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Operator: Good morning, and welcome, everyone, to the Neo Performance Materials Second Quarter 26 Earnings Conference Call. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded. 2026. For opening remarks and introductions, let me turn the call over to Mr. Jim Fitzpatrick, SVP of Investor Relations and Communications. Bernal. Jim, please go ahead.
Jim Fitzpatrick: Thank you, operator, and good day, everyone. Today's call is being recorded. A replay will be available starting tomorrow in the Investors Center on our website. At neomaterials.com. Our call will be accompanied by a live webcast presentation. If you are joining us online, the slides will advance automatically as we progress through the discussion. You can also download a copy of the presentation from our website to follow along or reference afterward. On today's call are Rahim Suleman, Neo's President and Chief Executive Officer and Jonathan Baksh, NEO's Executive Vice President and Chief Financial Officer. Before we begin, I want to remind listeners that some of the information discussed today will include forward looking statements within the meaning of applicable securities laws. These statements reflect current expectations, but involve risks and uncertainties that may cause actual results to differ materially. We refer you to our filings on SEDAR and the Investors section of our website for a discussion of these risks. Financial figures are presented in U. S. Dollars unless otherwise stated and we will reference certain non-IFRS financial measures. Reconciliations are available in our financial statements and the MD and A. I will now turn the call over to Rahim Suleman, President and CEO of Neo.
Rahim Suleman: Good morning, everyone, and starting from Slide 3. Coming off a strong first quarter, Neo delivered yet another record breaking quarter in Q2. Marked by strong operational performance, continued execution on our strategic priorities and financial results that once again exceeded expectations. Adjusted EBITDA was $57 million which is a new all time quarterly high for the company representing an increase of 200%+ from the second quarter of 2025. Year to date, our adjusted EBITDA is $93 million up 158% compared to the first half of 2025. This exceptional performance reflects continued strength in volumes, across all of our segments, strong improvements in our conversion costs, and a sustained favorable pricing environment. MagnaQuench delivered its strongest quarterly adjusted EBITDA in 4 years, driven by a 35% year-over-year increase in bonded magnet shipments. Chemicals and oxides, also had a very strong quarter, delivering a 56% year-over-year increase. In adjusted EBITDA driven by strong performance in our Emissions Catalyst business. And rare metals had a record performance. Delivering $45 million of adjusted EBITDA in the quarter driven by healthy volumes and a sustained strong pricing environment. Looking to the second half of the year, we are seeing continued end market strength in both pricing and volumes. Across all of our business units, we have increased contracted volumes through the remainder of 2026, and for some businesses into 2027. Along with securing more inventory, particularly for hafnium, gallium and tantalum. In early July, we increased our full year adjusted EBITDA guidance to $140 million to $150 million Today, we reaffirm the top end of this range, with potential for us to exceed this. This would represent approximately double our full year 2025 adjusted EBITDA. Moving to Slide 4. Turning now from our near term outlook to our mid term growth strategy, specifically 2 areas of investment for Neo, our European magnet operation and our bonded magnet business. To help fund this growth, in May, we successfully completed a CAD 115 million treasury offering. A financing that reflects both the strength of investor confidence in Neo's strategy and the growth opportunities in front of us. This capital is largely earmarked for equipment for Phase 1B of our European permanent magnet facility as well as for the expansion of our bonded magnet business. These investments position Neo to meet the accelerating demand that we are seeing across the rare earth permanent magnets and we intend to deploy this capital with the same discipline, and strategic focus that has been our hallmark to date. Now let's look at each of these in turn, starting with our European permanent magnet facility. Moving to Slide 5. As you know, our European permanent magnet platform represents 1 of the first large scale integrated rare earth magnet supply chains outside of China. Supporting Europe's automotive, industrial, robotics, and clean energy segments. Combined, with our European rare earth separation capabilities, we have the most vertically integrated platform in Europe, and that positions Neo to capture long term growth in permanent magnet demand. As we promised, we built this facility in under 2 years on time and on budget. We have won multiple program awards from 3 different Tier 1 motor manufacturers, including for traction motors. We have delivered qualifying samples to our customers for these programs made from this production equipment in Europe. And we continue to be on track to meet our commitment of launching 2 to 3 customer programs into commercial production by the end of this year. We also continue to advance our Phase 1B expansion activities. Which are expected to increase production capacity in Europe from 2,000 to 5 thousand tons. These activities include