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

Welcome to Lynas Rare Earths June Quarterly Results Briefing. [Operator Instructions] I will now hand over to Lynas.

Good morning, and welcome to the Lynas Rare Earths Investor Briefing for the quarter ending June 2026. Today's briefing will be presented by Pol Le Roux, Interim CEO. And joining Pol on the briefing are Gaudenz Sturzenegger, CFO; Chris Jenney, VP, Sales and Market Development; Daniel Havas, VP, Strategy and Investor Relations; and Sarah Leonard, General Counsel and Company Secretary. I'll now hand over to Pol Le Roux. Please go ahead, Pol.

Thank you, Jen. Good morning, everyone. My name, that is Pol Le Roux. And as you probably know, I replaced Amanda Lacaze as Interim CEO following her retirement at June 30. I'm pleased to share with you my analysis of our performance in this June quarter '26. And of course, I'll then try my best to answer your questions, if any. So during this quarter, the market continued to be strong and all the customers I reconnected with since I took this new position indicated a higher-than-expected growth of magnet demand, raising their concerns for security of supply and supporting, of course, quite healthy price level. So that's a great situation to be in. And this market situation beneficiated Lynas, and we achieved a record AUD 98 a kilogram average selling price through the quarter. This performance is the result of a favorable market environment, of course, but also improved offer from Lynas, in particular with the sales of dysprosium and terbium, and price premium obtained by the team in recognition for reliability. This favorable situation will continue as we finalize the qualification of our newly launched samarium and move from qualification into commercial contracts. I'm actually in Korea. And following this call, I will head to the signing ceremony celebrating the new partnership between JS Link and Lynas. This agreement includes a AUD 50 million contribution by Lynas in the 3,000-tonne magnet factory that JS Link will build in Malaysia as well, of course, as a 10-years rare earth supply contract. Some of you know my attachment to Korea, where I enjoyed 7 wonderful years. And I look forward to further development in this dynamic country, surprisingly called [ modern ] income country, which is not very obvious when you work here. Anyway, this is an important move by Lynas and one more step in the development of our Lynas 2030 strategy, supporting downstream industry development outside China. On the operations side, I would like to first start with safety because we have -- we are very pleased to continue operating safely on our three sites, as demonstrated by the decrease in our lost time injury frequency rate, which went from 2 to 0.9 end of the year. So that's a very good achievement, and we're looking forward for further improvement of the situation that is already a very good performance level safety-wise. On production, I have to say that our production performance was clearly not as good as expected, was impacted by the quality variation of our concentrate as we were mining into transition zone. These variations were impacting the productivity of cracking and leaching in both Kalgoorlie and Kuantan, therefore reducing the feedstock -- the feed flow to the solvent extraction and therefore, the total production. So that experience, while it's been very frustrating, it has mobilized all the teams together from the three sites and the R&D and led to a step change in our expertise, including solutions to vary our process parameters and sequence upstream and downstream to adjust to ore quality variations. So again, we are disappointed, but we get out of this much stronger individually and collectively as everyone has now a deep understanding of the process from mine to big bag and how each process step influence the others. On the positive note, the production of Dy and terbium was higher than expected. This includes part of the WIP. You remember last quarter, we explained that we had a lower production because we had some WIP. But in fact, beyond catching the WIP, our recovery has improved, and that's a very good sign and should continue as we start the IsaMill during this July quarter. Last but not least, and to me, it's quite important, reflective of the improvement of the team in Kalgoorlie. Kalgoorlie has started new process or continuous carbonation process, and they did that faster than it takes to write a report. So that's, to me, a very important change, reflecting the improvement of the Kalgoorlie team, the process Kalgoorlie team in the expertise, and that is something that makes me quite confident for future. Project-wise, we just focus on the heavy rare separation since expansion in Mt Weld is almost finished. We just need to finish the tailing pond #4. On the HRE project during the quarter, we have reviewed the project so as to allow us to go for stage product-by-product execution of the project. So you remember, we produced dysprosium in May '25, terbium in June '25, samarium in March '26. And now we changed the schedule so that we could produce gadolinium early fiscal year '28. So let's say, in the -- well, for the Northern Hemisphere, the summer '27. Yttrium, early calendar year '28. And lutetium, the last one will be probably around April '28. So that is very important because we continue seeing very strong demand for every single element that this project will deliver. And so for us, very important to be able to produce -- to execute and start supplying the market step by step and not wait until the full project is finished. In parallel with that, we've had a lot of detailed technical discussion with specific customers. And that discussions led to some change in equipment in order for us to match with specific targets, specifically very low level of non-REs impurities and even in some cases, managing the physical characteristic of the product such as very narrow particle size distribution. So this modification combined with now identified source of all equipment outside China. You know that we can't buy anymore anything, and it took a while for us to really identify contractors who could actually deliver all the equipment needed. So now it's done. And this all modification together led to an increase of our CapEx to AUD 294 million, a Class 3 CapEx. So it's a well-controlled and precisely defined CapEx. And again, what is very important is, first, we are in control. And second, we managed to anticipate and start to deliver on specific product all through the project rather than waiting to the end. So all in all, this quarter had its shares of challenges and successes. But altogether, this has led Lynas improving our cash position by AUD 138 million to AUD 1,209 million, which is a great feeling and a good place to be at the moment of market opportunities. So that would be my summary of this quarter. We don't make forward statements, but we feel pretty confident for the quarter we are entering, and I will take questions now, if any.

