Monthly Market Outlook: Peak Earnings Season! How to Navigate November?
MP Materials 2025Q3業績直播
Key Takeaways (AI-Generated)
Financial Performance
- Q3 NDPR oxide production hit record 721 metric tons, up 21% sequentially and 51% year-over-year
- REO concentrate production reached second-highest in company history at 13,254 metric tons
- Adjusted EBITDA remained stable despite eliminating concentrate sales, offset by separated product growth
- Company expects return to profitability in Q4 2025 with PPA implementation
Business Highlights
- Department of War PPA commenced October 1st, providing $110/kg floor price for NDPR
- Received first $40 million prepayment from Apple for recycled magnet production capabilities
- Heavy rare earth separation circuit targeting mid-2026 commissioning for 200+ metric tons annually
- Independence facility magnet production on track for commercial scale by year-end 2025
Financial Guidance
- Q4 2025: Concentrate production flat vs Q4 2024, NDPR oxide flat to slightly up
- Next quarter realized price expected around $61/kg excluding PPA impact
- Strong growth resuming Q1 2026 with magnet revenue from GM in H2 2026
- Gross CapEx expected at low end of $150-175 million range for 2025
Opportunities
- Significant customer engagement across automotive, aerospace, defense, consumer electronics, and robotics verticals
- Heavy rare earth separation will be first in decades producing magnet-grade heavies at scale
- Apple partnership provides $200 million total prepayments for recycling and magnet expansion
- Physical AI and humanoid robotics expected to drive explosive rare earth magnetics demand
Risks
- Complex equipment startup and system integration challenges at Independence facility operations
- China controls ~90% of global NDPR production, creating significant supply chain vulnerability
- Rare earth price volatility with realized pricing lagging spot prices by quarters
Full Transcript (AI-Generated)
Operator
Hello and welcome to the MP Materials Q3 Earnings Call. We ask that you please hold all questions until the completion of the formal remarks, at which time you will be given instructions for the question and answer session. Also as a reminder, this conference is being recorded. If you have any objections, please disconnect at this time. With that, I would like to turn the call over to Martin Sheehan, Head of Investor Relations. Mr. Sheehan, you may begin.
Martin Sheehan
Thank you, operator and good afternoon everyone. Welcome to the MP Materials third quarter 2025 earnings conference call. With me today from MP Materials are Jim Latinsky, Founder, Chairman and Chief Executive Officer, Michael Rosenthal, Founder and Chief Operating Officer and Ryan Corbett, Chief Financial Officer.
As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation, earnings release and in our SEC filings.
In addition, we have included some non GAAP financial measures in this presentation. Reconciliations to the most directly comparable GAAP financial measures can be found in today's earnings release and the appendix to today's slide presentation. Any reference in our discussion today to EBITDA means Adjusted EBITDA and tons means metric tons. Finally, the earnings release and slide presentation are available on our website. With that, I'll turn the call over to Jim.
Jim Latinsky
Thank you, Martin and good afternoon everyone. As most of you know, our third quarter was a game changer, a total acceleration of MP as a vertically integrated national champion with a transformed economic platform for long term leadership. If you are new to our story, I would encourage you to go to our investor site and listen to our July 10th webcast announcing the Dow deal as well as our last earnings call where we went through our Dow and Apple agreements in detail.
It has been an exciting and interesting time to say the least in the rare earths industry. I have a lot of thoughts to share. Let me first cover our execution for the quarter. Ryan and Michael will then cover the financials and operations respectively. And I will wrap up with my big picture thoughts on recent events and the outlook. So with that, let's go to Slide 5.
In our Materials segment, we delivered another outstanding quarter and DPR oxide production reached 721 metric tons, a 21% sequential increase and a 51% increase year over year. The 721 metric tons of production exceeded the high side of our outlook for the quarter and marks a record. Corresponding sales volumes also set records showing strong growth in the quarter, both year over year and sequentially.
In addition, REO and concentrate production was the second highest in our history. This marks the third quarter in the last five that Michael and the team have produced more than 13,000 metric tons of REO. While biannual maintenance outages can create some variability when comparing results sequentially, it is clear that we have made significant progress toward our upstream 60K target or 60,000 metric tons of annual output.
We are also ramping up the installation of the dozens of mixer settlers required for heavy separations. Our new heavy circuit will process approximately 3000 metric tons of feedstock and produce more than 200 metric tons of dysprosium and terbium annually. We expect this capability to fully enable our planned production of 10,000 metric tons of high performance NDFEB magnets each year and we are on track to start commissioning this circuit in mid 2026, a major milestone in our vertical integration and a historic step toward restoring America's ability to produce magnet grade heavies at scale for the first time in decades.
Our long term purchase price agreement or PPA with the Department of War commenced on October 1st. The agreement both earnings visibility and a clear and transformed economic foundation to accelerate our build out of magnetics production. Importantly, we expect to return to profitability in Q4 of this year and beyond. Ryan will provide additional PPA accounting and economic details shortly.
Moving to the magnetic segment, pursuant to the terms of our Apple agreement, we received the 1st $40 million prepayment for the production of magnets from recycled materials, engineering and equipment purchases. For the recycling circuit at Mountain Pass and the expansion of magnetics production at Independence are under way. We will receive additional prepayments, 200 million in total as we make further progress on this build out for Apple.