advanced equipment purchasing, supply chain planning, detailed designing of the facility as well as the layout for construction. And as I have shared on previous updates, our longer term roadmap for magnet production targets 20 thousand tons annually. Through continued global expansion. We anticipate that this amounts to approximately 10-15% of the projected rare earth permanent magnet market. Outside of China. Moving to Slide 6. Now while we have been focused recently on the future growth of our Sintered Magnet business, our bonded magnet business is sometimes overlooked. And it is an important existing business for Neo, as well as an area of growth. The universe of rare earth magnets encompasses both bonded magnets and sintered magnets. Most of the new magnet projects you hear about today including our project in Europe, are for centered magnets, as it is the lion's share of the existing market for rare earth magnets. But bonded rare earth magnets are important too, and are growing just as fast if not even faster. The 2 types of rare earth magnets share the same underlying principles. The same concepts in physics, much of the same material composition, and the same goal, of stronger magnets that drive more powerful, and more energy-efficient micromotors. Core technologies are generally the same, the end markets are the same, and the customers are the same. And importantly, the concerns around concentration risk are the same. China manufactures approximately 95% of the world's bonded magnetic powders and manufactures about 80% of the world's bonded magnets. Although bonded magnets tend to be less powerful than sintered magnets, they also do not use Dy/Tb. The heavy rare earths that are difficult to obtain outside of China. There is clearly growth in both types of rare earth permanent magnets. And as part of our long standing leadership in rare earth magnetics, Neo has decades of experience in bonded powders, and magnetics. Including our factories in Thailand, The UK, and in China. We have about 8 thousand tons of installed bonded magnetic capacity and we are the largest producer of bonded magnetic powders in the world. Neo produces the magnetic powder for the only heavy rare earth free traction motor magnet in the world for Honda. And we also shipped over 10 million bonded magnets for AI data centers last year. Moving to Slide 7. More broadly, Neo's Magnetics platform, spanning both bonded and sintered magnets, serves several large and growing end markets. With industrial and automotive applications, decades of proven performance in bonded magnets and deep customer relationships. Neo is an established and trusted supplier for rare earth magnets. In addition to the established areas for rare earth magnetic demand, there are several faster growing markets driving additional demand These include the electrification of vehicles, wind farms, robotics, drones and AI data centers. These applications rely on both bonded and sintered magnets. Positioning Neo's full magnetics platform to benefit as these markets continue to scale. In fact, some of these drivers may create higher growth rates in bonded, than sintered magnets. Let's spend a minute just talking about 2 of these markets. Humanoid robots and consumer and commercial drones. I would note that these market forecasts reflect only humanoid robots and a segment of drones not the full growing market for robotics and air mobility in general. Moving to Slide 8. The first is humanoid robotics. Where movement is enabled by electric motors and sensors. Located throughout the machines joints and subsystems. The largest, highest torque joints often use sintered magnets, and bonded magnets play a key role in the precision encoders, position sensors and small actuators that give the robot smooth, accurate, and responsive movement. Although estimates can vary widely, a single humanoid robot can contain between 3-7 kilograms of rare earth magnets. The market for humanoid robots is expected to grow dramatically over the next 10 years. With industry analysts suggesting over 52 thousand metric tons of permanent magnets required. And while the current market share for bonded magnets is about 8% of the total permanent magnet market, Some designs within humanoid robots may call for closer to 15% bonded magnets. Moving to Slide 9. The second segment is the drone segment. where lightweight, high-torque, energy efficient motors depend on magnets to deliver longer flight times and more stable control. Again, both sintered and bonded magnets will be required here. Sintered magnets generally are supporting propulsion and bonded magnets are supporting thermal stability and sensing. A single drone can contain up to 60 grams of rare earth magnets and the sintered magnet market for consumer and commercial drones is projected to be approximately 21 thousand metric tons by 2035. Again, while drone designs call for predominantly sintered magnets, bonded magnets are also growing with increased volume and increased share. Stepping back, I think these trends bode very well for Neo in sintered magnets, in bonded magnets and in our rare earth separation business. I expect to see further developments and growth opportunities in both sintered and bonded magnets in the coming quarters And of course, in expanding our separation capabilities, following our announcement earlier this year of the launch of our small scale commercial production of heavy rare earths in Europe. With that, I will turn the call over to Jonathan to walk through the financial results in more detail.
