Half Year Report FY25 (including Annexure 4D)

• Lynas Rare Earths Limited released its interim financial report for the half year ended December 31, 2024.
• Revenue increased by 8% to $254.3 million compared to the same period last year, driven by a 23% increase in NdPr sales volume, despite a decrease in NdPr prices.
• Gross profit decreased by 35% to $49.0 million, impacted by a 29% increase in cost of sales due to higher NdPr sales volume and a $5.1 million inventory write-down.
• Net profit attributable to members significantly decreased by 85% to $5.9 million.
• EBITDA decreased by 39% to $38.1 million.
• The company recorded an improved operating cash inflow of $49.5 million.
• Lynas officially opened its Kalgoorlie Facility in November 2024 and made progress on its Mt Weld Expansion project.
• The company is working with the Department of Defense to address wastewater management challenges at its U.S. Rare Earths Processing Facility.
• No dividends were paid or proposed for the period.

Score: 4

Explanation: The sentiment is below neutral due to the significant drop in profits and ongoing challenges, despite some positive developments in expansion projects.

• Revenue increased despite challenging market conditions.
• NdPr sales volume showed strong growth.
• Operating cash flow improved due to reduced debtors and sale of finished goods inventory.
• The Kalgoorlie Facility is now operational, representing a significant milestone.
• The Mt Weld Expansion project is progressing, with Stage 1 commissioned and delivering improvements.
• The updated Mt Weld Mineral Resource and Ore Reserve estimates indicate a significantly extended mine life.
• Lynas Malaysia is making progress towards producing separate Heavy Rare Earths products.

• Gross profit and net profit significantly decreased compared to the prior year.
• Cost of sales increased substantially.
• A $5.1 million net realisable value provision was made against low-value inventory.
• The average China domestic price of NdPr decreased.
• December production in Malaysia was affected by technical issues with MREC feedstock.
• Wastewater management challenges persist at the Seadrift site in the U.S.

• Rare earth market pricing remains at low levels, impacting profitability.
• Unit costs of production have increased with new facilities coming online.
• Technical issues in MREC feedstock can affect production at Lynas Malaysia.
• Wastewater management challenges at the U.S. facility need to be resolved.
• The Malawi deposit remains subject to an ongoing title dispute.
• The Group is exposed to fluctuations in foreign exchange rates.
• The Group is subject to environmental regulations and potential liabilities.

Lynas is focused on completing the Mt Weld Expansion project and ramping up production at both the Kalgoorlie and Malaysia facilities to meet anticipated future market growth. The company is also working to resolve challenges at its U.S. facility and aims to begin producing separate Heavy Rare Earths products in Malaysia in 2025. Lynas Malaysia is targeting first production of two separate Heavy Rare Earths (HRE) products in the 2025 calendar year. Process performance modifications to progressively work towards 10,500 tonnes per annum NdPr production capacity continued throughout the period. We expect to ramp-up these modified facilities to reach the 10,500 tonnes per annum NdPr production rate by the end of FY2025.

• The opening [of the Kalgoorlie Facility] highlighted the significance of the Kalgoorlie Facility as Australia's only downstream rare earths processing facility.
• Constructing, commissioning and commencing operations of a facility of this scale and complexity in less than two and a half years from the receipt of full construction approvals is a significant achievement from all involved.
• These are significant milestones for our Lynas 2025 growth plan.
• When complete, the Mt Weld Expansion project, together with the Kalgoorlie Facility, will ensure that Lynas is well positioned to take advantage of future market growth.
• A pathway has been identified to resolve the wastewater management challenges previously noted at the Seadrift site.
• Lynas is now working with the Department of Defense to assess this pathway, and alternative approaches.

The rare earths market is currently experiencing low prices, impacting producers like Lynas. The announcement reflects the broader industry trend of increased production capacity, particularly in NdPr, but also highlights the challenges of lower prices and increased costs. The focus on downstream processing and Heavy Rare Earths separation aligns with industry efforts to diversify supply chains and reduce reliance on specific regions.

• Lynas' results are reflective of the broader challenges in the rare earths market, with lower prices impacting profitability across the industry.
• Compared to MP Materials, another major rare earths producer, Lynas has a more diversified downstream processing capacity with facilities in Malaysia and Australia, while MP Materials primarily focuses on upstream production.
• Iluka Resources, another Australian company, is also investing in rare earths processing, indicating a growing trend of domestic processing capacity in Australia.
• Lynas' focus on Heavy Rare Earths separation is a differentiator, as many producers primarily focus on Light Rare Earths like NdPr.

• Shareholders may be impacted by the lower profits and lack of dividends.
• Employees are likely to be impacted by the ongoing expansion projects and operational changes.
• Customers may benefit from increased production capacity and diversified product offerings in the long term.
• Creditors, particularly JARE, have a significant stake in Lynas' performance and debt repayment schedule.

• Continue construction and commissioning of the Mt Weld Expansion project.
• Ramp up production at the Kalgoorlie and Malaysia facilities.
• Work with the Department of Defense to resolve wastewater management issues at the U.S. facility.
• Commence commissioning and ramp-up of the new Dy/Tb separation circuit in Malaysia.
• Continue exploration and development of the Mt Weld resource.

• August 5, 2024: Lynas announced a Mt Weld Mineral Resource and Ore Reserve Update.
• August 2024: New Mt Weld Mineral Resource and Reserve statement released.
• November 8, 2024: Official opening of the Kalgoorlie Facility.
• December 25, 2024: Chemical inputs required for MREC feedstock treatment arrived at Lynas Malaysia.
• December 31, 2024: End of the reporting period.
• February 26, 2025: Directors' report and financial report release date.
• March 2025: Expected commencement of commissioning of Stage 3 of the Mt Weld Expansion.
• March 2025: Planned operation of gas power generation assets at Mt Weld.
• Mid-CY2025: Expected commissioning and ramp-up of the new Dy/Tb separation circuit in Lynas Malaysia.
• End of FY2025: Expect to ramp-up modified facilities to reach the 10,500 tonnes per annum NdPr production rate.