The Apple partnership combined with our steady progress at Independence reflects the acceleration of our US magnetics platform. Commissioning at Independence continue to advance at a rapid pace throughout the quarter. As with Mountain Pass, starting up new equipment, integrating complex systems and optimizing material handling is a substantial undertaking. Ensuring we bring everything online safely remains our top priority.
Meanwhile, production and sales of magnet precursor products continued throughout the third quarter. Michael will share more detail on that. The pace of commissioning and Independence combined with steady improvements in metal production gives us confidence that we remain on track to begin commercial scale magnet production by year end. With that, let me hand it over to Ryan to discuss the quarter's financials.
Ryan Corbett
Thanks, Jim. Turning to Slide 6 and our consolidated results for the quarter. On the left of the slide, you can see the impact to revenue from the accelerated transition to separated product sales with concentrate no longer sold externally. The absence of concentrate revenue in the quarter was mostly offset by the continued ramp and separated product sales, primarily NDPR, as well as the ramp of magnetic precursor product sales which began in Q1 of this year.
Adjusted EBITDA was generally unchanged both year over year and sequentially. On a sequential basis, the decline in profitable concentrate sales was mostly offset by improving per unit cost of production for NDPR. On a year over year basis, the loss of concentrate sales was offset by the ramp in magnetic precursor sales at Independence as well as the per unit cost improvements I just mentioned.
Our adjusted diluted EPS generally followed the trend of our Adjusted EBITDA results with further benefits from higher interest income in the quarter, primarily from our materially higher cash balance as well as a greater income tax benefit.
Moving to Slide 7 and our operational metrics. In the Material segment, production of Oreo remained very strong at 13,254 metric tons, albeit down very slightly from a record setting quarter in Q3 of last year. In the midstream business, as Jim mentioned, production volumes continued to ramp nicely, achieving approximately 50% of our targeted output.
Michael will provide more details on the ramp up shortly, but assuming our debottlenecking continues at the same pace we have seen over the last several quarters, we would expect to hit our targeted throughput towards the end of 2026. We expect our per unit production cost profile to decline in line with this ramp with the impacts on the P&L likely visible approximately 1/4 in arrears as we work through averaging costs and inventory.
Separated product sales volumes followed production closely with nearly 20% sequential growth and 30% year over year growth. With much of our separated product sales toll processed into metal across various partners in Southeast Asia, there continues to be a lag between production volume growth and sales. As we fill the tolling channel, we expect to continue to scale up metallization to match our growing output with various partners in Southeast Asia and beyond.
And with that, we expect to build a bit more inventory at these various facilities. This modest working capital build is a natural function of the growth in our outside production, which we expect to lap once we are at our targeted output levels.
Looking forward, we will begin to recognize intercompany sales from our material segment to the magnetic segment in the fourth quarter as we continue to produce precursor products for GM and get ready for commercial scale magnet production at year end. Note that these intercompany sales along with the related cost of goods sold will be recorded at the material segment but will be eliminated at the corporate consolidated level.
The value of that sale and intersegment profit will remain on the balance sheet at the magnetic segment until it is sold, at which time it will be reflected within magnetic segment revenue and cost of goods sold. As we ramp magnet production and then sales later in the year, there will be some lag between the intercompany sale and the eventual realization of value on a consolidated basis via a magnet sale.
Lastly, on this slide on the far right, you can see that improved market pricing over the last year flowed through to our realized pricing in the quarter as a reminder given. To the dynamics of the tolling channel I just mentioned, combined with the nature of our sales contracts, some of which use moving averages of market prices, the change in our realized pricing generally lags the trend spot prices seen in the market by 1/4 or more.
Based on our current view of shipment timing and contract mix, we expect next quarter's realized price, excluding the impact of the PPA to approximate $61.00 per kilogram.
Moving to Slide 8 and our segment financials. On the left side of the page, you can see the initial impact of eliminating concentrate sales in the quarter on both revenue and Adjusted EBITDA. While we had always planned to ramp down sales of concentrate as production and sales of refined products increased, the Dow partnership has accelerated that strategy while refining operations continue to scale. We expect to collect payments under the PPA for placing concentrate into our strategic stockpile, which I will discuss more in a moment.
Moving to the Magnetic segment, the primary driver is the ramp up of production and sales of magnet precursor products, which began in Q1 of this year, positively impacting both revenue and Adjusted EBITDA.
Before I discuss a handful of housekeeping items for you, I wanted to wrap up with an important reminder on Slide 9. This was the slide we pulled together post our Dow announcement, giving an illustrative example of the minimum annual EBITDA we expect to generate as we execute on our growth plan. Importantly, and I can't stress this enough, this earnings profile is underpinned by firm in place contracts with much of the cash flow driven by our agreements with the Department of War.
As long as we execute across our materials and magnetics businesses, we expect to generate very attractive long term returns. And while the contracted nature of our future cash flows gives us tremendous confidence to continue investing in growing our business, we also expect material upside potential derived through upcoming initiatives including recycling, appreciating MDPR prices, magnet syndication or other growth opportunities.
As Jim mentioned, the price protection agreement with the Department of War went into effect as of October 1st. I'd like to spend some time walking through the gap accounting for this contract given the material earnings we expect from this feature of our Dow partnership starting in Q4 with the cash impact following soon thereafter in Q1.
