time that we spend just getting access to containers. In fact, we've decided we're -- and we have actually bought some of our own but getting access to containers, getting it onto a ship, getting it through Singapore, we got up to really good cover in front and then it's just sort of gone straight back down again. Finding -- we've been able to manage the situation with reagents by putting more inventory on the ground in Malaysia. But these are continuing challenges in our business which means that we still have not been able to dial up the plant to the level that we would like to do so. But every day, the team in Malaysia is focused on doing this. And the latest that we're going to do is that we have charted a ship so that we're not going to have to deal with that transshipment task in Singapore, which is the most difficult one that we have. So we need to grow our throughput up to sort of our Lynas NEXT rates because that's what our customers need from us. So customers definitely want to secure supply, but they also want to understand the provenance of their raw materials. And at Lynas, we are committed in our very DNA to supplying ethical and responsibly produced Rare Earths. We offer certificates of origin. We report publicly on our environmental, social and governance performance metrics in our annual ESG report. I hope you all took a copy of it, and we honor our commitment to the UN Global Compact. We're always assessing where we can embrace new technologies to improve the way in which we use and process our precious resource. But of course, as Kathleen has already said, health and safety are always our first priority. And so we are very proud of our 0 COVID-19 workplace transmission during the year. Pleasingly, as I'm a mad dog feminist, our gender diversity increased. We now have, well, 50% females on the Board. 21% of our senior executives are women, and almost 20% of our employees are women. Diversity is about a lot more than just gender. We continue to build diverse workforces in terms of age, ethnicity. We have 10 different nationalities in the first 2 layers of our company, first management layers of our company. And that brings sort of richer discussions because we have so many different perspectives. But we are required to report on gender and we are pleased that we are making good progress in this area. We're very focused on reducing our greenhouse gas emissions. And in this year, we were once again assessed by EcoVadis as part of our participation in the Together for Sustainability initiative. And we were awarded a Gold Medal sustainability rating for the second time. Only 5% of the 75,000 companies, which are assessed by EcoVadis globally attained the gold level. So we're very proud of that. Most people would know the governments around the world have intensified their efforts in relation to securing Rare Earths supply for industry. A whole variety of reasons for doing this, not just the strong consumer demand, but the pandemic has demonstrated that it's not just geopolitics, it disrupts supply chains. The pandemic has also caused many Western governments who gleefully outsourced manufacturing to East Asia 20 years ago to reassess whether that really is economically the best and most sensible thing to do. So the result is that there is a significant focus now on how to really underpin modern manufacturing in western economies. And I think that this is a wonderfully interesting analysis here, which basically shows the dominance of the raw material in China. And then you move gradually through until you get to, say, wind turbines where in the West, we're seeking to be producing those. But of course, as we've seen with things like the lighting market, the Chinese have been very good at moving down that value chain and in-sourcing the production of the finished goods. And so I think this is certainly in our discussions with various governments is they're recognizing that they need the economic firepower, particularly coming out of the pandemic, the strong manufacturing industries and that means that they need supply chains outside of China. And of course, Lynas go back to we're going to win more than others. We're ideally positioned as the only scale producer of separated Rare Earths outside of China. This level of interest has been reflected by the number of visitors that we have had to our mine site and to our Kalgoorlie site this year, notwithstanding some of the difficulties with the Western Australian border. So as we look at this, some photos, just to give you an idea, the Kalgoorlie project site with the Western Australian Deputy Premier, Roger Cook, and the local member, Ali Kent. We've also got Madeleine King, who is the Shadow Resources Minister, who's a Western Australian, came to visit the site. And probably the most -- one of the most exciting ones was co-hosting with the Governor of Western Australia, the Honorable Kim Beazley, a delegation of the European Union representatives in Australia to Mt Weld to truly understand what was going on. It was so funny because they all said, "Oh, that's such a big mine." and we're like, "Not, in mining terms, this is really just a little baby." So it's been terrific to have the opportunity to show off our operations. And of course, as part of our Lynas 2025 growth vision, we're expanding our industrial footprint. We've got the new Lynas Rare Earths processing facility in Kalgoorlie. I was fortunate enough to be there 2 weeks ago. And -- but by 2025, we will have grown from our current two-side operation to at least 4 sites likely on at least 3 continents. But -- excuse me. I don't have COVID. It is worth noting that we will remain anchored in Western Australia because what has become even more apparent as we've moved through this rapid growth phase, is our value comes from under the ground at Mt Weld. So as I said, I was in Kalgoorlie just a couple of months ago -- a couple of weeks ago, to present at actually a regional SEGRA conference. But I have to tell you it is very exciting. It's just like really cool to be building this facility. We have a dedicated project team who are very excited to have the opportunity to build a better factory basically. So these are people who have worked in our Malaysian facility, and this is an opportunity to upgrade and improve the design and the capability of the facility. They are working within the $500 million capital envelope. I note that analysts like to keep saying to me, there's no way you're going to be able to do that for that number and some on Monday came up with a different number, and I sort of laughed. And I said, "I'm not sure what you know about our business that I don't. But I wake up every morning thinking about it." At this stage, and we always know that, particularly after the last 2 years, you can have disruptions, but we certainly still expect to bring the project in on time and on budget. Progress this year includes getting the proposal recommended for approval by the WA EPA. Our preliminary site works are well advanced. The kiln shell sections have been fabricated and have arrived in Australia. The steel tanks that are fabricated in Western Australia have been delivered to site. We've placed 100% of our long lead time orders, and 77% of total equipment orders have been placed. That sounds sort of simple, but that means all the engineering on those elements has had to be complete. So it's not just we'll have a look at a supplier and will place an order for something which is in stock. These are all things which have to be fully engineered and fully specified. So a huge amount of work to get to that level. Our first Kalgoorlie-based employees have been hired. We signed a Water Agreement with the City of Kalgoorlie Boulder. And I have to tell you that the Kalgoorlie-Boulder City Council is a perfect example of why we actually selected Kalgoorlie as the location for this facility. Their support and facilitation of the development of this plant has just been amazing. And