[Operator Instructions] Our first question today comes from Austin Yun from Macquarie.

Pol and team, thank you for the update. Good to see that you made some progress on the Kalgoorlie front despite the ore quality challenges at Mt Weld. I'm just keen to understand, looking forward, given the improved understanding of the ore body and also improvement at the [indiscernible] facility, how should I think about the production run rate at Kalgoorlie for the next 12 months?

Well, I cannot project exact numbers. What I can tell you is that Kalgoorlie is in a much better shape today than it was at least 3 months ago. And this -- it's a bit unfair for them that this quality variations that we missed at the start, to be honest, impacting the productivity. Otherwise, they would have delivered a very good quarter. So moving forward for Kalgoorlie, I think we can be pretty confident. And what is really very important, I tried to explain that, but it's not only -- I mean, all the variation comes from ore and transition zones. So it was frustrating, but we have developed very, very complex new process parameters, including cracking, leaching and in flotation to address these variations. So that makes me quite comfortable for the future because everything depends on people's expertise, and I see that growing very fast.

The next question comes from Chen Jiang from Bank of America.

Just a follow-up on your production and operational performance. So NdPr production for this quarter looks like the second weakest quarter of the last 5 quarters. I understand the quarter-over-quarter variations, your ore variations. But I just want to confirm, [Technical Difficulty] tonnes per annum of NdPr capacity after Mt Weld expansion. And also, there are multiple issues [Technical Difficulty]. What kind of issues actually impacted your production the most?

Okay. I'm not sure I heard everything, you cut off quite a number of times. When -- maybe you asked a question about Mt Weld capacity. Mt Weld had -- so Mt Weld capacity, basically, this quarter was impacted because we had some problems on the water recycling unit. This has been fixed. Unfortunately, I would say, because of the problem with downstream, Mt Weld supply was big enough for the downstream. But now I think Mt Weld is really set up for the original design capacity. The only step that is remaining for us is to start the IsaMill. So grinding very fine, so liberating more rare earths, so improving the recovery rates. And that's -- we had a few test done very short, but normally, we should establish that permanently from this quarter. And that will be it for Mt Weld. So not too much concern on my side on the Mt Weld. I just want to emphasize a little bit because it's a good example. The expansion came with a lot of automation, including now you have a fixed crusher. And so that makes life of everyone way easier. But we realized that in the past, they had a mobile crusher. And so the people in-charge were really discriminating ore and blending them nicely to have a constant feed on the flotation system. Of course, once it's all optimized, you realize that people discriminate a lot less the ore. And that's something that we missed, to be honest, in the design. So we addressed that as well. But Mt Weld is really in very good shape. Except for the TSF that we'll finish this quarter or next quarter, everything is done and working pretty well.

The next question comes from Paul Young from Goldman Sachs.