First, from an accounting perspective, we have concluded that the top up PPA payments will not technically be revenue per US gap as the payments are not directly related to the underlying sales contracts we have with our customers. The cash flow comes from a third party, in this case the Pentagon that is not at least as it relates to the PPA, technically our customer.
Given that in the revenue guidelines under ASC six O 6, we will be recording the PPA as an operating income line item or expense in the case that market pricing exceeds $110 per kilogram. Starting in Q4, you will see PPA income or expense as the first line item below revenue in the P&L with PPA income therefore forming a core part of our earnings metrics on a go forward basis.
As it relates to 2026, we expect the PPA payments to be made-up of two primary levers. 1st, we expect top up payments for NDPR oxide produced from the material segment and sold either to third parties or internally to our magnetic segment. And 2nd, we expect payments from the contained NDPR value within the concentrate we are stockpiling as we continue to ramp up our refining operations.
The top up payments related to NDPR oxide can be approximated as the difference between our averaged realized sales price and $110 per kilogram with a few gives and takes multiplied by the quantity of NDPR oxide sold in the period. So for example, in 1/4 where realized prices are $70 per kilogram, our sold volumes multiplied by 70 would be recognized as revenue in line with how we report today.
And the $40 per kilo top up payment up to the $110 floor price would be recognized in the PPA income line with the full impact of both flowing through EBITDA and earnings.
Regarding how to model the PPA payments for stockpiles, particularly concentrate, the per unit payment will approximate the difference between market prices for NDPR in the quarter and the $110 per kilo floor. But in the case of concentrate, the quantities are tethered to the. Coverable NDPR within any concentrate we nominate to the stockpile for each quarter in 2026, I would expect the difference between our actual NDPR production volume and our quarterly target of 1500 tons of NDPR to be nominated into the paid stockpile and Dr. further PPA income.
Eventually this concentrate will be processed and sold at market NDPR prices. Realizing this is complex, we're happy to take further clarifying questions on the PPA and its impact to our financial statements offline following the call.
Moving to the balance sheet, I did want to point out that several of the pieces of the Dow agreement consisting of the PPA, the Sumerian loan, the preferred stock and the warrant required us to undertake an analysis of relative fair value and cash versus non cash consideration received. In order to properly account for these financial instruments on the balance sheet under GAAP, note that several of the items are therefore reported at a value that does not match the cash or other consideration received specifically for that feature.
There was significant discussion of our methodologies contained in our Form 10Q that we intend to file with the SEC tomorrow. But the two most notable outcomes of this are first, the recording of a $221 million asset called the PPA upfront asset that will be amortized on an accelerated basis over the 10 year term of the PPA. And 2nd, the recognition of non cash interest expense in excess of our coupon rate on our Sumerian loan from the Department of War, given the relative fair value of that portion of the agreement resulted in a deemed debt discount.
The PPA amortization will be presented in our depreciation, depletion and amortization line in the P&L.
Lastly, before turning it over to Michael, I wanted to address our year to date CapEx and remaining 2025 expectations through the end of Q3. Capital spending is totaled approximately $110 million on a gross basis and $86 million on a net basis due to $24 million of progress payments received from the Department of War under our prior HR EE investment agreement.
As such, we expect gross CapEx for the full year to be closer to the low end of our initial 150 to $175,000,000 range and to perform better than the range on a net basis. We will discuss 2026 capital forecasts and projects on our Q4 call in early February. With that, I will now turn it over to Michael.
Michael Rosenthal
Thanks Ryan. Operationally, we had a strong third quarter with production that came in just above our expectations. In the upstream circuits, we achieved our second highest quarterly result for concentrate production, just 4% shy of the all time record we achieved in last year's third quarter. The gap is largely attributable to several reagent and pre floatation trials the team executed that had a minor negative impact on stability and production.
It was nonetheless one of our best quarters with very good uptime and highest ever concentrate grade exceeding 63%. Midstream production continues to increase which led to another sequential quarter of record NDPR oxide production. In line with our expectations, we are now processing more and more of our concentrate on site while simultaneously building up a healthy concentrate stockpile.
The majority of our circuits are performing well, demonstrating higher uptime and throughput capability while sustaining good product quality. As in prior quarters, a few areas experienced temporary disruptions that modestly held back NDPR production. As we address these short term challenges, we are adding resiliency and stability to our operation that we expect to result in sustainable production increases over time.
In the first half of October, we successfully completed our semi annual maintenance turn around which included several minor debottlenecking efforts and tie insurance for future projects. The outage along with associated D and re inventorying, repairs and startup affected production for approximately 2 weeks depending on the area. We had one area require rework in late October that somewhat impacted October production.
As a result, we anticipate fourth quarter concentrate production to be roughly flat relative to Q4200024 and NDPR oxide production to be flat to slightly up sequentially with strong growth resuming in Q12026.
At Mountain Pass we are accelerating the pace of project execution, particularly on the heavy rare earth circuits. In the third quarter, we completed most engineering and primary equipment procurement for our terbium and dysprosium production capability, which will be the first heavy rare earth products to come online. Construction and installation of equipment began towards the end of the quarter and has accelerated in October.
On slide 10, we have a picture of some of the work underway. We are pleased with this progress. Importantly, we are targeting the start of commissioning of this circuit in the middle of 2026.
