MP Materials Corp. (MP) Earnings Call Transcript & Summary

Good morning. Welcome to day 1 of the Deutsche Bank's 13th Global Materials Conference. I'm Sathish Kasinathan, and I cover the metals and mining sector here at DB. Up next is MP Materials, and we have with us today Ryan Corbett, the CFO of the company. The format today will be a fireside chat, and we'll be covering a lot of topics. And before we start, I would like to hand over to Ryan to -- for any opening comments and a quick 2-minute pickup for the company.

Sure. Yes, thanks so much for having us. Appreciate it. Good to be here. Good to be in person and in New York and in the nice, new DB offices. But -- so MP Materials, for those of you who are not familiar, is the largest producer of rare earth materials in the Western world, the second largest producer globally. We produce about 15% of global rare earth content. We are a leading producer of rare earths in what we believe is one of the most environmentally friendly production processes with a dry stack tailings process and a co-located facility located in Mountain Pass, California. For those that aren't super familiar with the rare earth market generally, our primary product -- future product and refined product would be NdPr oxide. NdPr is found in permanent magnets that power the electric motors of EVs, wind turbines, drones, robots. Basically anything with industrial motion is synonymous with a permanent magnet. And the permanent magnet enables these electric machines to be lighter and more efficient. And so today, you see about 90% market share of permanent magnet technology in electric vehicle motors for that very reason. MP has been on a mission to restore the rare earth supply chain, from mining, refining, down to finished permanent magnet production, to the United States and the Western world. About 80% to 90%, depending on the stage of production, is currently done in China, and this is a capability that's been missing from the Western world for some period of time. We relaunched production in 2018 and have scaled very meaningfully to our position in the market today of producing about 15% of rare earth content, as I mentioned. Right now we're producing a mixture of concentrate that we sell into various refiners to separate them into the individual rare earth oxides. We will begin refining our own concentrate next year and selling separated rare earth oxides, and that's what we call Stage 2 of our business plan. Stage 3 is the production of finished rare earth magnets we will be doing in a co-located facility in Fort Worth, Texas: metal-making, alloy production and finished magnet production. With that facility, we've targeted initial production of alloy in late 2023 and production of magnets in 2025. We recently announced that General Motors is our foundational automotive customer for that facility, and so we're excited to be moving very quickly and bringing this capability back to the U.S. For those of you that have followed us since we went public in 2020, certainly we've seen really strong demand from end customers, focused on bringing this capability and a secure supply chain for these materials back to the United States and back to the Western world. So that's something that we're focused on executing on. That's our mission.

Yes. Excellent. And then let's start with the Q&A. So first off, can we just start with your view on the market in terms of both near term as well as -- near term, we are going to see a pickup in demand once China -- I mean, like as it eases the COVID restrictions, and then there should be some potential pent-up demand which should come back. And then maybe your long-term view also along with that.

Sure. Yes, I mean, we tend to not spend too much time thinking about the very short term. It's obviously pretty difficult for anyone to ascribe a very specific narrative to a commodity in the short term. But in our primary material in the NdPr oxide space, if you've looked over the last 18 months, obviously you've seen a very strong increase in pricing. I think that has been fundamentally driven by what we've been talking about for a long time, which is significant growth in demand with a significant difficulty in bringing on incremental supply. We expect that -- the fundamentals of supply and demand to continue to win out over time. And so you can sort of take your pick as to what you expect electric vehicle penetration to be in the next couple of years. I think the interesting thing about where we sit in the electrification market is with EVs in particular, and that's just part of the puzzle, that capital has been raised, right? There are tens of billions, hundreds of billions of dollars of capital that are going into the ground to transition us to electric vehicles, whether you think it's going to be 10% or 50% or whatever it's going to be. And I think with that and given sort of the fundamentals I talked about of the permanent magnet traction motors that I mentioned earlier, we expect demand to continue to grow very significantly. So I think EVs will power a significant amount of that demand growth, and we're seeing from the magnet making perspective significant capacity additions both in China and outside of China. We obviously intend to play a large role in that market outside of China. So with that and then following on that, we see the situation, for example, in Europe with dependence on Russian energy. What does that mean for what already was a pretty strong push towards wind power and those sorts of things? So I think just thinking about the fundamentals of demand, we feel very good about that. And we feel good about also the element of technology risk that's inherent in any of the commodities that you guys are probably talking about and looking at that are enabling the green transition. I think the nice thing is we don't know what the battery chemistries are going to look like. We don't know if it's LCA or if it's going to be solid state or what it's going to be. The nice thing is whatever that -- whatever chemistry is used to store the energy, converting that energy into motion very likely is going to have a very, very high market share permanent magnet traction motors. And so that's the demand side. I think on the supply side, there's a lot of focus on what are the Chinese producers doing, what do their quotas look like. And we expect, just given how strong demand has been, that China will continue to grow production to meet their own needs, let alone the needs globally given how dominant they are. The further downstream you go, the more dominant they are. And so I think the -- in a lot of ways, the game has changed somewhat given the fact that they are now becoming increasingly dominant not just downstream in the magnet space but further downstream in the electric vehicle space. If you think about their need to supply Nio and Xiaopeng and all their other EV makers, I think there's a real focus and understanding that this is a critical enabler of the trillions of dollars of downstream GDP that they're focused on that enable jobs and all those sorts of things. And so we certainly expect, sort of from our view, a continued healthy demand growth. And frankly, I don't think that Chinese production can meet all of that on its own. And so that opens up a pretty interesting opportunity for what I think will be pricing continuing to be strong to incentivize ex China supply to come online.