Pol, can I just dig into Mt Weld a little bit more, just the challenges in the quarter? I mean I visited the site in March and the commissioning was going extremely well, and there's clear upside on the -- in my view, on the base case, 1.3 million tonnes throughput. And just to step through the mass balance, clearly, can produce over a couple of hundred thousand tonnes of concentrate and you haven't had to run Kalgoorlie cracking and leaching really at all because the cracking and leaching facility in Malaysia can do 100,000 tonnes of imports. So the mass balance stacks up that Kalgoorlie hasn't really needed to run. And so to this point, probably more a statement really and the commissioning seems like it's mostly completed on all the key processing units at Kalgoorlie. So that's good news. But just to talk through Mt Weld, I mean, I understand looking at the circuit, you had a mineral sizer there, you've just now put in a more fixed crusher. You've had some -- clearly some challenges with the particle size distribution being fed into the SAG milling circuit. When I was there, the SAG mill was running really with low steel charge and more an autogenous mode. And you've obviously had some variability on feed size distribution and different ore types coming through. So it sounds like this is all pretty simple. So just confirm again, just to provide more color that it really was around size distribution to the float circuit, challenges with the gangue and silicates that are floating with the monazite and then basically impacting concentrate grade and also particle size distribution in the concentrate. I know that's a long-winded sort of technical sort of statement or question, but it sounds as though these are all minor just commissioning issues. I guess can I just confirm that?

Yes. So anyway, I like techniques. At the end of the day, techniques matters. Thank you very much, Paul. But no, the variation of quality, I mean, we are beyond some difficulty. It was not a big challenge on the new mill, which were related to particle size, et cetera. But here, it's more a variation on composition. So you have variation of MgO, calcium, carbonate, phosphate. And so it's a combination of these impurities combined. So it's not one versus the other. That's why it was a bit complex. It's an equation with four different variables, which are sulfate, magnesium, calcium and carbonate. And depending on the respective level of one versus the other, then you have different performance in both the flotation, but most important in cracking. This impacts the dynamic of the reaction. When you mix with sulfuric acid, your reaction goes too fast. And so you have the viscosity becomes terrible, so your product doesn't flow fast enough, and so that impacts your productivity in cracking. So it's more the composition and that is the result of transition zone when you have dolomite, apatite, monazite all coming together. You need to control that and be able to react both on modifying your cracking process or sequence and modifying the flotation process so as to secure a dynamic of the reaction in the cracking that is under control and not leading to viscous slurries. I don't know if I answered your question, Paul.

No, no. Sorry, I thought you were more processing limonite on a saprolite consistently rather than the apatite. But I think, yes, it just shows you that, obviously, the ore body is transitioning.

The next question comes from Rahul Anand from Morgan Stanley.

Look, I just had one on the CapEx increase that you had. Obviously, the plant was greenlit, I think, on the 29th of October, that was already after the restrictions came in from a China perspective. And I'm aware, given past understanding that there were contingency plans also in place to source from alternate suppliers. I guess my question is, it's taken us a fair bit of time to get to this updated CapEx estimate. Is it purely just a sourcing issue here in terms of contingency? Has the scope changed? I know you've talked a bit about purity of product. But if you can provide perhaps a bit more detail as to what exactly has changed in terms of the flow sheet so to speak, that has led to the increase in the size that it is?

So you understand that I will not go into too much detail because I don't want to help the work of our competitors. But there are two elements. One, you're right, the Chinese restrictions, especially for Lynas, were clear from quite a while. Now to review where you can buy outside China, every single equipment that goes in a factory, it's complex. And sometimes you simply don't have manufacturers existing outside China. And so it takes time for developing this kind of contractors that can build, for instance, a good furnace, specific reactors, mixer settlers. It was a bit of a challenge for us to really develop to the level of performance we want. Yes, it took a while and then additional cost to make sure that we would have a secured non-China supply chain for equipment. So that's one part. The other one is -- and that was very good that the sales and marketing team went way ahead with end customers because the specs of -- I used to work in this field 15 years ago in a different company. But the specs have changed over time, and they are more constrained. So that -- at the end of the day, we made a decision, for instance, to have the purification stage for our chemical products. And to also have water purification, so demineralized water systems so as to make sure that we will maintain the level and achieve the level of -- low level of impurities of non-REs impurities in the finished product that is required by those specific customers. So there are two elements. One is really to go through all the non-Chinese equipments, including sometimes in a few cases, developing the technology with some contractors. And the other was really going far into securing the purity and the particle size of our finished products up to the targeted specifications of our key customers for these new products. So those are the two elements that led to an increase of CapEx. But I have to say now that CapEx is fully reviewed. This is what I said is a Class 3. So it means that we have gone through all the AACE, et cetera. So it's -- the next step is construction, and we are in construction actually.