Jonathan Baksh: Thank you, and good morning, everyone. Moving to Slide 11. As Rahim highlighted, Neo followed a strong Q1 with an exceptional second quarter. Revenue was $206 million, a nearly 80% increase from the second quarter of last year. We set another all time high for adjusted EBITDA at $57 million a 200% increase year over year. Adjusted earnings per share was $0.55, compared to $0.21 per share in the same quarter of last year. This performance reflects healthy underlying demand and sustained strength in pricing across all of our business segments. Moving to Slide 12 and taking a closer look at each of our segments. Magnequench revenue increased 28% year-over-year to $64.3 million driven by a 35% increase in bonded magnet shipments with higher rare earth prices also contributing to growth. Demand remained healthy across a number of applications, including automotive, industrial automation, and advanced computing infrastructure. While bonded powder volumes declined 14% year-over-year, they remain modestly higher year to date. The quarter's variance primarily reflects timing of customer orders rather than any change in underlying demand. As customer volumes, margins and overall business fundamentals remain strong. Adjusted EBITDA for the quarter was $10.5 million an improvement of almost 40% year-over-year representing the segment's strongest quarterly EBITDA in over 4 years. These results reflect a combination of strong volumes and sustained strength in rare earth prices. Volumes, margins and business fundamentals remain strong, and the business continues to see encouraging demand signals from customers seeking security of supply and geographic diversification. Moving to Slide 13. Chemicals and oxides also delivered a very strong quarter. Revenue was $37.4 million, a 27% increase year over year. Adjusted EBITDA was $8.5 million, up 56% from the second quarter of last year. These results reflect solid performance in emission catalysts higher volumes and favorable rare earth pricing. Emission catalyst volumes were up 7% year-over-year reflecting continued solid commercial execution, supported by improved cost performance. Our water treatment business advanced the development of a new process enhancement technology, with initial units deployed to customers and commercial adoption expected to build in the coming quarters. C and O remains well positioned for long term growth anchored by Silmet, 1 of the few non captive separation facilities in the world equipped with advanced laboratory capabilities and our newly commissioned heavy rare earth separation line. Moving to Slide 14. Our Rare Metals segment delivered record performance in the quarter with revenue of $106 million, up almost 200% from prior year, and adjusted EBITDA of $44 million, up over 300% from prior year. This exceptional performance was driven by strong volumes amid tight global supply as well as sustained elevated pricing. This strength reflects increasing emphasis on supply chain resilience and secure access to critical materials across end markets, including aerospace, industrial gas turbines, and semiconductors. Hafnium volumes increased almost 40% year-over-year, while pricing held at record levels. As Rahim highlighted earlier, the business has secured additional contracted volumes through the rest of 2026 and into 2027, improving forward visibility. We are also seeing continued strong demand and pricing for gallium and tantalum, amid tightening global supply driven by a combination of regulatory and structural demand factors. Moving to Slide 15. On the balance sheet, we ended quarter with $96 million in cash and $157 million in total debt, giving us the flexibility to keep funding growth while managing risk prudently. Inventory levels increased in the quarter largely through deliberate strategic hafnium scrap purchases as well as the ramp of our European sintered magnet business. As Rahim mentioned, in July, we increased our full year 2026 adjusted EBITDA guidance to $140 million to $150 million up from prior range of $100 million to $110 million This increase reflects strong operating performance through the first half of the year healthy demand across our business as well as sustained higher than expected pricing. It also reflects the benefit of securing hafnium gallium and inventory alongside increased contracted volumes giving us greater demand visibility with additional opportunities in spot sales. As a result, we expect performance to be at the high end of our guidance range. The combination of stronger earnings, increased visibility and a healthy financial position allows us to fund our highest priority investments while maintaining a disciplined approach to capital allocation. With that, I will turn the call back to Raheem for closing remarks.