And do you have a view on what the long-term incentive price would be?

I -- we tend not to try to pick a specific incentive price. I think the unique thing about rare earth production is that I think folks try to simplify it into, okay, what's the grade of your resource, what's the elemental distribution. But it's about mineralogy. It's about the ability to not only have just an asset, a mineral asset that maybe has 8, 10 years of mine life. In order to get the separated oxides, you need to spend billions of dollars on a separation facility. This is much more a chemical business than it is a mining business in a lot of ways. And so with that, I think the price is much higher than it is right now is what I would say. I think you see a lot of news about small projects here and there that are sort of trying their best to move things forward. But I think that given the significant capital that's required and the fact that you need a long-lived asset with the right grade, with acceptable mineralogy that is amenable to refining, you need a lot of things to go right to get an economical project. And so I think that really supports pricing as well. And then one thing that I think is pretty unique about what we are building in the U.S. is, I'm sure we'll get into this, but we have our light rare earth separation facility coming online next year. We've also talked about our heavy rare earth separation facility that we're bringing on as well. And with that heavy rare earth separation capability, we're going to add the ability to bring in third-party feedstock into the Mountain Pass refining complex. And so what I think is interesting is as the market continues to grow, as pricing likely goes up and incentivizes new players to come into the market, what we likely will see are assets that could not support the economics of building a $2 billion separation facility but that makes sense and would be additive to supply that's needed in the market. And we can play a role in that over time given our ability to take an intermediate feedstock. And so that may be a way that we continue to be able to add incremental supply into what we expect to be strong demand.

So on the demand side, so you talked about the strong potential in terms of EV-related demand and wind turbine-related demand. But then today, much of the demand is still skewed to the traditional source in terms of -- so given the higher prices, how do you look about the -- any view on what the substitution risk could be going forward?

Sure. I think with permanent magnets for sort of traditional goods, you take a speaker, for example, your AirPods are mini NdPr magnets basically. For certain applications, frankly it probably makes sense for there to be some amount of substitution. I think there was a talk recently that I was listening to about -- I think it was an Amazon speaker where they had a low-end Echo Dot or something like that, where they substituted out NdPr magnets for a ferrite magnet in the speaker, and they got tons of customer complaints about the quality of the speaker. But that was a really low-end speaker, and they were fully fine with that. And that trade-off made sense. And if you think about a speaker like that, the percentage of the bill of materials, that is the magnet, is much, much higher than electric vehicle, where a magnet is a couple of hundred bucks, and you're talking about saving thousands of dollars on the battery side that's $10,000 to $15,000. And so I think there's going to be, in some ways, a bit of a rejiggering of the mix. But even in more traditional applications, you think about -- we're talking about earlier kind of white goods. You take an AC compressor. With mandates for power savings, the only way -- an AC compressor, you're not super worried about how light it is or you're worried about how much energy does it draw. And so in those instances, yes, pricing is higher for NdPr magnets that are going into that, but there's no other way to reduce the power consumption of an AC compressor. And so I think moral of the story there is in certain applications, low-end applications, it absolutely makes sense to sort of have a healthy rejiggering of the mix. But in a lot of applications, particularly the things that are growing rapidly, the -- we don't lose a lot of sleep thinking about substitution.

