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Earnings Transcript for LYC.AX - Q4 Fiscal Year 2024

Jennifer Parker: Good morning, and welcome to the Lynas Rare Earths' Investor Briefing for the 2024 Financial Year. Today's briefing will be presented by Amanda Lacaze, CEO and Managing Director. And Amanda is joined today by Gaudenz Sturzenegger, CFO; Pol Le Roux, COO; and Daniel Havas, the VP of Strategy and Investor relations. There will be a Q&A session following the briefing, and we ask that the questions are limited to one question per session. Thank you. I'll now hand over to Amanda.
Amanda Lacaze: Good morning, everybody. As always, thank you for joining us as we brief today on our FY '24 results. I think, as always, there are a few surprises given the detail that we provide in our quarterly reports. Just before I start, read the disclaimer carefully, please, everybody. And as a minerals company, in particular, we would like to acknowledge the traditional owners on the lands on which we live, work, and meet, and also acknowledge and value our Aboriginal and Torres Strait Islander employees, partners and communities, and pay respect to their Elders past and present. The market this year was depressed. I think even a casual observer would have seen that. It had the lowest sustained prices since 2020 and slower demand growth than we have seen over the past 4 years. In this difficult market, Lynas has delivered an EBITDA of $132.1 million and maintained a very strong balance sheet. Whilst this outcome was a reduction versus the prior year when prices were much more favourable, it reflected our continuing focus on capturing cost efficiencies across the business. Operationally, we made decisions on production that reflected the muted market. We reduced total rare earth oxide production. The prices for lanthanum and cerium products were lower than the cost of production of those materials and we elected to reject some of those products early in the process. NdPr production reduced by 8%, primarily as a consequence of the extended shutdown when we undertook major works at our Lynas Malaysia facility at the end of last calendar year. With -- following the variation to our Malaysian operation -- operating license, which we received in October 2023, we were confident to undertake that works program. This investment provides us with a progressive uplift in separation and finishing capacity to 10,500 tonnes per annum and a further significant investment in our Malaysian operations is the implementation of our project to separate dysprosium and terbium at our Malaysian operations for the first time. Of course, as all investors know, we continued with our significant capital plan, including construction, completion, commissioning and startup of our Kalgoorlie plant and completion of Stage 1 of our Mt Weld expansion program and commencement of Stage 2. Our first core value in Lynas is care and that is articulated that we care for each other and we make sure we all go home safe and well. In financial year '24, we were pleased to record a reduction in lost time injury frequency rates and we were very proud to deliver the Lynas Malaysia works program injury free. This was a very significant program of works, the most significant since the plant has been constructed. We were not pleased with an increase in our total recordable injury frequency rate and we have reviewed and improved our health and safety programs for financial year '25. Well, last year was a busy and challenging year with many significant achievements. We delivered profitable outcomes in a very difficult market and set the foundations for future success as the market rebounds. Early in the financial year, we delivered one of the most important outcomes for our business and our shareholders with the variation in our Malaysian license. This allows us to continue to import and process lanthanide concentrate from our Mt Weld concentrator at Lynas Malaysia. The Malaysian government has now clearly articulated its policy to develop the Malaysian rare earths industry, both upstream and downstream, and has placed Lynas and recognized Lynas as a key part of that development. We are very excited to have a platform for sustainable operations in Malaysia and are progressing our investment program accordingly. You will note our investments in the Permanent Disposal Facility for current residues, and alongside that, our cooperative research program, under which we aim to develop a process by which residues can all be under 1 Becquerel per gram of radiation. This gives us confidence to progress our investment program in Malaysia, including the uplifting capacity and new products, particularly dysprosium and terbium. Our costs were reduced by 17% whilst NdPr production, which I think as everyone knows is our core value driver, reduced only by 8%. Initiatives to improve the flow sheet at each stage and deliver better recoveries were at the heart of the cost improvement, alongside our usual focus on optimizing procurement and workforce efficiency. In the year, we had the first shipment of mixed rare earth carbonate from our new Kalgoorlie facility. It has now been received and processed in Kuantan successfully. Whilst we were disappointed with the increase in cost to construct the Kalgoorlie facility, we are incredibly proud of this new facility and confident it will serve us well as the market continues to grow. Of course, we are a minerals company. So our ongoing success and sustainability is founded on our Mt Weld ore body and progress at Mt Weld this year has been really exciting. We recently released a new resource and reserve statement. We've got our expansion program and we also had the signing of a new 5-year contract with the Carey Mining Group. So, this slide really speaks to itself. 