I had the opportunity to spend some time with the CEO and the [indiscernible] when I was there 2 weeks ago. And I couldn't ask for a better and more supportive group. And as well as that, along the way, we picked up this $14.8 million Australian government grant to commercialize a new process that our technical team has come up with. But here we go. Oh, who is that woman? Anyway, that is actually at the -- at site 2 weeks ago. So with our site manager George, and -- so as I said, it's -- we're pretty excited to have the opportunity to build a better factory, take what we know about our processes, simplify, reduce scope where we can and carefully manage in a way that allows us to be able to utilize local suppliers and engage with the local community. So here's the kiln being unloaded from the ship. It's pretty big. Actually, it's really big. That's one of the other ones where analysts that have said to us very early on how on earth are you going to build a kiln in Spain in the middle of a pandemic and get it to Western Australia. Well, here it is. And it had to pick up a variety of other things. It's got kiln tires and rollers and all sorts of things. We'll be lifting it into place, we expect in a couple of weeks' time, and it will be quite exciting. Of course, this is the -- we didn't capture this because Jen and I didn't know whether it's a Sunrise or sunset, and we felt that there might be someone in the audience who knew which way we were facing. So we'd probably best not actually expose ourselves on that basis. However, that just gives you a sense of this is the early works where we've had approval to clear 20 hectares and do work, which can be remediated if ultimately, the project was not approved. But it gives you a sense of where we're at on the site. But I do want to say a little bit about, as I said, one of the reasons why we chose Kalgoorlie, and we had 5 different sites that we were looking at, is that part of our experience, notwithstanding some of the stuff that comes out of the activists in Malaysia is that when we have the support of our local community and when we are part of the fabric of our local community, it is good for the community, and it is good for us. And Kalgoorlie-Boulder offers us a skilled residential workforce in a very livable community. And so as we think about our commitment to that community, our commitment is that we will employ locally. We recognize the importance of that local employment for our communities, and we value and embrace diversity in our workforce. We will -- our people are actively engaged with our local communities, and we provide further opportunities for the community to be engaged with Lynas activities. We have a very clear strategy on this, which is health and wellness, education and employment and then really just charitable giving to vulnerable community members. And particularly in Kalgoorlie, participation from our indigenous groups as well. We acknowledge and respect the traditional custodians of the land on which we operate, and we're committed to developing long-term beneficial and reciprocal partnerships. We really want to increase the economic and educational outcomes for our indigenous partners because this is what leads to sustained improvements. Once again, when I was in Kalgoorlie a couple of weeks ago, I was just absolutely blown away by the quality of some of the local businesses and our ability to be able to engage with them to be service providers to our new business. At Lynas, we definitely preference local than regional and Western Australian businesses and suppliers. We have a formal policy, which incorporates a premium allowance for locals in our procurement practice up to a certain value. I mean clearly, on a $40 million contract, we're not going to pay a big premium, but there are many others where we can afford to pay a premium to use locals. We maintain a procurement portal for local businesses to register their interest. And where possible, we split tender packages or construct them in a way that encourages local suppliers to participate. Sometimes small and medium enterprises can take a lot of risk onto their balance sheet. And so if we can actually look at the way that we construct those packages, it gives them an opportunity to participate. This is good for us because it means that we are not in a big cube of mining companies in Western Australia are all sort of chasing the same limited resource. We're working with local suppliers who also tend, and many of you will have read sort of the media reports on tightening labor markets, we're not fishing in the same contractor pool as every other mining company. And so we're working closely with our local community to be able to do this. And I thought this was really an interesting slide to sort of demonstrate we've already let tens of millions of dollars of contracts into the Western Australian and Kalgoorlie community. In fact, we've spent tens of millions of dollars already. So our perimeter site fencing by Built by Geoff in Kalgoorlie; our site earthworks by Versatile Plant Hire; the large bolted tanks were awarded to Western Australian Pioneer Water Tanks; the rotary kiln installation contract, which requires it to be lifted in place and then welded as it's rotating to Western Australian-based Alltype Engineering; $20 million Concrete Civils construction to Jagcor; $7.5 million for the 48 steel tanks; water supply piping to Kalgoorlie-based Brilly Limited. Down the bottom, you can see a crane from QWEST, they're local guys mostly. Our site surveyor is a Western Australian based McGregor Surveys and the buildings all come from the local supplier as well. Gray water sewerage system awarded to Kalgoorlie small business, Emyjor Services. The MCC contract has gone to a South Australian firm. Aquasol for water treatment, WA-based and so it goes. So this is really about the value of this is to the local community as well as to the state. And we see that, that is a really strong foundation on which to build our business. We've been operating in the West Australian gold fields at our Mt Weld mine since 2011. As I said, the mine is a relatively small footprint, it's about 600 meters long, 300 meters wide and 60 meters deep. But as a single mine, we've been able to supply a significant proportion of annual global demand. But as we look to increase production, clearly, we need to continue to explore so that we can sustain -- that our target is always to sustain about a 25-year mine life. Now the geology is really interesting. It's a volcano core. I think many of you would know this, which is estimated to be about 1 billion years old. We just did this 1 kilometer drill hole in about the middle of this year. And I was talking to the driller. And as I think you all know, I'm not a miner by trade. So I still get a bit of a kick out of some of the terminology. So they did this drill in about 3 weeks where it was originally forecast to take about 2 months. And he said to me, "Because it was beautiful competent rock the whole way." And I love this sort of competent rock as opposed to incompetent rock. Anyway, so the exciting part for us, apart from seeing a bit of what the earth was like 1 billion years ago, is that all the way to a kilometer underground, we found visible rarest mineralization and the work on those assays is continuing as we speak. I can't predict what that might mean in terms of our resource and our reserve, but our focus is always to continue to grow our understanding of the ore body and to always be able to make a sensible choice on whether we invest more in our own ore body or whether we say, for example, lots of people say, you thought about buying another one. And we say, well, we've always got to actually do that. Is it better to buy another one? Or is it better to invest more in Mt Weld? At this stage, the answer has always come that it's better to invest more in Mt Weld. We continue to focus on finding new and better ways to run our processing, and