So one of the key risks for the rare earth industry is the continuous government intervention from the Chinese -- I mean, the Chinese government intervention. So last year, we saw that they complained about the prices being too low. And this year -- or earlier this year, they said the price was too high and it was time to cut prices. So what's your view on like -- so going forward, what the government intervention -- like, what their plan is. And do you think that this will be an ongoing concern? And at what price level do you think that they will be comfortable with?

Sure. I think that a lot of industry observers think about the Chinese market as a monolith and the regulators as sort of dictating the way the market works. I personally don't believe it really works that way. Obviously, there are a lot of players in the market. And I think to your comments, though, specifically on there have been regulators that have said in China, particularly when prices were much lower 18 months ago, we view this as industrial gold. It should not be selling for the price of earth, it should be selling for a price that represents the fact that it's rare. And that has played out over time. But to your point, recently prices had come off their most recent highs sort of around the same time that there were comments made by regulators that pricing had gotten too high. But what I think they were really focused on, in my opinion, is not a specific price. As long as I think their -- they view that producers are selling for a fair return on capital that's going to incentivize further supply additions, which I think is sort of their critical worry, and that includes in and outside of China, I think it's just a matter of market stability. They didn't want things to go crazy in too short a period of time, and I think that was really more of the focus. But we've seen this in other commodities and some of the stuff that you probably follow as well, in iron ore, you've seen, where comments have been made and the market makes a quick reaction. And then very quickly thereafter, the fundamentals of supply and demand win out. And so our view is the fundamentals of supply and demand are relevant here and overseas, and I think that, that's going to continue to be the case.

Okay. So maybe we can just shift to MP specifically and start with stage 1.

Sure.

So right now, the production metrics have been like phenomenal over the past 2, 3 quarters. And typically, Q2 is a period where you take a downtime. And then second half, you could take more downtime to maybe commission the Stage 2. So how do you see the production for this year?

Sure. Yes, you are right in your comments on downtime. We do our sort of biannual plant turnarounds. We just had one in April that'll be relevant for this quarter, which we've spoken about before, and we do take one again at the end of the year, usually in the October/November time frame. And so those find their way into the metrics for sure. The one thing that we've been -- we have been able to execute and the team led by our COO, Michael, has done a really phenomenal job in continuing to hone the process, driving incremental throughput, incremental recovery. And that's enabled us to continue to grow production pretty significantly year-over-year. What we've said about this year is our focus primarily is on getting ready for the commissioning of Stage 2 assets. And so to your point, what that means is potentially incremental downtime. And of course, any time you take downtime, you lose efficiency on the front end and the back end ramping things back up. And so what I think the key message is, is that we're going to continue -- our primary objective is prepare the plant for the tie-ins of stage 2. We certainly are continuing to work hard in the background on a variety of different topics that we think can continue to kind of push the envelope, but you might -- while we're working hard in the background, you might not see it in the reported numbers given what we've talked about. And so the focus for this year is not on production growth, it's on everything that we just talked about. But I think over time, we certainly are not losing our focus or losing the ability to continue to drive tweaks. I mean certainly, given what we've been able to accomplish, there is the law of diminishing returns. But, and I'm sure we'll get into this, we certainly think a lot about how do we grow production both with our existing assets and thinking about broader growth over time as well.

Have you seen any port congestion issues in China for second quarter?

No change on -- in sort of what our commentary was in our prior quarterly call. I would just reference back to that on sort of port issues. I liken the sort of shipping and logistics environment to Whac-A-Mole. It's -- one day, it's -- you can't secure enough bookings on chips. And then as soon as you have those, you can't secure enough trucks to get it to the port. And then as soon as you've got that, the trucking companies don't have containers for you. And so what -- it's one thing or another always, but we've executed and been able to execute really well through what is a very difficult environment. I think there's no material change versus what we've seen. We continue to watch the port situation in China closely given -- from our perspective, if you just look at the public data out there and see ships offshore at Long Beach where we primarily ship our material out of, you've seen that come down. And our worry is, is they're coming down because all the ships are waiting overseas to get into the ports in China. TBD. But right now, we continue to just try to execute through what is -- has been and will be likely a challenging environment.

Okay. Maybe we can switch to stage 2 and talk about how the construction is progressing and what are the key milestones or key goalpost that you need to achieve and how confident are you in achieving your time line.