92% increase in mineral resources from our June 2018 statement, a 63% increase in ore reserves, 46% in total rare earth oxides and very importantly, a 92% increase in contained dysprosium. That gives us over 35 years mine life at current production rates of 7,200 tonnes per annum NdPr or greater than 20 years at our expanded production capacity of 12,000 tonnes per annum of NdPr oxide. The updated statement does not include the fresh carbonatite. It is based on 84,000 meters of drilling in the saprolite zone down to a depth of 200 meters, and it has significantly enhanced our understanding of the various zones within the Mt Weld ore body. As you can see from these figures, that extensive drilling has enhanced our understanding of the mineralogy. Perhaps the most exciting discovery is the expansive heavy rare earths halo shown here by the yellow blocking. The contained heavy rare earths, specifically dysprosium and terbium, proves Mt Weld is not just an exceptional source of light rare earths, but also an exceptional world-leading heavy rare earths resource. The increase in mineral resource comes from a lateral extension of the mineralization, additional heavy rare earths elements mineralized zones, a new deep appetite zone defined below the current pit, transitional and fresh mineralization below the 2018 life of mine pit shell, and mineralized clay zones above the saprolite ore zone of up to 3% rare earth oxides. The Mt Weld ore reserves are now 32 million tonnes at 6.4% total rare earth oxides for 2 million tonnes of contained TREO. Key changes compared to the 2018 ore reserves include an increase in ore reserve tonnage by 63%. The average grade has reduced from 8.6% to 6.4%. That reflects depletion and a revised cutoff grade based upon our improved and enhanced understanding of processing. Contained total rare earth oxides have increased 22% and contained Dy oxide has increased 92% from 6,660 tonnes to 12,790 tonnes. This new resource and reserve statement validates our view that continuing investment in exploration of the Mt Weld ore body offers the most economic pathway to continued supply of rare earth elements, both light and heavy. A 63% increase in ore reserves following 10 years of mining operations -- sorry, I'll just go back, is an excellent outcome from this most recent exploration program. It has identified truly new reserves and our ability to reduce the cutoff grade to 2.8% based on our proven processing capacity and the introduction of the new DyTb separation circuit in Malaysia. We've now included our tailings, which grade at 7.6% in the oil reserve based on the new processing capacity offered by the Mt Weld expansion program. We've had this goal for some years and have carefully managed our tailings to allow us to recover them. New resource, new understanding of the geology and metallurgy in our ore body, and firm plans for developing and processing those materials. Our geological and metallurgical teams have worked very hard on this program over the last 2 years and I would like to specifically thank our partners at JOGMEC who provided 2 expert geologists who worked alongside our team to do that work. At Lynas, we believe that it's not only what we do that's important, but how we do it, that is important. So ESG is not an external imposition to be taken with a bit of a grimace on our face. The principles start at -- sit at the heart of everything we do. We believe sustained prosperity can only be achieved when our people and our communities share in that prosperity. And this slide shows some examples of our initiatives during the year. Just turning to the market. The market was difficult in FY '24. Demand growth moderated, still grew, but it moderated. At the same time, as China released increased mining and production quotas. This misalignment resulted in overstocking in the Chinese market at the same time that the demand moderated. We are very pleased to see the recent firming of prices. Our intelligence indicates improved inside China demand and reduction in inventories, and we are optimistic with the new significantly moderated quotas released last week, we will see continuing improvement in market dynamics. We operate in a volatile market and we cannot drop our heads just because we have low prices. We are always energized to ensure we can compete even when the price is low and FY '25 is the strong evidence of that. But as it is inevitable, there will be prices when the price is low. It is also inevitable that the market will improve and we will be prepared for that with our program of works to ensure that we can meet increasing demand. At Mt Weld, we made significant progress on the growth plan, our mining operations, our new partnership with Carey Mining, one of Australia's first ever indigenous owned businesses, the completion of the exploration drilling program, the Mt Weld expansion going very well and the release of the new mineral resource and ore reserve update. This is a picture which brings joy to my heart. It's our new filter building. One of the areas where we've had persistent challenges with safety has been in our filtration and dewatering process at Mt Weld. This new building contains state-of-the-art filter process automatic which will significantly reduce risk to our employees in our operations in Mt Weld. Stage 1 of the expansion is complete. We're in the process now of commissioning it and we will progressively bring it into our flow sheet to debottleneck the dewatering circuit which has been the Mt Weld bottleneck for some time. We also have commenced early works on the new 65 megawatt gas-firmed hybrid renewable power station, which will significantly reduce our greenhouse gas