with a very strong ESG view on this. So for example, water treatment is a challenge. It's quite interesting. We operate on one of the wettest continents in the world, and we operate on one of the driest continents in the world. And water is a challenge in both instances for different reasons. Our team has developed a new process, which we'll see reduced water use, reduced chemical inputs, 0 discharge and so therefore, over time, this certainly gives us environmental benefits as well as cost benefits. When we talk about the modern manufacturing grant here in Australia, this is about producing a higher purity Rare Earth carbonate once again, reducing chemical consumption and over time, therefore, giving us further cost benefits. We are looking at energy solutions, in particular, at Mt Weld. We're not on the grid for electricity. So therefore, today, we are still burning diesel for electricity. This clearly is not a sustainable solution, and the team is working very hard on creating a new solution in terms of power at Mt Weld and then we'll also be looking at Kalgoorlie. So just looking at the market demand. Certainly coming out of the pandemic, the -- we appear to have hit the inflection point in the market. We've revised our estimates to an average 10% annual growth rate from previously. It was about 7.5%. And of course, there will be a matching demand for dysprosium and terbium. And of course, all of this is off the back of consumer demand for things like electric vehicles, which car sales, electric car sales rose by 140% in Q1 2021. The autocat market growth is driven by global vehicle sales, which are forecast to grow between 8% and 10%. And what we're finding is the demand for catalysts from the automotive and the FCC sectors is back to pre-COVID levels. So just looking at this within some of the big markets. The Rare Earths market in China, and it's really important, this is the largest Rare Earths market in the world. We need to understand it. We need to when we choose to be able to participate in it. They are essential to China's plan for improving energy efficiency and heading towards carbon neutral before 2060. So in addition to EVs and wind energy, permanent magnet technology is now strongly promoted in China in the steel, cement and machinery markets because it provides 20% to 40% energy savings. China is expected to remain dominant in the magnet industry, consuming about 5,000 tonnes more NdPr each year. That's almost the equivalent of our plant in Malaysia every year. As the electric motor power increases, so does its temperature. And so therefore, for the high-performance magnets, you need more Dy and Tb as well. And so China is very alert to the fact that at present, about 50% of their Dy and Tb comes from imported ore from Myanmar whose border has been closed for most of the last year due to pandemic issues. So as we read China's decisions and strategy going forward, the August 2021 State Council decided to further restructure the Chinese Rare Earths, which is a strong sort of signal of the desire to really have this as a planned and profitable industry within their economy. The detailed restructuring plan includes consolidation from the current 6 to 2 players. And that is under review by a specific committee, and we expect it will be confirmed. And the primary objective on that is to reinforce China's purchasing power for imported ore and concentrate. Because as you will recall, I talked about there's a lot of firms who are aspiring to enter this market. Most of them still see concentrate and ore, mixed rare earth carbonate being sold into the Chinese market. And China wishes to continue to develop the downstream capability. This will allow them to maintain market power in the raw material. As the Dy and Tb prices remain high, we expect that -- and we're seeing this now, many of the magnet makers that don't have innovative technologies are losing market share. And so we expect to see that there will be a natural restructuring of the Chinese magnet industry, which will follow the restructuring of the primary resource development. In the Japanese market, we continue to develop to support the growth of the magnet market in Japan. We are quite proud of the fact that we are the #1 supplier to the Japanese market, and that's not just because the Japanese government is our senior secured lender, because it's not a single Japanese customer who would buy from us if we didn't meet the quality specifications. And we are continuing to contribute to the growth of the market. And demand is absolutely rock solid, and we are really once again seeing a very strong offtake and the forecast from our customers in Japan are for that to continue. So as we think about our ESG approach, we aim to be an employer of choice, a supplier of choice and investment of choice and, of course, a valued community member. And our approach to ESG reflects this. We hold ourselves to account by participating in external verification. It's very easy for us to look at it and say, "Aren't we good people?" It's a whole lot more meaningful if a third party looks at us and says, "Aren't we good people?" And so we run a number of external verification and auditing programs. Our sustainability credentials extend beyond our production value chain because we are a supplier of materials used in low-carbon supply chains. And so this year, some of the really exciting things that we've done, I guess, the most significant for me is the commitment to science-based targets. We are a technology company. We operate in a technology industry, using science-based targets rather than some sort of offsets to truly improve our environmental footprint really appeals to everyone in our company much more than sort of looking at offsets as a way to meet our environmental targets. And I just wanted to show a little bit of sort of biodiversity at Mt Weld, remembering that it's actually a desert. But we are already starting to work on how do we rehab this area, and this is a great example of the rehab trials that we're undertaking there. So really, talk a lot about communities, even with the pandemic. We've not actually reduced our community activity. We've looked at ways to increase it, particularly in Malaysia. In Malaysia, people don't work. The government can't just afford to pump money into the economy like it does here in Australia. So our support for our local communities to ensure that they can feed their families is even -- has been even more important during this period of time. And so we have been there, we've been there to lend a hand to ensure that people and our local communities can survive the pandemic. And finally, I just want to let everybody know many people here will have met Kam Leung, who's been our Vice President of Operations and most recently of our upstream operations. Kam has decided that it's time to retire because he's had 1 of those birthdays with a 0 in it. I think that it's a bit of a -- I think that he's doing this rather earlier than he needs to do this, and I've had that as a conversation with him. But nonetheless, he is quite determined that now is the right time. We wouldn't be here today having this conversation without Kam's commitment and contribution to the company. And so I send him off with our best wishes because he has been so important for us, but also with a great deal of sadness. I've got to know his family in the time that he's been there in the early days when I joined in 2014 and neither of his stead instead go anywhere right down to Christmas Day. Our families came and shared Christmas with us. So I'll be really sad to see Kam go, but with our thanks and our gratitude for really a huge contribution to our business. And the good thing is we have built a capable business with depth. And so we will be able to continue to operate and continue to improve. So as I said, remembering that our job is about enhancing, accelerating and delivering. And even without Kam, I am confident we can do that.

