Lynas Rare Earths : Quarterly Activities Report

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QUARTERLY REPORT

FOR THE PERIOD ENDED 30 JUNE 2022

18 July 2022

HIGHLIGHTS

•	Quarterly Sales Revenue:	A$294.5m	(Q3	FY22:	A$327.7)
•	Sales receipts:	A$351m	(Q3 FY22:	A$262m)
• Closing cash and short term deposits:	A$965.6m	(Q3 FY22:	A$768.4m)
•	Total REO production:	3,650 REOt	(Q3	FY22:	4,945 tonnes)
	o NdPr production:	1,579 REOt	(Q3	FY22:	1,687 tonnes)

• Lynas 2025 growth project highlights:
  o Lynas awarded US$120m follow on contract by the US DoD to construct a Heavy Rare Earths facility in the USA
  o Progress on the construction of the Kalgoorlie Rare Earths Processing Facility continues to accelerate
  o All five kiln sections have been lifted into position and assembled o Cash Outflow on Capital projects increased to $73.6m during the quarter

CEO REVIEW

I am pleased to report a very strong final quarter for Financial Year 2022 (FY22). Lynas has continued to realise the benefits of robust market pricing and demand despite continued challenges in the external environment. Our year end cash balance of $965.6m provides a confident basis for funding continued growth as demand grows.

Record sales receipts of A$351m were achieved in the quarter. Sales revenue of A$294.5m was the 2nd highest quarterly result recorded reflecting slightly lower production primarily due to water shortages in Malaysia.

During the period, rare earth prices were sustained at recent high levels, especially the NdPr price which remained between 70% and 80% higher than at the same time last year. The average China Domestic Price for NdPr during the quarter was US$120/kg. Demand for Lynas' products remained strong in the quarter, with the majority of our products sold in the outside China market.

NdPr production of 1,579 tonnes and total REO production of 3,650 tonnes was achieved during the quarter. This was lower than in the third quarter due to ongoing and unpredictable water supply interruptions from our local supplier in Malaysia. Over the past 5 years, Lynas has implemented several mitigating strategies

Lynas Rare Earths Ltd Level 1, 45 Royal St., East Perth, WA 6004

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to deal with the frequent interruptions to water supply including additional process water storage on site and use of other natural local water sources. However, the frequency and severity of the outages this quarter necessitated several partial or complete temporary production halts which affected production volumes.

As a further improvement our team has now designed a process modification with the objective of decreasing fresh water consumption by 40% at the Lynas Malaysia plant. This modification will be implemented during next quarter and is expected to substantially reduce exposure to water supply issues going forward whilst being consistent with best practice sustainability principles.

During the quarter, Lynas continued to use both commercial shipping and charter shipping to transport concentrate from Fremantle to Lynas Malaysia, mitigating the risk of unforeseen delays in commercial shipping schedules.

As has been reported across industry, various cost categories have seen significant increases over the past 12 months. Royalty cost increases follow price increases in the market, freight costs were approximately double due to global shipping cost increases and the addition of charter ships to mitigate the impact of port and shipment delays. Chemical input costs have increased by approximately 20% with some specific chemicals seeing changes of up to 70%.

More recent shipping and chemical cost developments indicate a moderation of the price pressures and in some instances even show prices retreating from their most recent highs. Notwithstanding these recent trends, we have redoubled our focus on opportunities to improve efficiency recognising the continued uncertain external conditions.

Progress on growth projects continued during the period. At the Kalgoorlie Processing Facility all five kiln sections have been lifted into position and assembled, and welding has commenced.

Significantly, during the quarter Lynas was awarded a follow on contract for approximately US$120 million with the United States Department of Defence to build a commercial Heavy Rare Earths separation facility in the U.S (announced 14 June 2022). Lynas is planning to construct the facility within an existing industrial area on the Gulf Coast of the State of Texas. The new facility will house both the Heavy Rare Earths separation facility and the planned Light Rare Earth separation facility (announced 22 January 2021).