Regarding supply sources, we are actively engaged with a number of different and different types of potential feedstock providers to supplement our own contained HRE content. I am optimistic about having several long term supply options.
We are also advancing towards completing the restoration of the first train of the Chlor Alkali plant and enhanced brine purification capability. The recommissioning of our Chlor Alkali plant will add resiliency to the entire mountain pass operation by enabling on site production of key chemical reagents. Pre commissioning will begin early next year. The plant has two additional trains with the first one likely to be ready for service by mid 2026. We then have the flexibility to achieve our full capability in phases over a multi year. At a pace we determine at independence.
We continue to make meaningful progress in expanding our metal production capabilities. We are actively exploring multiple strategies to optimize costs and scale metal production to support future growth, including our 10X expansion. In August, we began an accelerated trajectory of alloy flake casts at independence. Meanwhile, installation and pre commissioning of powder production, pressing sintering, passivation machining and grain boundary diffusion GBD are all advancing well.
In our new product introduction area. We continue to refine magnet chemistries and production processes to produce higher and higher quality magnets in an expanding range of magnet grades. Engagement with GM for commercial scale production qualification is underway and we are encouraged by the continued collaboration between our respective teams. We remain on track to meet our goal of producing finished magnets by year end 2025.
This will kick off an accelerated qualification process with GM, with magnet revenue expected to begin in the second-half of 2026. In addition to supporting GM, our teams at Mountain Pass and Independence have initiated engineering and procurement to support the Apple recycling partnership and magnet production expansion. This work includes magnet chemistry development and Independence and pilot testing, design development and circuit engineering to support the addition of recycling capabilities at Mountain Pass.
Overall, it was a very busy quarter and we expect the pace of activity to continue accelerating. Through it all, our team has remained focused, executing safely, efficiently and with a strong sense of mission and urgency. I cannot say enough about the quality of the team and capabilities we have built and our building and the opportunities that lie ahead. With that, I will turn it back to Jim.
Jim Latinsky
Thank you, Michael. Moving on to Slide 11, you can see the unmatched array of capabilities we have built entirely within MP. This is what true vertical integration looks like, something no other company in the world has achieved in the rare earths and magnetics. This quarter was another solid one for MP and that same execution discipline is now driving progress across our GM, Apple and Dow partnerships, each deepening our integration, broadening our reach and advancing our trajectory for long term growth.
Since we last spoke, we have witnessed a frenzy of attention and volatility around rare earths in recognition of the necessity that we, like most nations, must move at a warp speed to de risk from reliance on China for this supply chain. The President ** Summit in Korea has resulted in a one year postponement of China's October 9th rare earth export controls. But the reality is that this pause has only underscored the inextricable link between the world's most advanced semiconductors that America produces and the rare earth supply chain that China dominates.
Two sides. Of the same coin at the forefront of the strategic contest between our nations that will shape the global economy for decades to come. We are now locked in a new kind of Cold War, a race of mutually assured economic destruction fought not with weapons but with supply chains. self-sufficiency, allied resilience and national industrial champions are no longer optional. They are the front lines of security.
In the last Cold War, America prevailed through military strength powered by economic might. In Cold War 2, point O, the equation has reversed. Economic might, itself expressed through control of critical materials, advanced technologies and the supply chains that sustain them, has become the decisive measure of national power.
Against that backdrop, it is important for investors and policy makers alike to consider with clear eyes the complexity and scale required for success in this supply chain. It is very often said that rare earths are not rare. That is true, they are literally everywhere. One could take a sizable piece of land, multiply by some amount of rare earth content percentage within, multiply that times a price basket, and then lo and behold, claim a rare earth ore body of some major value.
Unfortunately, it is not that simple. What is underappreciated, but far more important, is that economic ore bodies are extremely rare. The vast majority of projects being promoted today simply will not work at virtually any price. Even deposits labeled heavy rich still contain a vast majority of light rare earths and atrium, and when grades sit in the hundreds of parts per million, the cost to concentrate, separate and refine becomes uneconomic.
M PS overburdened in tailings are quite literally more valuable by many multiples than many of those so-called projects. The structure of the existing industry tells the story. China accounts for roughly 90% of global NDPR production. Yet even there, most of that output comes from just two Hard Rock mines and refineries, now controlled by two entities. Think about that. A country with the world's largest reserves, A national industrial policy dedicated to dominance, generous subsidies and accommodative regulatory practices, and still only two highly productive, low cost integrated operations represent the vast majority of their industry.
It is not a coincidence that outside of China, the only scaled light rare earth production also comes from 2 mines, Mountain Pass and Mount Weld, and their respective refiners MP Materials and Linus. The lesson is clear. Great ore bodies and scaled refining capability are the indispensable foundation of this industry. Everything else depends on them.
In addition, certain types of mineralization such as aulonite, eudalyte and even coal based deposits have never successfully yielded refined rare earths at scale. The reason is straightforward. Their mineralogy is complex and the concentrations are extremely low. Now, perhaps there will be breakthroughs someday, and based on our own experience, we would never underestimate the power of human ingenuity. But the reality is that even China does not attempt to produce rare earths from those types of deposits today.
Michael has my favorite analogy on this. Controlling A udialite rare earth ore body today is like having billions in Bitcoin, but without the private key. In theory, you can see it on the screen, but you can't unlock it. And that raises the question, what is it really worth?