Rahim Suleman: Thank you, Jonathan. In summary, this was an exceptional quarter for Neil. Another all time high for adjusted EBITDA with strong growth in revenue and earnings per share. It reflects sustained demand across all 3 of our segments. Disciplined execution and a resilient pricing environment. Looking ahead, I am confident in our raised guidance and our ability to land at the high end or potentially above the range. We continue to invest in the capacity and capabilities that position Neo to meet the accelerating demand we are seeing across permanent magnets and critical materials. We remain excited about our growth projects and expect to provide updates on these projects in the near future. We have the assets, the experience, the customer relationships, and the balance sheet. To capture this growth and we remain focused on executing. With the same discipline that is gotten us here. Thank you all for joining us this morning. And I will now turn the call back to the operator for Q&A.
Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Did you have a question? Please press the star followed by the 1 on your touch tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the following process, please press the star followed by the 2. If you are using a speakerphone, please lift the handset before pressing any keys. 1 moment please for your first question. And your first question comes from Daniel Harriman from Sidoti and Company. Please go ahead.
Daniel Harriman: Thank you. Hey, good morning, guys, and congratulations on another outstanding quarter. I will start off with 2, and then I will get back into the queue. But obviously, you are guiding out of the high end of that range, which roughly implies $57 million across the back half of the year. Compared to $57 million in the second quarter alone. You just give a little bit more detail on what assumptions are driving that shape? And where would you say that conservatism sits right now? And then just curious about, Hapium contracts in the 2027 and how that forward book developing relative to a normal year at this point? And is that business being written right now at prices consistent with where we are today? So much, and congratulations again.
Rahim Suleman: Hey, Daniel. Thanks. So the first on our guidance range.
Jonathan Baksh: So I just emphasize, obviously, first half was really strong. And that strength was across all of our segments. When you look to the second half, we see that strength continuing, but I think we have been in intentionally measured in our approach to our Hafnium outlook.
Rahim Suleman: So we do have contracted Hafnium volumes for the second half, but we have assumed minimal spot sales in the second half. And so the potential to outperform would come from spot sales. Obviously, the first half was really strong on spot sales. We see a lot of spot sales in the second half that would give us the potential to outperform. When you look at next year, we have started to book contracts for 2027. That contract volume, as you said, is at, you know, accretive and beneficial prices. Obviously, prices are really high right now. So when we look at our long term contracts, we do look to lock them in at these beneficial and accretive prices. So we are doing that today. will not give you an exact percentage of how much coverage we have for next year, but I would say we are tracking pretty well in line with kind of historical levels of contracted volumes entering a new year.
Jonathan Baksh: Thanks, Jonathan. it is really helpful.
Operator: Thank you. And your next question comes from Nicholas Boychuk from Cormark Securities. Please go ahead.
Nicholas Boychuk: Appreciate the color that you shared on the bonded outlook related to both humanoid robots and also drones. But curious, when you are looking at that bonded capacity that you have right now in place, both geographically and size, how comfortable are you with that mix when you mentioned that you were making some investments from that treasury offering into bonded, any color on where those dollars are going or how it is going to be spent would be helpful.
Rahim Suleman: Yeah. Great questions. On both fronts. I think what we wanted to get across here is when we talk about permanent magnets as a general industry and growth in permanent magnets, we are obviously continue to be very excited about the growth of our sintered magnet business, and I think we are going to continue to see progress and expansion in that area. But our bonded business just gets overlooked in that universe. Right? We already have $240 million of LTM revenue driven by, you know, primarily by the bonded. We have significant, positive EBITDA driven by our bonded business, all of that kind of at market conditions. We compete with customers or with competitors around the world, and we win business on a competitive basis. Our cost structure is very good. And we are very disciplined in how we operate that business. But at the same time, there is a significant amount of growth opportunity. We talk about the concentration in sintered magnets. Do not talk a lot about the concentration in bonded magnets. That same concentration risk exists. And Neo is the only company that has bonded magnetic powder capability at scale outside of China. So we offer the geographic diversity that customers are looking for. So we have been talking about the various elements of where that business will grow and the strength of that business and we continue to be very confident in the growth curves of that business I think we will give more details on exact growth plans how we see that kind of unwinding, say in the next quarter or so. But today, really, we wanted to just reinforce the size of the market the importance of the market, and that it is the same growth trends and kind of confirming that, look. Our bonded business remains strong. The growth in the quarter is strong. Our growth, you know, our financial growth is often, let's say, overshadowed by the pricing dynamic in our rare metals business. But we really wanted to talk about that there is strength in the other fundamental businesses as well, and we think other long term growth opportunities in those businesses.