The next question comes from Jonathon Sharp from JPMorgan.

Just a question on China control. So they suspended their October 2025 export controls and they potentially come back in on the 10th of November this year. So just with those controls potentially returning, can you just tell me what are the potential consequences for the industry? How are customers preparing? Just interested in your thoughts on those potential controls.

Well, we'll see what is announced in November this year. Definitely -- well, what I can see from our side and what I can see when meeting customers, the level of concern about accessing rare -- specific rare earths from China is very high. I know that in China, some rare earth producers are trying to lobby and say, "well, we need more business." But I think it's a very important geopolitical game being played. And I foresee this restriction to be further strengthened. And therefore, our job is to grow as fast as possible additional capability, additional products, additional heavy rare earths in particular. And all of this for Lynas, whether it's official or not anyway, Lynas cannot source any single material expertise, whatever from China and we don't. So that's a challenge ahead of us. But I think we are in a market environment where you need to go very fast because China is still in control of the majority of the rare earth supply, and that's a major challenge for the rest of the world.

The next question comes from Daniel Morgan from Barrenjoey.

Just back on Mt Weld, when do you expect Mt Weld to be back up to full operational run rates? i.e., do you still have a lot of transition ore in the feed in the months ahead? Or have changes being made to the operations such that it's delivering the feed the downstream needs currently?

We are fully done now on what we know. So this frustrating experience is in the past. And I will go in Mt Weld next month, but I -- well, we are always careful to not underestimate the issues. But to me, Mt Weld is well on track now, it's done. We are back in.

And just a quick follow-up, if I may. I have observed in the Kalgoorlie region, there's been several grid instability issues. Other mining firms have referenced it during the quarter. This was not referenced in your release today. Obviously, if Mt Weld upstream is not operating at full tilt, it's not giving feed to the downstream at full tilt. But if Mt Weld were delivering, would the bottleneck move to Kalgoorlie and power? And if that's right, is there -- what's being done about power supply for Kalgoorlie?

Very good question. It's true that the power supply is not up to where we want it to be. This being said, we had a very difficult situation back in October '25 until January or February of this year. Since then, the situation has improved. There were some modifications made on the Western Power side. And okay, it's not as good as we wish. Let's say, we are staying within one power failure per month, which is not what we wish to have. That's what we have. It's, I would say, manageable given the excess of capacity we have between Kuantan and Kalgoorlie. We're still waiting whether we should go for off-grid solution or not. At the moment, it's not the real emergency, I think. Power has improved, not to where you could dream of, but enough. And I hope I won't be made wrong in a few hours or next week. Keep just one power failure per month, that would be nice.

The next question comes from Mitch Ryan from Jefferies.

My question relates to Mt Weld. Obviously, you're blending ore for mineralogy for now, and that seems to be under control. But are there any physical modifications that the Mt Weld circuit will require in the mid- to long term as you progress through the ore body to account for that ore mineralogy to meet the required concentrate grade and quality?

Yes. In the long term, we know that we'll have variations of ore. And -- but that's not imminent. And we're working on this to probably -- well, we have plenty of options process-wise. And so we are addressing that now. We have time to prepare. So not for transition, but for really addressing mining some specific ore. And so this is under progress at the moment, and we'll work on it and get ready for it probably later in this -- well, not even this fiscal year, but the year after, yes.

Okay. And sorry, is that when you will encounter the problems? Or is that when you will communicate the solution to the market?

Yes, we will, of course.

Sorry, you didn't answer my question. Is that when the problem will occur?

No, we will not wait for the problem to happen. This happened this last quarter. So it was a problem with the transition zone. But when it comes to different kinds of ore to be mined and processed, we have time to really address that. We have different options that we are studying. And once we are done with it, we'll communicate on that. But that will be anticipated not in a reactive mode like this quarter.

The next question comes from Matthew Hope from Ord Minnett.

I just wanted to know if there was any change in the plans for the heavy rare earth separation plant because you spoke about when you would add gadolinium and yttrium and lutetium, when they would be coming out. But my understanding was the heavy rare earth refinery was also supposed to replace the current facilities for dysprosium, terbium and samarium. But you've given no timelines for those. So are they still going to be -- the old facility is going to be replaced with the new? And if so, what's the timeline on the new enlarged production for those elements?