Even with one of the very few economic rare earth feedstocks, building and operating a refinery is capital intensive and painstaking work. Despite what some promoters might suggest, even the best producers take years to ramp and stabilize output and economics. Linus took roughly A decade. MP is on track to reach normalized production in about 3 years from the start of commissioning. That speed, scale and discipline speak to the strength of our people, our ore body, our access to decades of operational history and our platform.
The heavy rare earth market has a somewhat different profile. Heavy elements are largely sourced from numerous small clay mines, but once again separation is aggregated at a smaller number of scaled refineries in China. We do see opportunities for deposits with a much higher proportion of heavy rare earths to support profitable upstream concentrate business. However, the short mine lives and complex mineralogy or environmental considerations of many of those deposits make it uneconomic to build full refining capability around them.
That's what makes our scale heavy rare separation circuit truly distinctive. It allows us to leverage our broader infrastructure to produce heavies on a low cost basis, feeding directly into our integrated magnetics business.
Moving downstream. Even with mined and refined feedstock in hand, the path to a finished magnet is anything but simple. To make a magnet, you must first convert NDPR oxide into metal, then alloy it with iron and boron through strip casting. Each step is technically demanding and essential to performance. Perfecting the precise recipe for automotive grade EV magnets can take a year or more. And even with an all out effort like our partnership with the Department of War, building a scaled facility demands years of work and significant capital.
Tonnage, while often cited as a proxy for scale, says little about capability. The true test lies in mastering the complexity of magnet grades, sizes and chemistries. In today's rush to localize supply chains, we have seen projects promoted that cannot yet perform grain boundary diffusion, the critical process that enables efficient use of heavy rare earths. Others proclaim full vertical integration while depending on phantom feedstocks or technologies that remain unproven at scale.
A business plan that starts with magnets and works backward to mining may sound compelling on paper, but it defies both economic and supply chain reality for the foreseeable future.
Scaled recycling is another underappreciated pillar in magnet manufacturing. Typically, 20 to 50% of material ends up as SWARF or CURF magnet scrap. Capturing and reusing those elements, both light and heavy, is essential to a resilient and economic supply chain. All of this reinforces 1 conclusion. MP Materials, with its vertically integrated assets, partnerships and execution track record, is uniquely positioned to lead as the Western rare earth supply chain takes shape.
Finally, as the global economic realignment continues, I would encourage investors and policy makers to approach the sector's capital allocation with clear eyes. With that, let's open it up for questions.
Operator
At this time, if you would like to ask a question, please click on the raise hand button, which can be found in the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk and then you will hear your name called. Please unmute. Please accept, unmute your audio and ask your question. We will wait one moment to allow the queue to form. Our first question will come from Bill Peterson with JP Morgan.
Bill Peterson
Yeah, good afternoon and thanks for taking my questions. I'm wondering, I guess, with your current stockpile, SCG plus stockpile, how long could that support your heavy production once fully ramped? And I guess, you know, you talked about engaging with other heavy feedstock suppliers. Are these foreign suppliers, domestic suppliers, I guess in the context of you know you're mentioning that there's not a lot of viable options out there in terms of ore bodies. Want to get into more context on on what type of feedstocks you may have or or maybe effeminate may come into consideration?
Ryan Corbett
Yeah, Hey Bill, it's Ryan. I'll start and let Michael take some of that. In terms of the the SCG plus stockpile, we have several 100 tons on an REO basis of SCG stockpiled. Obviously, we are producing SCG every single day. And so from that perspective, you know, we we feel good about our inventory, you know at this time to to be available for us to Commission that circuit and charge that circuit. And certainly as we've discussed, we believe with our own internal feedstock we will be able to satisfy the demands of the Independence facility. With that turn it over to Michael for the the rest of the question.
Michael Rosenthal
In terms of feedstocks, I think one thing we're very excited about is how our fully integrated site with both ore based processing as well as light and heavy separation gives us and recycling gives us like very unique capability in terms of processing different types of feedstocks. So we are in touch with both domestic suppliers, suppliers of recycling material or recycled material, along with some foreign suppliers obviously you see. As much as we do all of the announcements from various players around the world where we have our opinion on some and are in discussions with many. But like I said, we're confident that we will find several different options.
Bill Peterson
Great, thanks for that. And then on the magnet business, I guess how is the customer engagement going beyond Apple and GM? I guess what you know, I guess are people trying to test some of your sample or what, what what's going on with the the business or the further off takes and independence and then ultimately 10X
Ryan Corbett
sure, it's Ryan again. You know, I think certainly since liberation Day, the supply chain mindset across the space has changed very meaningfully. There's a tremendous amount of engagement across, you know really every vertical that consumes magnets, automotive, aerospace and defense, consumer electronics, robotics, you know, you name it. You know, I, I think fundamentally we are focused on executing first for our foundational customers. And from a 10X perspective, we have the luxury of continuing to operate in the same fashion that we have for the last several years, given the fact that we have 100% off take secured for 10X. As we've talked about, our Apple agreement anchors the vast majority of the expansion that we've planned for independence. And so it puts us in a position where we can continue to be very selective with our customers. But the engagement is is quite significant and and you know, broadly very exciting.
Bill Peterson
Thanks Ryan and good luck to the team. Thanks. Nice job and the execution, Jim, Ryan and Michael, thanks.