emissions on this new expansion. The Kalgoorlie facility, isn't it a thing of beauty? The ramp-up now that we have the Malaysian license in place and as we look into the market will be managed to align with both the Mt Weld and the Malaysian production capacity uplifts. We did have a successful first shipment of MREC in the June quarter and we continue to progress the ramp-up of that facility. Now, we will start to switch our focus to efficiency and initiatives, which will improve the cost competitiveness of that facility. And in Lynas, Malaysia, we have had a very exciting year. Of course, the variation to the operating license is very reassuring and high value adding for our business. It enables full operations and allows us to confidently invest in further development. The photo here shows our new mixed rare earth carbonate receivable facility completed, commissioned, and operating. Our team has implemented a very cost-effective improvement in our flow sheet in solvent extraction, which allows us for really minimal investment to increase our separation capacity to approximately 10,500 tonnes per annum of NdPr. And, of course, I've mentioned already a couple of times the DyTb system separation circuits. In the U.S., during the year we signed the follow-on contract with the U.S. DoD for the construction of the heavy rare earths plant. We've done a huge amount of work on engineering, procurement, and approvals. Unfortunately, whilst we got the national environmental approval that it was a project of no significant impact, a permitting issue has arisen related to wastewater management. We think it is unlikely this will be resolved this year. So the earthworks, which we had previously planned to commence this year, will be delayed until that matter is resolved. With the implementation of the DyTb circuit in Malaysia, we don't see this being significantly affecting in terms of our ability to meet our customers' needs. Of course, we cannot prosper unless the communities around us prosper, and we continue to be very actively engaged across a variety of different programs with our communities. So at Lynas, we are productive, we are profitable, and we continue to grow. We are fit for today when the market has been less pleasing than it was at times over the last 2 or 3 years. We have worked to ensure that we sustain our cost muscle. But we are also making sure that we are fit for tomorrow, and that includes, both making sure that we have the capacity, the operating competence, and the products to meet the market as it grows in the future. So with that, I'm very happy to take questions. As I said, best I'd like it if you could just ask 1 question at a time. That way everybody gets to have a turn.
Operator: [Operator Instructions] Our first question comes from Paul Young from Goldman Sachs.
Paul Young: Amanda, my only question is actually on operating costs, which I just wonder if you could step through and just provide a bit more of color on operating cost performance, maybe just quite a few numbers. Your costs were $280 million in FY '24. They did come down by about $60 million. I'm talking about OpEx, excluding G&A. I mean, your production came down during the year, but -- and there's probably some other factors there. So what I'm trying to get to is, as you ramp-up production, what is actually the starting base for costs and for perspective of fixed versus variable, what are you seeing on chemical inputs? What I'm trying to get a sense of is, with production increasing, where will absolute cost go? Because my sense is, by the way, that the Street's just way too high on operating costs relative to what they're forecasting for production.
Amanda Lacaze: Yes. So, Paul, I know that Gaudenz would be happy -- Gaudenz and Daniel would be happy to have a bit more time on this with you as well. But I think that you are right that we look at our costs. We look at them, of course, on a unit cost, as well as a total cost basis. On a unit cost basis, we continue to target further reduction. So we saw unit cost reductions this year. Some of that came from reductions in input costs. A fair bit of it came from improving our operation -- operating efficiencies, which was not just availability, but it was particularly in recoveries. And so, we, I think, continue to improve our understanding of the interdependencies and recoveries right from the mine through to finished product, and understanding what we might be able to do even at the concentrator that is ultimately going to deliver a better outcome in our processing facility in Malaysia has been a standout success this year. Probably the most important thing is that, in our cracking and leaching facility in Malaysia, we were able to significantly improve recoveries this year. And that came -- some of that improvement started before we did the major works, and some of it came after we had completed those works. The year that we've had the very best cost performance in our business was in 2019 when we had a very stable operations, and we continue to use that as sort of a minimum benchmark in terms of targeting, and we're targeted on continuing to get back to there. The other thing that really did affect it, as I said is, we selectively rejected some of the lanthanum and cerium early in the process. The process of taking those once they're separated and putting them through the precip and the calcine circuits is greater than the cost that we can recover in the market. So we rightsized the amount of that material that we produced, that allowed us once again to really optimize our assets. I'm conscious we have, Pol, on the line as well, and a lot of this has been done within Pol's area. And I'll just invite him if he wanted to make any further comments on that.