Nicholas Boychuk: Okay. That makes a lot of sense. Thanks, Raheem. And on the cintered opportunity switching to Europe, there were a couple interesting reports this week about Chinese automotive manufacturers taking over capacity for existing European players and how the shift of that whole supply chain is becoming a little bit more Southeast Asian focused just as European firms struggle. And I am curious if you have any commentary around what you are seeing from your existing automotive partners as it relates to phase 1 a, as well as you are thinking about phase 1 b. Just if in the context of that shift that is seemingly happening towards more Chinese influence?
Rahim Suleman: Well, I think what we are seeing there is a couple of things. We are seeing that, you know, the Chinese export control restrictions are getting more and more difficult. And that has led to a number of potential projects from Chinese suppliers to be, delayed or to be pulled. Quite frankly, in Europe. So what that means for us in the grand scheme of things, it does not change the end. It does not change the fact that Europe, you know, is currently importing 25 thousand tons of magnets, and it needs a global and diverse and resilient supply chain It just means that there are you know, the Chinese competitors that we are going to set up shop in Europe look like they are not going to set up shop in Europe at present following Chinese regulation. But it means that the market is still open for us. You know, we think that the market will continue to be dominated by Chinese suppliers, but we do think that there is a requirement for localized supply everywhere, and a resilient supply chain everywhere. So, frankly, these developments are positive things, but it is actually to be perfectly honest, not all that impactful because we already see so much demand. That we cannot actually meet the demand with our capacity. So we keep moving forward, adding capacity, adding technology, adding products. And we just continue to have customers waiting for waiting for us to deliver more and more magnets. So the opportunity from a growth standpoint just continues to be extremely strong. And we continue to execute the way that we have outlined that we would execute. So none of this is different than what we had laid out originally. We had talked about we would deliver magnets in 2026, commercial magnets on real programs, including traction motor programs. And we continue to believe that will be the case. So we have not moved our timelines. And we continue to see the market being exceptionally strong.
Nicholas Boychuk: Excellent. Thank you, sir. And last for me, just, Jonathan, coming back to the rare metal pricing dynamic. I just want to make sure I understand a little bit of the dynamic that is still kind of baked into H2 2026 when you commented that there is no spot pricing assumptions that you have baked in. I am curious why that is the case. If that is a dynamic of customers have indicated to you that they have now restocked their inventory. Or if that is just conservatism on your part? Yeah.
Jonathan Baksh: So, yeah, the comment was minimal spot sales in the second half. So we do have contracted volumes for the second half, and those would be at beneficial pricing. But we had a really, really strong first half obviously, and we had a lot of spot sales in the first half. Customers have not indicated to us that they are not buying at spot in the second half. But just given the strength of the first half, given we have line of sight to certain volumes in the second half, took what I would say is a moderate or conservative approach in how we viewed spot sales in the second half. I would make 1 more comment, which is this stuff shifts quarter to quarter, but it is not like you know, real demand destruction if we do not see spot sales in a given quarter. it is just indicative of likely the coming quarters will be stronger because this is really just about demand shifting, not about demand being lost in any given quarter. Yeah.
Rahim Suleman: And I will add to that as a comment to just to be open and honest about it. I think we saw more spot sales in June than we would have originally anticipated. So, you know, when we gave the guide in early July, we had a view of what the spot sales were looking like. And then I think we saw just more demand, in June, and then we are thoughtful that some of that demand we would have otherwise had planned for July. So it might just be shifting through the quarters. Either way, I mean, we are still talking about projecting our EBITDA to be double from the prior year. I think that the markets are strong. So it is just you know, it is a universe of do we measure ourselves year by year, quarter by quarter, month by month, or day by day. Right? And you will get fluctuations. So it is not necessarily always linear. But the market is strong. there is nothing that indicates that the market does not continue to be strong. So all factors are continue to be really positive for us.
Nicholas Boychuk: Okay. Excellent. Thanks, Jonathan.
Operator: Thank you. And your next question comes from Max Yerrill from BMO Capital Markets.