Ryan Corbett
Thanks.
Operator
Your next question will come from Lawson Winter with Bank of America.
Lawson Winter
Thank you very much, operator. Good evening, gentlemen. Nice quarter and once again a very interesting and fascinating update. May I ask about the a couple things? So, so just on the heavy rares, there's the dysprosium and terbium 200 kilotons annually. How is that roughly split? And then secondly, on the, the heavies, there's the Sumerian low. And as the name implies, there are other rare earths that the DOE would like to access. What what's the timeline to, to producing some of those other, those other rare earth metals that are that are particularly of interest to the DoD And has the DoD set any, any deadlines?
Michael Rosenthal
This is Michael. Thanks for the question. In our ore body, the general ratio of dysprosium to terbium is about 3:00 to 1:00. So that would be kind of the approximate mix. You know some of the other third party feedstocks and recycled material may have slightly different mix. So you know ultimate production may may differ from that to some extent in terms of other heavy rare production that we have made a commitment to produce sumerium in 2028 sumerium oxide and we feel very comfortable with that type of time frame. We have made no sort of public commitments to produce any other heavy Rias, although gadolinium would be a logical next one to produce probably around the same time frame.
Yeah. As for the others, I think we are eager and in discussions with various other parties domestically and in allied countries about, you know, offtake of our other materials for them to to process into other railroads. But to the extent there's strong demand or need, you know, we're capable of doing further separations.
Lawson Winter
OK, that's very fascinating. Thanks, Michael. And then can I ask about the Apple $200 million prepayment? I had not expected $40 million to be paid in Q3 so quickly. Can you help us understand a timeline under which the remaining 160 million would be prepaid?
Ryan Corbett
Sure, It's Ryan. We are thrilled to surprise you to the upside. You know the we can't get into contract specifics, but you know certainly the way this was designed was to continue to provide capital for this build out as we had certain operational milestones. We actually expect a next payment of of relative scale coming up in Q4. And I think that you know, over time as we execute on this plan, you know, we've laid out initial magnet volumes targeting mid 27 and recycling close behind. You know you'll continue to see those prepayments, you know on that schedule.
Operator
Your next question will come from Matt Summerville with DA Davidson.
Matt Summerville
Hey, Matt. Matt, I can see you've unmuted. Please go ahead. Unfortunately, we're not able to hear you, Matt. I'll just go to our next analyst and we'll come back around to you. Our next question will come from David Deckelbaum with TD Cowen.
David Deckelbaum
Thanks for taking my questions, guys. Hi, Jim, Ryan and Michael, appreciate the time. Hey David, you know Ryan, I, I think you, you probably astutely pointed out that the, the key risk here for MP with incentive prices now is, is execution. And, and if I heard right, it looks like it sounds like you're targeting the end of 26 or for operating an NDPR separation nameplate. Michael, I, I guess you, you alluded to, to some things around just and, and the PR separation, you know, I guess King said you're, you're ironing out now. So I guess is it is it fair to say as as the contract becomes live now with the Department of War at $110 a kilo, should we think about you guys ramping as quickly as possible in, in the 26 calendar year or can you provide any color arounds, you know what we should expect in the AA ensuing quarters from incremental throughput tonnage?
Ryan Corbett
Hey, David, all start it's Ryan. I think the important thing to keep in mind from an economic perspective here is, you know, we've talked about our our concentrate stockpile and frankly for a variety of reasons and now economic reasons, you know that that actually has a lot of value to us. And so, you know, certainly we are focused on ramping as quickly and as smartly as possible to serve the market and to prove out this capability. But it's important to remember that under the the PPA, we still are paid for the NDP, our content within the concentrate that we stockpile. You know, of course we don't get paid twice. We get paid when we put it into the stockpile. And then once we refine that material, we'll sell it at market prices. But it's a, it's a very important value driver for us. And you know, we can continue to look at our view of the market and nominate volumes into that stockpile as we produce them and as we see fit. So that gives us a lot of operational and economic flexibility in 2026 and beyond.
David Deckelbaum
I appreciate that. And then just as a follow up, you know, I think Jim, you talked about you know really, really the availability of of Swarth end of life magnetic products that you guys talked about third party feed. And I know others have asked you about those questions. But I guess as you think about really addressing the supply chain going forward for your own needs and really internally in this country and for for allied nations. So it where, where do you prioritize looking at your own capabilities around recycling with the obviously the the startup of the Apple facility over the next few years, How do you think about focusing on on Swarth and the ability to source that versus looking at third party feed for more bodies?
Jim Latinsky
I mean, I think it's an all of the above approach. Obviously over the next couple years we're maniacally we have a number of projects right. We are scaling independence, we are getting 10X underway and quickly and then doing you know the the multiple pieces of recycling and mountain pass. As you know David, this management team is pretty opportunistic. So we, we will try to, you know, take advantage of opportunities out there. I would say that, you know, again, over the next couple years, it's just executing all this. And I'd remind you that we have the feedstock to serve our entire 10,000 tons of, of magnet capacity, you know, currently with, you know, certainly with the Apple piece being part of the deal that they're helping provide feedstock. So we have we have the, I guess to use Ryan's words from earlier, the luxury of, you know, being methodical about, you know, how we think about incremental feedstocks.