Thank you, Amanda. I will now move to questions. I will table the financial statements of the company for the year ending 30 June 2021, consisting of the annual financial report, the director's report and the auditor's report. The annual report was dispatched with notice of this meeting to those shareholders who requested a hard copy, and an electronic copy was sent by mail to shareholders with an e-mail address and made available on the ASX website and the company's website. We would now like to ask for questions on Amanda's presentation and the financial statements. A reminder that only shareholders, proxy holders and authorized representatives can ask questions. Proxy holders, please state your name and that you are a proxy holder. [Operator Instructions] So I now open the questions.

I'm Mark Tom Fawcett . I'm a shareholder through AustralianSuper Member Direct. And I was told I can ask questions but can't vote. With the perils relations between Taiwan and China and possible war in the South China Sea in mind, and the Malaysian plant is in a very disadvantaged position, have you been to see Mr. Dutton or the Shadow Brendan O’Connor? And by the way, it's rumored that Peter Dutton may be the next Prime Minister before May. So what I'm thinking is, if you go and see him and you put his money where his mouth is, you might get a lot more extra cash to shift the plant to Kalgoorlie. So the question is, have you been to see Dutton, Joshi and Brendan O’Connor and Penny Wong?

So are you happy for me?

Yes, I'm very happy for you. I think that question was clearly directed to you.