So the dysprosium and terbium, and I understand the information didn't pass very well, but I don't know why. We today are established and we could produce 240 tonnes of dysprosium if we had it in the feedstock. So dysprosium, terbium production is established and will not be modified from then on. It's just a matter of us changing the feed with a higher content of dysprosium and terbium in the feed, for which we have different options, and we are working on them. For samarium, we have a temporary situation where we produce 400 tonnes a year of samarium. That's a temporary situation that we started in March this year. For the full production of samarium, which will go to 1,100 tonnes or more, that will be an asset that is under construction, and that will come beginning of calendar year '28. In between, you will have gado in beginning of fiscal year '28, so sometime between August, September '27. And then as I said, yttrium later. And finally, the samarium and the lutetium. Sorry, I didn't include in my presentation. The samarium increased to over 1,100 tonnes from the current 400 tonnes.

The next question is from Neal Dingmann from William Blair.

Can you hear me?

Yes.

My question is around the JS contract. Could you talk about -- and will that be a continued strategy of -- will that be one of several joint ventures that you would connect more on the downstream side? What is the strategy going forward beyond just the JS contract that was announced?

Well, we are not a magnet maker, we are a miner and a chemical processing player. So we will not manage magnet making at Lynas. This being said, we support magnet makers because we need more new magnet makers coming up. And so this partnership with JS Link was a very good opportunity for us. We are -- well, AUD 50 million is not peanuts, but it's not the majority of the capital they need to build this factory. And they will manage this factory by themselves and the business. We are supporting them in our position, which is basically supply of rare earths and most likely very soon the recycling of their swarf. That's how we position ourselves. And we'll continue doing that, supporting downstream industry, including metal making and magnet making, but not necessarily managing those assets. Especially magnet to me is a step where the expertise required are very different from what we have. So that's definitely not a step. I'm not a supporter of the famous mine-to-magnet theory. We have enough work in our positioning.

Understood. So with most of those, would you make -- continue to make investments in the equity? Or what -- how do you see structures going forward?

It's just when needed, if it's needed for -- we can look at it. But it's not -- I think there are many projects where the key point is security of supply, and we can -- and we do discuss that. JS Link was a particular case where some capital injection was needed to help them taking off. That's what we did.

The next question is from Chen Jiang from Bank of America.

Hello. I don't hear the Chen Jiang's second question, by the way.

It appears Chen is having some technical issues. So we'll move to the next question, which is from Rahul Anand at Morgan Stanley.

Pol, my questions were answered, but I would love to perhaps test the Mt Weld thesis a bit more. I know you've talked about transition ores being the key driver for the variability in production that you've had. And obviously, you have to marry up three different plants or three different sites to produce what you produce. So it's complex. But how do we think about the plan from here? I mean, I know you're not here to provide guidance, but in terms of the mine plan and when you think all these three can be humming along again? And how do you kind of think about the medium-term planning? What type of actions do you need to do now? Do you need to drill more, define the ore body better? Or do you have the right definition, but not the right planning in place? I just want to get a bit more sense on the mining side.

So all of this, except that we already did. So we launched additional mining drilling to better characterize the ore that is mined. So that's already launched from end of May. So to have a better accuracy on what we mine. Second most important is to -- so we are a lot more segregative in ore -- sorting ores. And so blending and controlling back again the blend of ore that is feeding to the flotation. But most important to me are the improvements that have been made in variations in the flotation circuit and the cracking leaching sequence that allow us to adjust and to maintain productivity despite these variations. So that's the reason why -- well, I don't want to project, but we feel much more comfortable and secured now that we were.

The next question is from Paul Young at Goldman Sachs.

Pol, a few further questions on the JS Link agreement, please. Can you share any details around the additional capital requirements from your side? I understand the AUD 50 million is going into the equity part for JS Link will go into funding part of their share of the facility. But can you share any sort of total capital numbers for the project and potentially when it could start production? And then further to that, is the supply contract at NdPr going to be at the USD 110 a kilo? Is that the base case?

We will do something that I would enjoy. I will ask Chris Jenney to answer that question because he negotiated all the contract with JS Link.