Analyst: Hey, Rahim and Jonathan, Thanks for taking my question. I wanted to ask a little bit on the bonded magnet margins. Now we have seen the EBITDA margins per tonne creep up over the past few quarters. Wondering if you could talk about if this is more of a structural market shift you are seeing? Or are these some internal cost improvement measures that are showing through? And then any read through to how we should think about the sintered magnet margin based on this? Thanks.
Rahim Suleman: Yeah. I think the bonded magnet improvements coming from a number of different areas, right? So first, it is just volume. Right? The volumes of bonded magnets and powders that we have been shipping every quarter have been going up over the last couple of years. 2 is the mix of us making more magnets versus just making powders. Again, this was a move for us to get more value add. From our business, and we have talked about the growth in our magnets portion of that business. So the magnets portion is growing very healthy. there is more margins in the magnet than there is in just in the powder. Again, it is just 1 more step on the value add curve. I think we have, as we have talked about consistently, seen improvements.
Jonathan Baksh: I think our conversion costs are down 20% or so over the last couple of years. So you are and, you know, volumes are also giving you more leverage. So I think all of those factors, are beneficial for the bonded magnet business.
Rahim Suleman: And we are continuing to see customers require and desire more diversity and supply. I think that is helpful for our business as well. So every element that we look on that business, I think, strong, and I think that it is clear. We have talked about we wanted to get into more magnet making from the bond powder side, and then we wanted to get into more assemblies. So we are just gonna continue to see more value add inside a growing market. So both volumes and additional margins.
Jonathan Baksh: We are also benefiting a little bit from price and lead lag. Obviously, prices have remained high, and we bought a lot of inventory call it, 3 or 6 months ago. You can all see that our inventory balance balances are quite high. We have been very strategic in the approach. And so I think our bonded business that, you the quarter's EBITDA is helped.
Rahim Suleman: By some of the historical purchase costs, of our inventory because we make strategic purchases because we have a good view on where we think prices will go. As it translates over to sintered, I do not know that I see them as kind of a direct translation to sintered, but I would say that the overall theme is the same that customers requiring diversification a lot of demand, and I think those things will continue to bode very well for our sintered business both in phase 1 a and in phase 1 b. And we have talked about the margin profile in phase 1 b being much stronger than the margin profile in phase 1 a. Some of that is, again, volumes. Some of that is leverage. Some of that is cost and yield improvements after we get through our first 2 or 3 years of production. And, of course, some of that is the nature of contracts, that we will have taken on because some of the contracts that we were awarded in Phase 1A were really before a lot of the geopolitical dynamics happened presently. So I do think that phase 1 b and when we get further into phase 1 a, we are gonna see better margins on the sintered side as well. But I think the bonded magnets are on a consistently positive trend here with the 1 notice. Like I said, we did get some benefit from inventory, pricing. Thanks, Rahim, And then 1 more from me is, are you able to give a sense about how much of the current sales focus contracted versus available for spot pricing? And then maybe how have your traders been able to source supply? Like, are there still constrained volumes, or are you finding new sources of feedstock? So I think it is different business to business. And the word when we talk about what the backlog is in terms of orders, it is less of a backlog style issue for us. You are awarded platforms. And then you operate on the customer forecasts. You have those platforms in place. So some people might define the entire platform that you have been awarded as a backlog. We do not kind of view it that way because the POs and the orders themselves can vary, from quarter to quarter from period to period. So what I would say there we continue to have very strong contracting programs. And we do not tend to lose any of the programs that we are contracted on. And then we win more programs. So the book of business is very healthy, but not in certain definitions of how 1 might define backlog. there is a little bit more of that backlog feel, let's say, in the rare metals business where there are more contracted volumes for longer periods of time, versus, say, the Magnequench or even the chemicals and oxides business tends to be on a program, and then we receive orders against that program. And as I said, we do not define those orders as being backlog per se.
Jonathan Baksh: In terms of the market, I think that there is continues to be tight supply. So I think in that universe, prices continue to be higher.