Pol Le Roux: Yes, there was a lot of improvement done in the past year on both variable costs and fixed costs in production. So variable costs, despite prices of chemicals and energy being higher than 2019, we have substantially improved our cost position, thanks to better recoveries, reduction of chemical usage, and energy usage, which is very good. And a lot of work has been done as well on the fixed costs through optimizing the sharing of work between the sites. And this will continue, of course. Costs are mussels and we plan to keep building our mussels over time. So very, very good achievement of the team.
Paul Young: Great, Pol. Just can I ask a quick follow-up, Amanda, just on cost again? I mean, as far as -- I know you've been capitalizing Kal cracking and leaching costs. I presume that we'll start expensing those a little bit over the next 12 months. But just on the uncontrollable costs and chemical inputs, have we -- do you know if you've unwound the high cost inventories like across all your chemical products and we're back to chemical inputs being at more normalized pricing?
Amanda Lacaze: Across the business, yes, largely so.
Paul Young: Okay.
Amanda Lacaze: Yes. And you're right, Paul, Kal will come in. We're assessing at present with the auditors that what's the right time for us to make that transition from the capital to the operating account.
Paul Young: Yes. Amanda, maybe just lastly, I know you don't give production guidance, and therefore, you don't give cost guidance. But again, I just think that the Street's too high on cost, by the way. Is there any way you can help the Street would be I think helpful for your company.
Amanda Lacaze: Okay. Yes, we'll think about how we could do that better. Thank you.
Operator: Our next question comes from Chen Jiang from Bank of America.
Chen Jiang: Amanda, congrats on the Mt Weld resources and ore reserves upgrade released on 5th of August. I just have 1 question for the production outlook and I know you don't provide a guidance. Just look at the market started to rebound in the last 4 weeks. July, when you released the quarterly, the NdPr price was average USD 50 per kilogram, but now the spot is like $55 per kilogram. How can we think of Lynas NdPr production versus your capacity of 9,000 tonnes? And also remind us any major maintenance work or shutdown that would impact the production.
Amanda Lacaze: Chen, we aim -- 5 years ago we set ourselves the target of being able to produce 10,500 tonnes per annum of separated NdPr in this financial year. It remains our target that we will demonstrate that. However, looking into the market at present, we don't feel it's necessary to sort of jump to that number right now. I think that the market is adjusting to slightly more moderate production levels and the Chinese quotas assist us with that. But certainly, through this year, by the end of the year, our objective would be to be able to demonstrate our ability to sustainably produce at the number that we have targeted now for quite some time. That effectively means that we need to have both Kalgoorlie and Malaysian cracking and leaching performing reliably at target rates, and we will optimize the proportion of production between those 2. The -- however, that's not going to be what we do, particularly in the first 6 months of the year. We think that it's quite important not to provide any more supply side pressure into the market as it readjusts and as the price starts to improve, as you've noted, Chen, it's very pleasing the way that it's improved over the past month or so. I said to Pol that we could have some Australian sparkling, but not champagne, not yet. So, this year, we will have some additional works that we will do at the Lynas plant and we will probably do that towards the end of the year. That's related specifically to our cracking and leaching facility there. But our objective at this stage is that, we will be able to continue with downstream production with that feedstock being provided from the mixed rare earth carbonate from Kalgoorlie during the time that we actually have the cracking and leaching facility in Malaysia shutdown. But it will be a modest stepping up quarter-by-quarter, rather than attempting to go full blast on sort of day 1 because we think that it is quite important to support the market coming back into more like an equilibrium between supply and demand.
Chen Jiang: Sure. Amanda, just maybe if I can have a follow-up from your answer. So, I know 1 question, but it's a follow-up from my single question. You mentioned additional works towards the end of FY '25. How big is the supply? I mean, is there a shutdown? Or how should we think about the supply disruption? Like, just trying to smooth out your -- the production forecast quarter-over-quarter.
Amanda Lacaze: At the end of this calendar year, we will have to do some work on one of our kilns in Malaysia, 1 or maybe 2. Pol, I can't remember. So we actually have to do that at the end of this calendar year. We're hopeful. We're working on the ramp-up and the way that we manage the mixed rare earth carbonate inventory that comes from Kalgoorlie. It should not have a significant impact on finished goods production. The amount that we produce will be what we choose to produce given market demand as opposed to necessarily being determined by the facility and any maintenance activities that we need to undertake.