Sure. yes. So also on this point, no change since our quarterly call on our view. We talked about then our goal to be mechanically complete with the construction this year and then to ramp the facility over 2023. And the goal is to hit our run rate production capability in 2023. Obviously, what that means is we've got a lot of construction to do this year. We shared and tried to share lots of pictures of the progress and things like that, that you can see in our materials and on our website. But we've made a pretty incredible amount of progress particularly recently. We talked about in Q4 how we hadn't made quite as much as we had hoped just given some of the bottlenecks not just with supply chain but labor and getting folks on site. And so it remains a large construction project that is subject to the same construction risks as any other large construction project. But from what we see right now, no update to that timing. I think the nice thing was that we've obviously been focused on this for a very long time and had done a lot of procurement early on. And so what gives us some confidence is the long lead critical equipment is on site and ready to be installed. So it's a matter of we're transitioning from, I mean, how many iron workers do you have on site, how many pipe fitters do you have on site, those sorts of things, typical construction puts and takes.

So obviously, the scope of stage 2 have changed over -- since you IPO-ed. I mean so you have had third-party feedstock, you have had recycling, you have had -- certainly, we've had those. So can you just talk about the time line for all those and then if you're able to quantify how much of volumes could come from third-party ore?

Sure.

Yes.

I'll answer the first part. I think what we have laid out is obviously -- the time line that I just discussed relates to the light rare earth separation capability. What we talked about a little bit at the beginning was our stage 3 progress as well. And so with our Fort Worth facility for magnet making, we're going to be launching and aiming to launch the metal and alloy-making capabilities at the end of '23 and then the magnet-making -- finished magnet-making capability in '25. And so with that, you can assume that our goal would be to get the heavy rare earth separation capability online in time to supply heavy rare earths to the downstream facility. And so that is how we think about that. And to your comment on some of the incremental capabilities that we've layered on, that includes -- with heavy rare earth separation capability, that includes the ability to take third-party feedstock, which we talked about. And one really important element that we haven't, which is recycling, that capability will be present both at the Fort Worth facility and the Mountain Pass. And I think that it's something that is a critical piece of the puzzle for economic magnet manufacturing that not enough folks really focus on. When we think about what has enabled China to be so dominant, a lot of the IP has been created elsewhere. It's been created in Japan and in Europe and some other places. But obviously, the Chinese have access to raw materials, and they also have almost the entirety of the solvent extraction and separation business in China. And what does that enable them to do? They've developed a capability where all of the manufacturing waste that comes off of making a finished magnet -- if you think about making a finished magnet, if you're cutting it into a specific shape, all those cuttings, all the waste that falls off of that is called swarf. There's the capability in China to take that swarf and sell it back through into a refiner or a separator and turn it back into rare earth materials and then basically create manufacturing efficiency by doing that. That's often not necessarily housed in the same company in China, but they at least have that capability and have developed an industry around it. What is really unique about our recycling capabilities that we'll be bringing to Mountain Pass is it will be in the same company. So we will be able to take all the magnetic swarf, either recycle it at Mountain Pass or, to the extent it makes sense, to put it into the melt or somewhere else. At Fort Worth, we can do that as well. And so those are critical capabilities that we're very excited to bring to market and I think will be one of the key reasons that we'll be able to continue to focus on growing our downstream business and coming down the cost curve in our downstream business to be competitive over time.

I'm going to ask it in a different way. So based on your current configuration, so how much -- I mean, how much more recycling or third-party feedstock can you incrementally handle be it stage 2 or stage 3?

Sure. We haven't quantified a specific number. What we have said is that we don't believe at this point that the bottleneck in growing production is the downstream assets. And so what that would tell you is that certainly, we are planning for the fact that there will be -- to the extent we're bringing in third-party feedstock to feed the heavy rare earth capability, that tends to come with lights as well. So any mixed media that we would get would certainly likely come with a significant amount of light rare earths as well. And so you can assume that we are preparing to be able to separate that as well and could drive some volumes from that. But we haven't been specific on volumes. Obviously, given the variety of different feedstocks that we could bring in, it drives a pretty significant amount of variability in how that might look. But we're certainly preparing for that eventuality.

Okay. I would like to pause a bit to see if there's any questions from the audience. Otherwise, I'll just continue with my questions. Okay. So switching to stage 3. Now obviously, stage 3 is a much more complex process. It's a manufacturing process compared to the traditional mining and refining. So what are the key hurdles that you think you will face? And how are you planning to handle that? And then especially, can you talk about the IP that is needed to get it done?