Mt Weld continued Mining Campaign 4-1 during the quarter and the campaign transitioned from waste removal to waste and ore mining during the quarter.

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SAFETY AND ENVIRONMENT

Lynas is committed to ensuring the Company's operations and projects in Australia and Malaysia are consistent with national and international safety and sustainability best practice. Lynas has established extensive processes to ensure that our operations and projects are safe for employees and contractors, safe for the environment and community, and secure for our customers.

The Company-wide12-month rolling Lost Time Injury Rate, as at the end of June 2022, was 0.8 per million hours worked. The Company-wide12-month rolling Total Recordable Injury Rate was 2.4 per million hours for the same period.

Lynas is proud to report that on 27 April 2022, the Mt Weld operation achieved the milestone of one year LTI free.

All sites operate with COVID-19 protocols, including surveillance Rapid Antigen testing, communication and education, disclosure and reporting, hygiene and required isolation procedures. Protocols in Western Australia and Malaysia adhere to the respective government directions.

In line with our commitment to international environmental best practices, detailed environmental monitoring since the start of Lynas Malaysia's operations in Kuantan in 2012 has consistently demonstrated that Lynas Malaysia is compliant with regulatory requirements and international standards. Information concerning the Company's environmental monitoring programs is available at www.LynasRareEarths.com.

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MARKETING AND SALES

	Q4 FY21		Q1 FY22		Q2 FY22		Q3 FY22	Q4 FY22
Sales Volume REOt	4,758	2,724	3,753	5,067	3,719
Sales Revenue	A$185.9m		A$121.6m		A$202.7m		A$327.7m	A$294.5m
Average Selling Price	A$39.1/kg		A$44.6/kg		A$54.0/kg		A$64.7/kg	A$79.2/kg
Sales Receipts (cash)	A$192m		A$92m		A$151m		A$262m	A$351m

In the quarter, demand for rare earths for NdFeB magnets inside China weakened impacted, in particular, by the COVID-19 related lockdowns in several industrial regions in China. However, despite this weaker demand, rare earth prices were resilient, especially NdPr which remained between 70 and 80% higher than a year ago. In the longer term, global demand for NdFeB magnets is forecast to grow from 130,000 tonnes of NdFeB magnets consumed in 2020 to 265,000 tonnes in 2030.

The demand for Lynas products, mostly sold in outside China markets, remained very strong during the period.

NdPr Oxide China Domestic Price (VAT excluded)

Q4 FY21

Q1 FY22

Q2 FY22

Q3 FY22

Q4 FY22

Apr

May

June

	USD/kg	70	80	106	139	120	116		121	124
	Base 100	100	115	152	199	172	167		173	178
				Dy Oxide China Domestic Price (VAT excluded)
		Q4 FY21		Q1 FY22		Q2 FY22		Q3 FY22	Q4 FY22		Apr		May		June
	USD/kg	348	353	394	420	341		349		342	332
	Base 100	100	101	113	121	98		100		98	95
				Tb Oxide China Domestic Price (VAT excluded)
		Q4 FY21		Q1 FY22		Q2 FY22		Q3 FY22	Q4 FY22		Apr		May		June
	USD/kg	985	1070	1422	1950	1884	1850		1919	1882
	Base 100	100	109	144	198	191	188		195	191

Note: Sales information in this report is provided on an unaudited basis. Audited financial results will be published in the Full Year Financial Report in August 2022.

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OPERATIONS

Upstream

Mt Weld continued Mining Campaign 4-1 during the quarter and transitioned from waste mining to waste and ore mining. Ore mined in this campaign is being transported to the run of mine stockpile for future blending. Campaign 3 ores were processed in the mill during the quarter. Lanthanide concentrate product from Mt Weld was shipped from Fremantle to Lynas Malaysia using both commercial and charter shipping.

Photo: Mt Weld open cut mine as at 6 July 2022 showing Campaign 4 cutback on the right hand side

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