Ryan Corbett
Yeah. One important point also David to think about this is Ryan, is as we look at sourcing third party feedstocks or we look at sourcing magnet material and end of life material. I think you know despite all the focus on price floors, at the end of the day the economics of this business depend on your cost structure. And so, you know, as you see some of these other, you know, things announced out there, what you should keep in mind is we will be one of the lowest cost producers of these products whether refined or from mined material. And that also gives us the opportunity to be thoughtful in the acquisition of third party feedstock. And so with the platform that we've built, we think we are in pole position to be able to acquire most thoughtfully the best potential feedstocks for the business given the fact that our cost structure will be best of class.
Operator
Our next question will return to Matt Davidson. Matt Summerville with DA Davidson. Hey, Matt. Matt, I can see that you've unmuted. We're not able to hear you. You may need to select a different microphone input next to your audio button. OK, we'll move to our next. Yes. For our next question, we'll hear from Carlos de Alba with Morgan Stanley.
Carlos de Alba
Hey, Carlos. Yes, Hello. Hi, Can you hear me? Yes, great. All right. Thank you very much. Congrats on a strong performance this quarter. Just maybe on, on the, on the prior response, Jim, can you clarify, maybe I misunderstood, but are you going to be able to supply recycle material or or have capacity in your recycle line above and beyond the 2000 tons that you have under contract with Apple?
Jim Latinsky
Oh, are you referring to? Well, actually Michael, why don't you take that in kind of I think 'cause if I understand the question, we are building a dedicated line for Apple to manage material and feedstock that they are responsible for providing to us. We also will have the capability to process our own swarf and we'll build that modularly to process, you know as that market grows, which we're very optimistic about, you know additional feedstocks as well over time.
Carlos de Alba
All right, got it. Yeah, OK. And it will be a separated line from the one that you were you were working on building on for for Apple, right.
Michael Rosenthal
So the Apple line will be largely separate from our existing line. But the other feedstocks we will, we are evaluating and and we'll leverage our existing infrastructure and capability and light and heavy rare separation in the most thoughtful way possible depending on the nature of the feedstock and customer requirements.
Carlos de Alba
All right, OK. And then Michael, maybe you can help us understand what is the, the thoughts about the ramp up of the DY and TB output post commissioning.
Michael Rosenthal
Our focus initially is obviously on, on meeting the needs of our customers and the you know, independence for for GM. And because we have this stockpile, we'll be able to produce, you know, amounts greater than our initial, you know, ore based material would supply on a yearly basis. And then we'll look at what third party feedstocks we have and what preprocessing is required. But the the volumes are obviously relatively modest. So I think the ability to ramp will depend on how quickly we feel comfortable pushing those volumes. Obviously, we have very high quality requirements and need to make sure we we we perform.
Operator
Our next question will come from Ben Callow with Baird.
Ben Callow
Hey guys, good evening. I was wondering how you think about price floors for heavies as you advise the administration, if you've given any weight to that follow up to I'm I'm.
Jim Latinsky
Hey, hey, Ben, you mean what do we think of them intellectually or I, I would just, I guess when it comes to heavies, I would the one thing I I think this kind of comes at your question another way. But if we, if we reference back to kind of the, the overall point that I was trying to make in the, in the prepared remarks is that when you look at the supply chain in our space and the, and the various areas of it, the heaviest area is 1, where typically you have deposits where it makes sense that if there are economics where that could be a concentrate or a feat, you know, make a concentrator, make a feedstock that can go to a refiner like ours, like we've built. But typically at least we haven't seen those sites, the various ones around the world of varying degrees of value where it would make sense economically to build refining capability around that. And so we are really well. Positioned to accept those feedstocks and and so that's obviously the work that we are doing with Dow to make sure that we have the material for our business through 10X. And so obviously there are a variety of ways that you can incentivize that upstream production and get economics to those parties to encourage that production. But I do think it is important to think of those as sort of part of a broader supply chain. And you know, there are not necessarily independent stand alone economics for sites like that to be, you know, a full vertically integrated participant.
Ben Callow
So just a, a follow on because you, you guys have, I guess everyone's ear. So what is the advice to give the heavies to the admin?
Jim Latinsky
Well, I'd like to, you know, obviously the, the, you know, the, the detailed advice that we would give to the government. I think we would, you know, try to keep that, you know, in confidence. And, and, but I, I think I can speak in general terms, which is if what I was hinting at, Ben in my remarks, is that when you, if you look, look at the structure of this industry and just look at how China has formed. Now, obviously a lot of that is state driven, but you know, a lot of it is, is sort of structural. Is you should think of this industry as closer to a global structural oligopoly rather than just, oh, if we throw a bunch of money at dozens of sites and businesses, we can form a supply chain. Because the reality is, is that to have the geology, you know, we talked through the geology and the differences between lights and heavies and then the complexity of the magnet business. And when you Add all that up, I mean, the best analogies are if, you know, if you were going into the aircraft production industry or the smartphone industry, you know, would and, you know, think of our great companies like Apple and Boeing, right? You wouldn't necessarily say if let's say it was reversed and you were trying to create those and and the Chinese had the competitor, you wouldn't necessarily say let's spread money around to 30 different things. So I think the way to think about it though is we view MP as America's national champion. We have structural advantage because we're fully vertically integrated. We're years and billions ahead of others. And what I would say is if you, you know, there's various projects out there, both public and private. If you took anything that I'm aware of now there may be a bunch of stuff I'm not aware of, but anything I'm aware of, if you gave whatever that was the deal that MP had, I don't see anywhere where there's any equity value for any of them public or private. Now that. So I think that's a very interesting thing. Now that doesn't, that doesn't mean that the government shouldn't catalyze a lot because I think the government is doing an outstanding job catalyzing private capital to come in. And so to the extent that the government can make investments, whether it's loans or other forms of support and grants, if X dollars of capital can stimulate 2 or 3X in private capital, they should be doing that as much as possible. So I think we've seen some really great action out of the administration. And so my advice would be to keep going, keep doing what you're doing. I think they're, they're really thinking about it a thoughtful way. I would just also say that the the message of today is, you know, for private investors because obviously we don't want people to get burned. We want people to think that this is a good space is to just be very clear eyed about what the actual structural economics are in, you know, in amidst all the excitement.