Sure. Yes. I would not minimize the complexity of our upstream business and say that the downstream is much more complicated. I think rare earth separation is our bread and butter. We've got decades of prior process knowledge, and I think that, that's a key competitive advantage of ours. But certainly, the downstream business is a new business for us. I think that the processes that are required to move downstream, metal making, which is an electrowinning process, producing an alloy and then sintering and doing a finished magnet, are relatively well-understood manufacturing processes, that electrowinning and things like that are done not just in the rare earth space, they're done in other materials businesses as well. And so while there is a significant amount of IP that has been generated over time primarily in Japan and there's a significant amount of operating experience in China, there also is operating experience, expertise, academic work and various pieces of the supply chain globally, right? There are very downstream pieces of magnet making in the U.S. but none of the upstream parts. And so those remain dependent on China for some step. And there are midstream pieces that are in Europe and upstream pieces that are in Europe. And so what we've been able to do is assemble a really talented team of experts in each of those verticals that are required to get us from A to B and begin implementing those processes at Fort Worth. And so what you've seen us do as a management team over time strategically is walk before we run. We very methodically laid out this three-stage process and split the production of a mixed rare earth concentrate and focused on that first before we went into retrofitting the separation assets and the refining assets at Mountain Pass. And that was -- because if you look at what had plagued the prior operator, it was doing too much too fast. They made a host of mistakes. But really, the separation facilities worked phenomenally well under the prior operator. They had a lot of issues upstream. So we focused on let's fix those issues first with our folks. And we've been successful doing that. And so that gives us the confidence to move to the next step. And so you're seeing a similar playbook with our initial magnetics facility. Certainly, what we talked about is the initial magnetics facility will take less than 10% of our upstream feedstock from an NdPr perspective. And so we are methodically walking before we run, getting metal-making and alloy production up first and then moving to magnet manufacturing down the road. And so that is sort of how we're approaching it. And we've also said, strategy-wise, that our stage 3 strategy is buy, build and/or JV. We are clearly making great progress on the build front, but that does not foreclose any of the other opportunities. And so there are a lot of paths for us to get to our end goal, and it's not a foregone conclusion that we'll take any which one. But we feel good that we will get there with what we know right now based on how we've set things up strategically so far.

Okay. And maybe specifically on the IP front. So current -- I mean, current IP is probably held by some of the Japanese producers and...

Sure. Yes. So there is a lot of focus certainly on Japanese IP. Like I said, I think that these processes individually, there's -- these capabilities exist sort of outside of that realm. Certainly, there are Japanese magnet makers that do the entire process and have some intellectual property there. But I think what I would say is certainly, you're seeing us deploy a significant amount of capital into this opportunity. We would not be doing that if we didn't feel we had the freedom to operate. And so like I said, there are a lot of different ways, some shorter, some longer, some more labor intensive on the internal side than others, about how we get to our ultimate end goal, but we feel good that we will get there with the strategy that we've laid out.

Okay. So you have not yet disclosed the exact CapEx for the Texas facility. But suffice to say that the -- a huge portion of the $700 million CapEx is related to the Texas facility. But given the high capital intensity and your plan to maybe expand the capacity by 10x or even more, so what -- how are you planning to fund those expansion going forward?

Sure. Yes. So to your point, we've talked about our overall capital plan, obviously, which involves completing the stage 2 construction, bringing Fort Worth online and the heavy rare earth capability. I think that the -- when you look at our construction progress, certainly what we're focused on primarily with stage 3 or initial facility is risk-adjusted returns on capital, right? And so while this is our first facility, which is a greenfield, which means generally returns are lower than a brownfield, we feel very good about the return profile, particularly the risk-adjusted return profile, given the commercial agreements that we've been able to enter into and the way that we're structuring that business. And so are there opportunities for us to continue to move downstream and grow? And could those be higher return? Certainly, and that's something that we stare at all the time. But again, we're going to employ the walk-before-we-run mentality, okay? We certainly right now, even just performing in stage 1, generate a significant amount of free cash flow. And so -- and operating cash flow, obviously, that's getting reinvested into this capital plan. And so if you look at where commodity prices are right now, when you look at our business plan and what that means in terms of enabling our earnings power over time, we have a very strong balance sheet. And even with all of this capital that we're investing, we expect to come out the other side with a very strong balance sheet. And so that gives us a lot of flexibility to be opportunistic should the opportunity arise whether that's organic investment or something else. And so given the earnings power of the business, given the capital plan we've laid out and given the fact that we have been very methodical in our thought process around our balance sheet and not being capital markets reliant, being sure that we employ -- given the business that we're in, we have our leverage in the commodity price, our leverage is not on our balance sheet, that has given us a lot of flexibility. And so I don't expect that to change in the near future.