Operator: Our next question comes from Al Harvey from JPMorgan.
AI Harvey: Amanda, just wanting to get a little bit more on the permitting issues in the states. What are the steps that we need to see to resolve this? Is it likely to resolve in calendar year 2025? And just extending from that, I guess, the updated time frame to commission, I think with the DoD funding update last year had been an FY '26 target for it being operational. How should we think about this delay? And then I will sneak in another final question. Just how you're thinking about system capacity more broadly, 10.5 from LAMP, 1.5 from Texas? Do you still think about going further beyond that in the medium term?
Amanda Lacaze: Thanks, Al. So the wastewater permitting situation in Texas is quite complex. I don't propose to go through sort of line by line. Suffice it to say that we selected this site because it's alongside a very big brother, which is Dow Chemical. They have a particular issue that they are dealing with, and we can't move to the next stage of the approval process until that issue is dealt with. So we're working closely with them and engaged with the USG. So everybody is fully aware of the implications. The -- we don't have -- when we first looked at this, we didn't -- we hadn't finalized our thinking on how we were going to be able to really increase our separation capacity in Malaysia. Today, we don't have sort of a huge amount of supply side pressure to accelerate this. It's not going to fundamentally affect our ability to meet our customer needs because of the rest of the work that we've undertaken on our capacity and production configuration. So the U.S. project is one which we think is valuable and good to have. It's part of our ambition to have a footprint geographically around the world. It's not got some of the time pressures that we may have perceived previously. So the fact that this has come up as an issue, we can just work through it in due course. I'm sorry. Al, because I forgot what your follow-up was. I noticed that the 1 question rule is being honored in the breach. So...
AI Harvey: Just -- if you don't mind, just, I guess, how you're thinking about system capacity in the medium term, then if markets did recover to a level that was acceptable to you and the team.
Amanda Lacaze: Yes. So I think our first milestone is get to the 9,000 tonnes, which is absolutely consistently on spec, on time, all of those sorts of things. And that's pretty much where -- sort of where we're aiming to make sure all of our SX circuits are there. And I think, as we mentioned, we're managing our product finishing at present to be able to do that. But we have new equipment coming in, new rotary kilns for product finishing and some other equipment to allow us to do that, and they will be coming in later this year. The next step is the 10,500 tonnes, which we aim to demonstrate in this financial year. The next step after that is logically to 12,000 tonnes using -- because that's our target at Mt Weld and we will have 2 paths to be able to do that. We will have more potential to do additional separation in Malaysia or we will have the facility in the U.S. And so, that becomes the next step. And I think that what it does provide very clearly is evidence that we can meet market demand, certainly, over the medium term, particularly from outside China customers, both magnet makers and magnet buyers.
Operator: Our next question comes from Reg Spencer from Canaccord Genuity.
Reg Spencer: Amanda, just one question...
Amanda Lacaze: I'm sorry, I can't hear you.
Reg Spencer: Sorry, Amanda. I will stick to the 1 question rule this morning relates to the CapEx guide for FY '25. Are you able to give us some kind of split on what remaining capitalized costs there might be for Kal, remaining CapEx for the Mt Weld expansion, and what you might plan to spend in Malaysia?
Amanda Lacaze: Sure. So the lion's share of that is completing the Mt Weld expansion. I think, I can't see, Gaudenz, but it's about 65% of what we're sort of estimating is the total spend, maybe a bit more. Then there's the mop up at Kalgoorlie, which is now relatively small. We've spent a lot there over the last 3 years and the LAMP industrial plan we still have over this year and next year, some tens of millions of dollars that we will spend in Malaysia. But the lion's share is completing the Mt Weld expansion.
Operator: Our next question comes from CLSA.
Unidentified Analyst: Just a question on your statement that you're promoting fixed pricing and long-term contracts. Not sure if this is something new. Can you just provide a little more detail on the promotion of these on the fixed pricing and the development of the long-term contracts? Are there any in place? Are there any specific floors or ceilings in the discussions? And also, just a brief comment on -- I know we've talked to some Chinese magnet makers and they've mentioned that they're receiving quite a bit of pressure from European customers to diversify their supply chains. Are you seeing similar pressures?