Okay. So first thing, the Malaysian facility, we feel is actually very well placed, and it has actually served us all very well over time. It is a low-cost jurisdiction. It's a Commonwealth country, so we're familiar with its political and legal frameworks, has an English-speaking workforce, and it is close to our customers. And we see that as having been a key part of our success as a company. Having said that, we want to grow, and that was the basis for our decision to go to Kalgoorlie. The Kalgoorlie site has been designed such that it can grow beyond its initial facility, which is primarily in the first instance, we have to get the cracking and leaching facility operating. But it has been designed with all of its utilities and infrastructure to be able to grow and do additional tasks as we move through. Have we spoken to all the various levels of government about sort of critical minerals and rare earth in particular? Yes, we have. Are we going to rely on politicians to make our business a success? No, we're not. Because our experience with governments everywhere is that they match to their own drama. Their timetable may not necessarily be the same as ours. And so therefore, if we are -- what we aim to do is to maintain a strong and positive relationship and where they're determined to throw money at the industry to make sure that we're in the front of the queue, right? So we do that, but we will never make ourselves dependent upon government for our growth and our success.

Stephen Underwood , common shareholder. I'd like to first thank you for having a live AGM rather than hiding behind virtual coverage. Three short questions. The annual report doesn't list CVs for the key management. I'm disappointed that, that was not there because I'd like to see from what businesses have come and what the culture is from those businesses and what they're importing into your culture.

Thank you. Would put it on notice.

Water supply. I'm surprised that you've put the processing plant in Kalgoorlie, is your primary water coming from Perth or from subterranean? And finally, your energy future production at the plant. Is that going to be solar or wind or a combination?

Okay. Amanda, I'll give you this.

Okay. Good feedback with respect to the CVs not being in the annual report, but they are actually on our website. So that will give you an opportunity to see that. The other thing to note is that we've got a very stable senior management team. I think that, that has served us very well during the pandemic, where we've been sort of distributed and unable to travel across borders. The stability of the team and our relationships with each other has been, I think, really a key part of our ability to continue to operate the company through the pandemic. With respect to water in Kalgoorlie, we have signed an agreement with the Kalgoorlie-Boulder City Council, who have a water treatment plant, which is powered by solar, a building -- a pipeline out to our facility. And so all of the water that we'll be using in our facility is gray water. So it's not actually coming up. It's not the beautiful water coming up from Perth. And in fact, we're not even relying on subterranean. At Mt Weld, of course, we continue to do water exploration as well as our resource exploration. And part of our process there will be to continue to develop. We have quite extensive water treatment, including reverse osmosis ultrafiltration units. So -- and a number of other ways to ensure that we're able to recycle as much of our water as we possibly can through the process because water is such a precious resource for us. In terms of our energy for the future, our first step at Mt Weld will be to move from diesel to gas, and that will give us a significant improvement in terms of our greenhouse gas emissions and reducing those. But over time, we will be looking and we already have done some of the surveys for sort of hybrid power stations, which will be a combination of solar and wind. And we expect to do something similar in Kalgoorlie, where we are engaging with the various different authorities on options for things like microgrids or otherwise, which may allow us to be able to deliver significant improvements in terms of the energy and the emissions associated with the energy for running our plants.

Bob Richardson, ClearView Retirement Proprietary Limited. Two questions, please. Firstly, I don't think the word America was mentioned in either of your addresses. It is -- seems to me, having passed the age of 80 that it's been a few years since we've been hearing about cooperative ventures in the United States for both light and heavy rare earths processing. So I'm just wondering if there's anything you can say about that this year. Secondly, my good friend, Mr. Hughes in New Zealand would love to have got here that wasn't sure that his Prime Minister would let him back into the country afterwards. So he would have liked to have asked a question about the appearance that we may have $900 million to $1 billion in cash by the end of this financial year. And he's wondering how that will be might be employed given that it's pretty clear now what the likely cost of Kalgoorlie are. And I wondered if there's anything you could say about that, please.

Thanks, Bob. Happy birthday. I don't think you were 80 last time I saw you. Anyway, the U.S., we continue to progress our activities in the U.S., but it is a classic example of governments run on their own time line. So we have done all of the work which is required under our Stage 1 contract in terms of engineering and design of the facility, particularly for the heavies. None of that is regretted investment because if the U.S. government continues to take a long time to resolve some of these matters, it is engineering and design, which can be used in alternate facilities. All of that was delivered on time. We're now in the U.S. government merit review process, which means that they won't really talk to us because that's sort of the property settings and all of those sorts of things. So I can't tell you when we would get an answer. We continue to progress our piece, which is to understand how we would construct the facility, which would integrate both the lights which we signed the contract on in January and the heavies and how we would do that in the best possible way. But I guess the reason why we didn't say much about it is because we haven't got much to say because we are awaiting feedback from the USG. With respect to how we might use -- I like Chris' forecast of $1 billion of cash. I'm not sure that, that's what our own cash forecast is right now because we have quite a lot of money that we're going to be spending this year, particularly with respect to Kalgoorlie. We are looking at -- we are facing into a high-growth market. And so our capital management plan is really about how do we grow, how do we accelerate? I go back to the title enhancing, accelerating, delivering. We need to look at how to accelerate our growth initiatives in this market. And some of those are going to mean that we will redeploy some of that capital into the business. I suspect that Chris' underlying question is do we think that we'll be paying a dividend anytime soon? And clearly, that features into our consideration in the company and particularly as a Board.