Okay. So the Chinese downstream industry is -- so they've definitely benefited from a lot of favorable policies. They do get full batt refund and stuff like that.

Yes.

So do you think once your stage 3 operation is up and running, you would be able to compete with the Chinese guys on the cost front?

So what we've said on that is obviously, I don't think anyone would expect our first magnetics facility and a 1,000 metric ton capacity to be the price leader vis-a-vis China. We don't expect that either. What we do expect to do is employ the same game plan that we've employed upstream downstream, which is scale up and come down the cost curve. This is a scale business, particularly the magnet-making piece, and rare earth production is a scale business. And when we talk about -- dovetailing into our discussion on capital, one of the fundamental advantages that the Chinese have is a lower initial capital outlay because they don't necessarily have all the environmental, health and safety concerns that we employ. But what you're seeing is while they may have had that advantage before, particularly on the rare earth side, their cost curve is shifting up as they are more and more focused on environmental controls, worker safety and things like that. And so I think their cost curve is shifting up. And while we may have a higher initial capital outlay, you see this in our upstream business and we intend to employ it in the downstream business as well, is we're paying for incremental automation as well. And so if you look at our current upstream facilities, yes, Chinese labor is cheaper on a per unit basis, but we have fewer units. I think that you will see a similar concept on the downstream. And certainly, we have a lot of ideas on bringing incremental automation and sort of avoiding frankly what is, in a lot of ways, a bit of an innovator's dilemma. They've got decades-old facilities in China that they're leveraging, and we're able to bring some new ideas to bear to compete on the cost side. But certainly, I think what it's going to require is us continuing to scale up. But what I think is interesting is there's a lot of market data out there about what the Chinese prices are. Historically, ex China magnets in general -- there is no significant U.S. capacity right now, but Japanese magnets, European magnets have been at a multiple of the price. Historically, a lot of that was due to quality. But I think what you're seeing is a real recognition from the market that they do not want to trip over dollars to pick up pennies, right? It's -- if this capability is existential for you as an automotive OEM, as a wind turbine manufacturer, you name it, and the percentage of your bill of materials that is impacted by this is low, like that's the sweet spot where you see a market developing that is willing to pay for that security of supply. And so we don't expect to build an entire business solely on that. We do want to continue to drive incremental scale and automation to come down the cost curve as much as we can. But what we are seeing is the fact that Western manufacturing is demanding that Western industry earn a return on capital in this industry to bring this capability back. And so that's what we see with this initial facility, and that's what I think we will continue to see. So I think that speaks to -- you hear this in not just magnet manufacturing or rare earths, you hear this in a lot of things, a bit of a decoupling and, with everything that's going on in the world, sort of the reversal of globalization. It's one of those things where this is a market where we are primed to see a bit of a bifurcation, I think, in how buyers think about what is a secure magnet worth to me versus a magnet that maybe I can get today. But not only do I not know if I can get it tomorrow, but I have no visibility into where that magnet maker gets their upstream supply. And so that's the -- one other piece that I would layer into this that I think is critical, is you're not just seeing the pure economic argument of growing this industry and being willing to pay for a fair return, but you're seeing the demands from an ESG perspective of understanding your supply base. And that's becoming more and more critical. And with the advantages that we have with our facility in California that does not have any of the radioactive tailings that many of the other players have to deal with, you see also customers really leaning into that and recognizing the benefit of that and being able to trace their supply chain all the way back through to mineral extraction. And I think that, that's a real competitive advantage that's becoming more and more important as well.

So we have exceeded our time. But one last question, a quick question will be on your thoughts on upstream M&A.

I think at the end of the day, we are opportunistic. We approach this originally with an investor's mindset, and so our focus is return on capital. And we're obviously, as a management team, large owners of the company and focused on the same things that our investors are. Specifically on upstream M&A, obviously we've talked about the fact that we think probably the highest-return incremental supply in the market would come from us. And so with that lens and the same lens that we talked about, the difficulty in adding supply, it's not like there are a ton of obvious candidates out there. But I think at the end of the day, we will be opportunistic and sort of follow the returns.

Okay. That's it from our side. I mean so thank you for your time. Thanks. Appreciate it.

Absolutely. Thanks.