Amanda Lacaze: Okay. So the situation with contracts, it's not new news. The idea that you would seek to have a pricing portfolio where you have a variety of formula associated to the pricing is something that we've talked about for, I don't know, 8 years. We do have some customers who are on fixed prices, we have some customers who are on floor ceiling prices, and we have some where we have agreed a premium above the market price, but it follows the market price over time. We don't disclose the specific prices that we sell at. It's commercial and confident, but it's not an earth-shattering new concept unlike some people might have you believe. We aim to optimize our pricing at all times. We don't sell anything into the spot market and we think that, that is beneficial. Everything that we sell is on a contracted basis with some price formula associated with it. In terms of the European market, the critical -- CRMA, critical minerals -- CMRA, maybe I've got my acronym wrong, but anyway, the Critical Minerals Act in the EU certainly requires EU consumers to use more material, which is -- interestingly, there is one requirement for material sourced from the EU. Now, whether that's mined or whether it's recycled, I guess, is something that is a matter for the EU. But certainly, then there is a proportion, which is to be processed and processed outside of China. So this idea that there's a singular supply chain on which Europe is dependent, the EU is attempting to address that matter. So we see that, and we are working with magnet buyers, actively working with magnet buyers in Europe to find ways to ensure that they are able to meet the regulations. I think as we think about the development of the outside China industry, on which -- which is important for all of us, including, I would suggest, even the Chinese who quite like their monopoly or quasi-monopoly. But having said that, a robust market will be more -- a diverse market will be more robust. I think we see both the U.S. government and the EU governments really adopting, I'd call it, sort of the carrot and stick get the donkey moving strategy. But they have both carrots with things like the Inflation Reduction Act in the U.S., but they also have sticks like the CRMA in the EU or some other sourcing legislation that they have in the U.S. We will all be better if there is more development of the outside China industry. And that's not just about resource, because frankly, if you put Mt Weld and say, Mountain Pass together, you've got pretty much resource that you need. It's really about downstream industry development as well.
Operator: Our next question comes from Daniel Morgan from Barrenjoey.
Daniel Morgan: Could I just return to Paul's earlier point on operating cost, if I may? So in 2019, as part of your answer, you said that was a benchmark cost year for you. I estimate your costs at that time were about AUD40 a kilo of NdPr. Is that something that might be attainable this year or close to or any quantitative guidance at all on operating costs I think would help the market because I do share Paul's view that operating cost estimates might be a little bit higher?
Amanda Lacaze: It is in our sights, and I think we are quite determined that we will be able to achieve that sort of cost level. But the problem with guidance is that, I'm not going to put a noose around my neck on the date that we achieve that. But we believe that we have a series of initiatives that will allow us to be in the vicinity of that sort of number on a like-for-like comparison. But bear in mind that in this year, we will be bringing Kalgoorlie into the equation, and that therefore will give us some different cost pressures. And at this stage, we have not done the work to optimize our costs at Kalgoorlie. So, I don't want to make any promises about how low we can actually get our total costs in this financial year, but we know that our success over time is dependent on us being the lowest or close to lowest cost producer in the market and we continue to have a core focus on delivering that.
Operator: Our next question comes from Austin Yun from Macquarie.
Austin Yun: Most of the questions being asked, but maybe just a quick follow-up on the CapEx guidance. The $400 million to $500 million is quite a wide range. I'm just wondering what's the kind of swing factor or noncommitted programs that you have that could take place in next year or could be delayed. If any colors that you can provide would be appreciated.
Amanda Lacaze: Yes. So, thanks, Austin. So the reason why it is a range, and you're right, it's relatively broad. We will, of course, actively manage our capital program to be fit for purpose with market conditions. We're not going to just keep spending money on capital if the market remains sort of difficult. And we have identified the programs which could either be moderated or delayed as part of that process. So, as said earlier, the Mt Weld expansion, and I can tell you, as we were looking into this very sort of difficult market, we have 3 times gone back around and looked at that and looked at would there be value in delaying the second -- the Stage 2 of that. What would be that value? What would be the cost to disrupting what we've got, which is a very efficient project in implementation at present? We had made the decision that we will proceed with that project and complete it in this financial year. But we do have other projects and, of course, we don't really have an option but to complete sort of the final stages in Kalgoorlie. The stage at which we make the transition from the capital account to the operating account will clearly have an impact on the CapEx line as it stands in FY '25. And then as we look at some of our business as usual capital programs, we will make decisions on those and the speed at which we execute based upon that the health and the market dynamics into which we're facing. So that's why it is such a broad range. But we are confident it will actually be managed within that range and managed to be optimum for the market into which we're selling.