Thank you. No, I'm pretty sure that, that wasn't what Chris was thinking about. I think he's thinking more of other ventures. But I've been following the Wall Street Journal carefully and all the Argus stuff and I see these pronouncements continuously appearing from spokespersons in Canberra and Washington about critical minerals and cooperation with Argus in critical materials, including rare earths. And all I can say is talk is cheap, isn't it? But it's about time something happened. Thank you.

Thank you. I might turn actually to the online platform for a question just for those people who aren't in the room, give them an opportunity. Jen?

Chairman, we have a question from Mr. Dua Hugh Mclain , who has asked -- said that he has heard that there are -- that asked about the permanent waste disposal facility in Malaysia and claims that it's being located in a flood or fire prone area, and he's asking if these claims are correct.

They aren't correct, but I'll allow Amanda to give a bit more color.

Yes, these are not correct. In fact, the EIA that we've just completed on the proposed site explores both of those issues extensively. The area is not a flood-prone. And certainly, in the way that this is being constructed, that's not a significant risk. It is like so many other things that he now dwindling anti-Lynas activists numbers in Malaysia like to do. They just sort of make statements, which are not necessarily supported by scientific fact. The EIA is supported by scientific fact and also by our 8 years of studies and operations in Kuantan, which give us a very clear view on these matters.

Jen, can we get another question from online, please?

Chairman, the next question is an audio question from Kieran Baha , asking another question about the U.S. proposed facilities.

In addition to the answer that Amanda has already given, do we think?

Yes. What is the capital requirement for Lynas to undertake the U.S. manufacturing facility? And how is that going to be established?

Amanda?

So we've not disclosed that number at this time, and I'm not proposing to do so this morning because it is a matter of commercial negotiation with the U.S. government. And as most people would know that the sort of negotiations generally don't benefit by being conducted in public. So our intention really on the -- in the U.S. is that -- the U.S. is attractive so long as the government is funding our growth, I mean, for you as shareholders, this is about the best free kick that you get is when somebody else funds growth. So we'll work through that process and at the right time, we will disclose whether there is additional shareholder funding, which is required over and above that. For the light Rare Earths, we have disclosed that the contract there is envisaged to be that the government will contribute 50% and Lynas will contribute 50% up to the government funding is up to about USD 30 million. So that gives you sort of a construct within which to think about the funding.

Is there another one, Jen?

Chairman, there's a further audio question. This one is from Keith Mellis and it's asking about the FY 2022 financial guidance.

Good morning, Chair Conlon. It's Keith Mellis from Perth, and I'm representing the Australian Shareholders' Association who hold proxies from several shareholders for today's meeting. Once again, if I may like to congratulate the company on a very fine performance in financial year '21 and a big thank you to Amanda for a very effective overview of the financial year. Chair Conlon, I have one main question, but something that was just mentioned or referred to by a man that the Board do deliberate or consider the payment of dividends. Just looking there at the accumulated losses of $700 million to date, is it likely that shareholders can look forward to a dividend prior to those losses being recovered?

So our dividend policy is something we look at. Our capital management policy is something that we look at regularly. At this stage, we are, as Amanda said, in a significantly rapid growth business and industry. And therefore, at this stage, we view that all of the capital that we have is best served to fund that growth. So we will continue to look at our capital management policy as we do with the Board annually. Did you have a follow-on question to the dividend question?

Can I ask my main question now?

Yes.

Many Australian-listed companies take the opportunity to provide financial guidance for the forthcoming year in the current year annual report. I don't believe this was the case with Lynas this year. So I'd like to ask, could you give some financial guidance to shareholders now that financial year 2022 is 5 months through? Would you be able to do that today?

Thank you for the question, but no, we do not give financial guidance, it is not our practice to do so. So I might move back to questions in the room.

Yes. I'm Jeff Parsons , and that's not Geoff, the perimeter fence builder. I think I asked this question last year. Can you update us on the more bridesmaid rare earths, the cerium and lanthanum. With respect to the special grades, how that's standing at the moment and how you see that progressing, particularly with premiums for those special grades?