Operator
Your next question will come from Max Yarrel with BMO Capital Markets.
Max Yarrel
Brian and Michael, thanks for taking my question this afternoon. My my questions around the the ramp up of the heavy railroad separation facility. And I was just wondering if if the ramp up time there affects your ability to deliver certain higher grade magnets to General Motors. And then I guess the second part is when we look at the universe of potential feedstocks for that heavy railroad separation, are there types of concentrates that you cannot process and which ones are are the most ideal? For the circuit that you envisioned,
Ryan Corbett
yeah, sure. Max, it's Ryan. I'll, I'll start in, in terms of how we're positioned from a supply chain and inventory perspective to support our our ramp up at magnetics. I think we've discussed, you know, over the last several quarters that we had anticipated. You know some of the restrictions that had been put in place and have built a stockpile of products to allow us to Commission and and ramp independence facility. We've timed the construction and commissioning of the heavier separation circuit to come online to support further growth as we work that inventory position down. I'll let Michael take the second part,
Max Yarrel
just to be clear. The question was on whether types of feedstocks for the heavy red circuit are preferred exactly.
Michael Rosenthal
I certainly to the extent we got an SCG plus that would be easier than processing a full mixed rare earth carbonate with lights and heavies. But our circuit can handle because we have all of the capabilities for either one of those. So it will look at the economics and the distribution and compare those to other alternatives.
Max Yarrel
So thank you. Appreciate taking my question. I'll turn it back.
Operator
Our final question will come from Lawrence Alexander with Jefferies.
Lawrence Alexander
So good afternoon. I appreciate kind of the analogies you've tossed out. And I guess what I want to tease out as you talk about your opportunistic approach to creating value is the Cold War would have gone very differently if the nuclear missiles had a 10 year expiry date. And so when you think about the incentives that a 10 year support program from the DODODDOW gives you and also the way the capital markets might perceive that as setting you up for some severe kind of cyclical risk if there's a recession or otherwise a glut at the end of the of the of the 10 year. And what that does to your cost of capital and how you think about your balance sheet. Is the strategy here to double down on the fortress balance sheet vertical integration and just ride through that transition? Or do you feel either the government needs to make a decision soon about extending the support or you need to make a decision arguably sooner rather than later about adding a second plank to sort of smooth out volatility once you make the transition back into a fully unsupported entity?
Jim Latinsky
So Lawrence, I think it's actually the opposite. There's probably, I don't know how many listeners we have today because there's another exciting call happening where there's a trillion dollar pay plan being proved because you know, we're going to have humanoid robots, whether it's, you know, Musk or Jensen talking about that. I mean, if we look out and I don't know if it's 5-10 years, whatever it is, but there's no question that physical AI is going to just create explosive growth in rare earth magnetics. The issue is that in the in the very short term, we can't be, you know, leveraged by the Chinese from a supply chain standpoint. We've got to have an industry that is here and thriving. And actually if you take my remarks when I want to be clear that when I talk about the structural realities, it's not because that is a forever condition. I do think that there's a room for a lot of other players and a lot a lot of other supply. But I think that the point is that to get to that 5 or 10 years, you're going to need materially higher prices. So the, you know, sort of the, the MP deal, if you will, I just don't think that's enough. And so I think that what, what you're really going to see is that in the very short term, the, the administration has, you know, made sure that we have a successful national champion in, in MP. We've got to execute, but we are going to sort of open the pave the path, if you will, to then figure out how there's much broader supply coming online. So obviously 10 years is a long enough time to not, you know, not in the short term, think about kind of what that role looks like. We'll, we'll think about the next couple years of getting things online. But I think if we don't have some development in physical AI by then these, you know, the markets, I, I, I would be least worried about MP relative to pretty much many other places in the market. So I don't lose any sleep over what demand is going to look like in 10 years and what NDPR prices and magnetics prices are going to be. You know, I think it's going to be amazing for us. My bigger guess is that we'll have grown our business and moved downstream. You know, just as if you think about us five years ago versus where we are today, I think on that roll date, you know it will not be as material a portion of our business remotely compared to what it is today.
Lawrence Alexander
Perfect. Thank you.
Operator
That concludes the question and answer portion of today's call. I'll now hand the back call the back for closing remarks.
Jim Latinsky
All right, well, thank you everyone. We think think it was a great quarter of execution. We are going to get back to work and look forward to talking to you all next quarter.
Details at MP Materials IR
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