Rahim Suleman: I think in all of our end markets, probably except for niobium. I think we are seeing continued strength in pricing. So we are seeing strength in pricing in hafnium, gallium and tantalum. We are seeing strength in pricing in rare earths. So all of those things, I think, continue. I do not foresee today changes major changes in the feedstock. Dynamic of either of those, of any of those markets. But I think that, you know, you can look at our inventory balances. We have been pretty proactive in securing inventory that we think is very cost effective. That we think has been very opportunistic. So I think we have built our business to be able to take advantage of the pricing trends that we see And I think it is going to bode well for our margins for the rest of this year and next year and for periods to come.
Operator: And your last question comes from Ian Gillies from Stifel.
Ian Gillies: Good morning, everyone. Following on some of the-- good morning. Following on some of the commentary on the guide for the remainder of the year, On the rare metal side, is your inventory position meaningfully more expensive on a unit basis heading into the back half of the year than, call it, than the first half that rides some of the, I guess, conservatism?
Rahim Suleman: Yes. So our inventory position is at cost, so what we purchased it for.
Jonathan Baksh: Obviously, we have been adding to that inventory over the course of time and you have seen that inventory grow, including growing in this quarter. So the average cost of that inventory has risen, but not materially. And you have seen it in the in the, again, cost of inventory you see today. So maybe said another way, there is a lot of potential embedded profit sitting in that inventory that is not valued. That would be, I guess, back to an earlier question, available for spot sales if we see those spot sales come through.
Rahim Suleman: Yeah. If I can add to that, Ian, I think that costs have risen. So all of all of our inventory costs on per unit basis are higher in line with the market. But average ASP has risen, and particularly with respect to the products that you are focused on or talking about here, you know, we contract we have contracted a certain amount of our volumes for, like, that 3-year period of time at what was at the time very good prices. So the ASPs that we see actually flowing through our book are actually a combination of historical ASPs and current ASPs. And I think what we are gonna see is this historical ASP contracts will are diminishing. Right? They are being fulfilled. Over time, and it is being replaced with higher ASPs. So I am not you know, we inventory costs are higher than they were, like, on a per unit basis, I think ASPs are actually even higher.
Ian Gillies: Understood. On the hafnium side, are you able to disclose or provide goalposts on how much of that product is going into semiconductors right now?
Rahim Suleman: Yeah. So we do not supply the DRAM chip market. Our material, we produce metals going into the primarily superalloy market. So think about aerospace and industrial gas turbines. The product that goes into the semiconductor industry is actually not a metal, hafnium tetrachloride. chloride and yeah. So as I said, we do not really supply to that market today.
Ian Gillies: It is obviously a massive demand driver. So it does influence price, which is why we talk about it. Understood. The other 1, as your hafnium profitability is ramped up, how are you thinking about cash dividend payments that are going to have to go to your minority shareholder on that business over the next 18 months.
Jonathan Baksh: Yeah. it is challenging because we do not really forecast that out in a sense. The reality is that there is been a lot of reinvestment as we have said, with inventory growing. Historically, we have generally done, you know, a dividend or payment annually. But as we sit here today, we are really monitoring the business, monitoring the performance, and making decisions quarter by quarter. And with really strong prices, we think the right strategy is reinvest, contract volumes, and continue to capture that profitability.
Ian Gillies: Okay. that is that is helpful. And then Raheem, I tend to ask you this question every couple of quarters. There seems to be more and more dollars flowing into the U.S. as they chase the critical mineral strategy. And as you sit here today and think over the next couple of years, how are you feeling about Neo as pursuit of going into that market or even building assets in that market and the like?
Rahim Suleman: Look, I congratulate a number of the companies and the progress that they are making with respect to building out their infrastructure in the U.S. And Neo's focus continues to be a global company, so we view all markets in the world as potential areas of expansion in including The United States. We look at the playing field in terms of government support, in terms of end market growth, in terms of cost competitiveness. And in terms of a number and where the where the customers are and where the customers require support. So I think we continue to be very much in the loop with, a number of developments, not just in The United States, but elsewhere in the world. But, you know, I congratulated the number of The United States players that are making progress. We need to see more players make progress. We need a stronger ecosystem and a stronger infrastructure for this industry. So I think it is a very positive thing for the industry in general. We may be a participant in that industry or in that particular region, But what I would say is we have a granular focus on where customers are where we see long term growth, where we see competitive pricing. that is where we will make our expansion decisions.
Ian Gillies: Understood. Very much. I will turn it back over.
Operator: Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day, everyone. Thank you.