Yes. Yes, really happy to do that. The bridesmaids continue to be bridesmaids, maybe they're no longer silver metal holders but bronze medal holders maybe because the bride has got so much more beautiful this year. So the price for standard grade lanthanum and cerium has not budged really $0.01 the last year. What's pleasing is demand has returned to pre-COVID levels. And that matters to us because we are going to produce cerium and lanthanum as we produce the NdPr, that is the most in demand. We are significantly increasing the proportion of cerium, which is sold at higher prices. But it's still relatively small by comparison to the amount of cerium that we produce in total. So it makes a contribution to our profit. We've got a target for growth in terms of how much margin that will generate over the coming years. But certainly, we're not seeing that, that market is going to significantly pick up without us really delivering sort of really more advanced formulations that we're doing now, and we are working on that.

Can you also update us on the technical developments at Mt Weld? You mentioned some in the annual report, the drying and the second stack cell flotation.

So the second stack cell, I think, is a really great example. I think I might have used this as an example. In last year's AGM, when we look at what was phase 1. I think it's got 29 different float circuits. It's 3 stories high. It's got a lot of steel and concrete. Phase 2 was 9 different float cells. Then we put in our first stack cell as part of Lynas NEXT, and we've just installed our second stack cell, and they give us almost the same as the Phase 1 and the Phase 2. So this is just an example of the continuous improvement, and we would see that we will have more of those as we move through. So a significant efficiency improvement, but it also allows us to better control quality. And that's important when we're talking about really as we're moving further into the ore body, we get a few more sort of challenges around the metallurgy and the stakes that allows us to do that. The other sort of reasonably significant sort of current operating enhancement is putting in the concentrate drier, so that we are able to drive the concentrate below the sort of relatively natural sort of 15% grade, 15% moisture level at present. We're finalizing electrics on that at present, and we expect that to be commissioned in December. Other than that, the met team and the geos are doing a lot of work on really thinking about as we move into the ore body and different types of metallurgy, how do we continuously improve our flow sheet. And I expect that we will have more to say to you about that soon.

Are there any other questions in the room? Questions online, Jen?

Yes, we have 2 further questions, Chairman. The first question is what are the current prices of NdPr? And by comparison, how does that price compare with the 2021 average? And additionally, what is the forecast price of NdPr for the next few years?

I'd like to know that one, too.

Yes. The second one will leave in the hands of the experts who do the forecasting, but I'll turn the first one over to Amanda.

I think today's spot price is in excess of USD 105 a kilo for NdPr. As we look at the market up until about a month ago, it had sat pretty steady at around about USD 80 a kilo for several months, there's been a bit of a kick up. Will that be sustained? Well, we're not sure. But do we think that we've come off what was previously sort of -- last year, we were looking at between about $33 and $38 a kilo for NdPr for most of the year. Do we think that we've seen the end of those sorts of numbers? We fervently hope so. But on the other hand, my encouragement to everyone in the team is to understand that we might not always have $105 a kilo NdPr prices. So we better make sure that we maintain our muscle and are fit for purpose even if the prices reduce.

One more question, Jen?

Chairman, the final online question is an audio question from Kieran Baha asking, are there any intentions to further refine the products from concentrates to a more final item to end users.

Amanda? Sorry. Are we getting a video?

Yes.

Sorry.

All right. With the governments in more free world nations being more concerned about the supply for rare earths, is there a particular market for Lynas to come in more on the processing side rather than just the mining side as an additional activity?

Thank you for your question. I think that the -- I think the idea of moving down the value chain to be closer to finished materials is, once again, something that we always have a strong strategic focus. It is worth noting that the perceived constraint in the short to medium term, it's not on magnet production, but it is indeed on the production of rare earth oxides. This is the reason why the price is strong at present. So for us, as we consider how do we grow our business, it is a case, just like I said, where we think about spend more money on Mt Weld or buy another resource. Well, let's look at that economically make the decision. Similarly, spend more money on upgrading our capability to produce what we produce today or move downstream into new areas that we may or may not have the same level of expertise as we do and what we're doing today. So this is a consistent consideration within our business, and we make choices really all the time as we're thinking about our development programs on which is the best pathway for us to consider. I know that there are many juniors or new entrants who sort of say, well, we're just going to get into the business of magnet making. I've got to tell you, making magnets is a very different technology from processing rare earth oxides. And so I am a lot conservative manager in some ways, and I won't just say, well, we're going to wake up one day and we'll be expert magnet makers. So we do consider this and look at where is the major value that we can create for our shareholders. Bearing in mind that it is also easy when your business is on a spreadsheet to say we will be in the business of magnet making much easier than when your largest customers are magnet makers. So we consider all of these things as we reflect on our strategy. And at this time, we are not making any announcements about becoming magnet makers.

I think we have another online question.

Yes, Chairman. We have a question from Mr. Peter Nassim , who said, congratulations on a great year, Amanda, and everyone in the team, a big well done. In regards to planned output constraints at the Malaysian plant, 75%, do you see this being eased with a more diplomatic government in Malaysia or the current logistic and demand parameters in the market make this a secondary concern at this point?

That's a good question. And right now certainly, it's a secondary concern. Our challenges relate to logistics and -- rather than any of the regulatory conditions that we see in Malaysia.