Operator: Our next question comes from Regan Burrows from Bell Potter.
Regan Burrows: I guess, you mentioned, obviously, on the 35-year reserve life, that sort of implies a 7,200 tonne per annum run rate for NdPr currently. And you mentioned production this coming financial year will be weighted to the second half. I mean, that's still a 27% increase year-on-year. I guess, are you comfortable that the market's going to sort of recover to a sufficient level by the beginning of calendar year '25? And if it doesn't, what's the thinking?
Amanda Lacaze: Well, we never set a path and then bullishly go down that path, no matter what else happens around us. So, of course, we will accommodate what happens with the market. As I said, though, I think that we've got some signposts at present that give us a bit more confidence coming into this financial year. Not just the sort of firming of the price over the last month or so, but the new Chinese quotas, which were released last week, certainly give us more confidence that there's a drive also within China to really improve value in the market. And we are seeing an improvement in demand and a reduction in inventories at the same time. So, we will manage the task that -- the management task is, how do we make sure that we're operating our assets as efficiently as we can at the same time as making sure we're not overproducing for the market. And we think that we've got a path to do that. And we remain convicted on the underlying growth in this market. It just slowed a bit last year and it did have a lot of supply side pressure because of the quotas in China, but we think that the market will continue to grow. We're rather expecting that it's going to be more a case of when do we accelerate production rather than when do we take our foot off the accelerator.
Operator: [Operator Instructions] Our next question comes from Dim Ariyasinghe from UBS.
Dim Ariyasinghe: I think most of the questions have been asked, but I might chuck in with a couple of follow-ups. So first on the production outlook for next year with respect to the Chinese production quotas, is it as simple as thinking? So I think they missed estimates a couple of weeks ago, which was positive that Lynas could produce marginally more. And then looking for the first half of next year, can we go and -- if they underproduce again or miss market expectations, can we almost take that and give that to Lynas' share of production?
Amanda Lacaze: So I might let Pol have a few comments on the China quotas, because he's very close to them and can give you a bit more rounded perspective.
Pol Le Roux: Yes. What is interesting is to see the modest increase in mining and production, especially production quotas in China. The other factor that is not under control at the moment, it's production of rare earths from imported ore. That quantity is substantial and doesn't help the price. But at the same time, you saw the imports from Myanmar decreasing because, at the current price level, there was no way for the mining company to find a deal that was acceptable to the separator in China. So that makes price quite volatile because from one quarter to another, one month to another, the volume changed quite a lot. I expect that to be better organized in the near future so that we would have a more steady market. But Amanda says, I know China well, but I'm not the Chinese administration.
Dim Ariyasinghe: Yes. I guess, is it like a case that if they underperform again or miss next year, that you guys can ramp-up quickly into the second half of FY '25?
Amanda Lacaze: Yes, that is our objective, is that, I think that what you will see this year is that, the second half production is a step up from the first half production. And we expect that, that will be aligned to market demand.
Operator: And I'm showing no further questions at this time. I'd like to turn the floor back over to Ms. Lacaze for closing remarks.
Amanda Lacaze: Thank you. Yes. So, aren't we doing well? We're going to be done in the hour, which I think may be a record. Thank you for your questions. We will take them on board and really look at what are the opportunities to enhance people's understanding. I particularly recognize the question around the operating costs and whether we -- and we will work through that because it is -- and you can see from the slide that I've left on the screen here, it is our #1 objective to make sure that we continue to improve, not just be low-cost, but to continue to improve our cost position. And it is also really important to recognize that, that is not just about input costs, but it is really about the way that we operate our assets. And the biggest kick I think that we've had this year is recovery improvement. And the second is being more selective in what we actually produce. Mt Weld continues to give us this fabulous foundation. It is a low-cost operation because it's high grade. And that cannot be -- geology can't be reproduced elsewhere. The geology is as the geology is. So we look forward to actually, I think, a good year this year and being a perpetual optimist, certainly, Pol has a great saying, is that, today, we're much better than last -- yesterday and much worse than tomorrow. So our objective is to ensure that tomorrow and that this year continues to see us improve our performance. So, once again, thanks very much. And I'm sure that the team will follow up with some more detail on some of those areas that people have asked questions.