Well, if there's no further questions. And before I move to the formal business, I would like to just add my thanks to Kam and my gratitude to Kam. He has been such an underpinned for the company at some tough times, and he really has sacrificed a lot. So with Amanda, the Board would also wish him well in the future. So with that, we'll proceed with the formal business. Attendees in the room will have received one of the following cards on registration, Blue for voting shareholders, orange for nonvoting shareholders and yellow for visitors. This year, we will again use the procedure whereby each resolution will be discussed, and each resolution will be voted on by way of a poll. Details of the proxies received for each resolution will be shown on the screen prior to each resolution being put to the meeting. As stated on the proxy form, the Chairman will vote undirected proxies in favor of each resolution. Each shareholder who is present in person and who is eligible to vote at today's meeting, will have received a blue-colored voting card at the registration desk. At the conclusion of the meeting, representatives of Boardroom will collect the completed voting cards from each shareholder. The notice of meeting has been duly distributed to all shareholders and will be taken as read. After each resolution is tabled, I will ask for questions from the shareholders online and shareholders in the room. Resolution 1 seeks approval of the 2021 remuneration report, which is set out in the company's annual report. The remuneration report sets out the specific details of the company's remuneration framework during the year ended 30 June 2021. Proxies received for resolution 1 concerning the remuneration report are now shown on the screen. Are there any questions to this resolution? No? Okay. There's no questions. So I will now put resolution 1 to the meeting for voting by way of a poll. The text of the resolution 1 is shown on the screen. Thank you. Resolution 2 relates to the proposed reelection of Philippe Etienne as a Director. The Board values Philippe's contribution and experience, and we thoroughly support the reelection of Philippe Etienne the Board. Details of Philippe's background and experience are set out in the explanatory memorandum and on the screen. The proxy for resolution are also shown on the screen. I would now like to invite Philippe to briefly address the meeting.

Thanks, Kathleen. Good morning. I think this is the somewhat awkward point where I meant to tell you how good I am, but I'm not going to do that. Instead, I want to take the opportunity to thank you all, that you've given me over the almost 7 years now to be part of what undoubtedly is the most dynamic, interesting and at times challenging business that I've ever been involved in. And what a 7 years it's been. At the start, we were struggling to produce salable products saddled with a mountain of debt and a share price that valued the company at just a few hundred million to today's reliable, profitable ASX 100 company. So my contribution to your Board draws on a long executive experience in global chemicals, manufacturing, heavy and complex asset management, international marketing and disruptive technology. And should you choose to support my reelection today, I look forward to continuing that contribution.

Thank you, Philippe. Are there any questions on this resolution? Excellent. So I will now put the resolution 2 to the meeting for voting by way of a poll. The text of resolution 2 is shown on the screen. I will now move to resolution 3. This relates to the proposed grant of performance rights for the benefit of our CEO and Managing Director, Amanda Lacaze. Each performance right is a right to acquire 1 share in the company in the future. More details regarding the performance rights that are proposed to be issued to Ms. Lacaze are set out in the explanatory memorandum. Proxies for the resolution are now shown on the screen. Are there any questions on this resolution?

Michael Strakos , Abbott and Co. super fund. With the performance rights, the only problem I see is if the current CEO is no longer able to perform her duties, and do you have a CEO in training in the wings because it would be difficult to replace the current CEO with equivalent?

Thank you for that question. We obviously have a succession planning process in place, and we have been bringing executives in under each of the levels. So for example, with Kam's retirement, we had 2 very high-quality executives who have stepped up. With Andrew's requirement, we did actually have to replace them with about 3 individuals. So that does go to show the quality of the executives that we have. But we do have a succession planning in place. But my understanding is that Amanda has 0 intention of going anywhere. So as long as we keep her safe from buses and other things, we should be in very good shape.

Other things is the usual problem.

Exactly. But we do have succession plans in place. Are there any other questions? Okay. I will now put resolution 3 to the meeting for voting by way of a poll. The text of the resolution is shown on the screen. Ladies and gentlemen, that concludes the formal business of the meeting. And if there's no other business, I declare the formal part of the meeting closed. I would now like to complete the poll process and advise that I will close the online voting system in 1 minute. Please ensure that you've cast your vote on all resolutions. For those shareholders present in the room, the instructions for completing your blue card are as follows. Please write your name in the space provided at the top of the card. Secondly, unless you wish to vote a number of shares in one manner and another shares in a different manner, clearly mark, 1 only of the boxes on the voting paper next to each of the resolutions. You may vote for or against each resolution. Please sign in the space provided at the foot of the voting card. And finally, logs the completed blue voting card in the ballot boxes, which are available at the doors when you exit the rooms or hand your card to the Boardroom representative. For shareholders online, Voting is now closed. The results of the poll will be announced to the ASX and will be posted on the Lynas website later today. Ladies and gentlemen, thank you for your attendance and the interest you continue to show in our company, and that concludes today's proceedings.