Neo Performance Materials Inc T.NEO

six concerns from latest investor presentation

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Addressing Investor Concerns

Concern 1: Commercial Activities in China

Neo has too much concentration of business in China and that is too risky.

• Neo has presence in China, where the vast majority of the rare earth industry’s resources, processing and experts are located. It is the biggest supply and demand market.

• Neo operates unique parallel supply chains both inside and outside of China for RE Magnetics and RE Solvent Extraction (SX). Neo’s Rare Metals business is entirely outside of China.

• In Q1 2024, Neo shut down its light rare earth solvent extraction separation process in Zibo, China.

• Neo’s dependency on China is over-scrutinized because of Neo’s RE SX asset concentration origins three decades ago in China.

• Neo has been growing rare earth assets outside of China (UK, Estonia, Thailand).

Concern 2: RE Price Volatility & Impact on Neo’s Earnings

Quarterly results are too volatile, unpredictable and highly correlated with RE price movements. Sounds like Neo is really a Rare Earth Commodity player.

Response

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Neo is almost entirely a value-add player in the RE Magnetics business. MQ has pass-through provisions for RE commodity price changes on >80% of its business. MQ’s volatility is due to timing of cost/price changes - not due to value.

Most of the volatility exists in the RE-SX business – a smaller piece of Neo’s business. However, due to price fluctuations, Neo’s earnings have been very volatile: e.g. large earnings in RE-SX in 2021 and losses in RE SX in 2022/2023/2024YTD. These swings overshadow the general strength in Neo’s earnings.

Rare earth pricing has been unusually volatile in last three years. Nonetheless, Neo is taking steps to reduce the impact of this volatility on earnings.

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Response

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Addressing Investor Concerns

Concern 3: Upstream Strategy

Neo’s growth prospects seem limited by access to Rare Earth carbonate feedstock. Neo is not a mining company. How can Neo get comfort on sourcing of material?

• For our midstream separation, sourcing of feedstock is a valid issue. Neo has the most globally diversified sourcing, while actively engaged with promising new mining sources coming online to supply our European midstream asset. But RE SX is a smaller portion of Neo’s overall business today.

• MQ currently sources only 5%-15% of its magnetic rare earths from Neo’s midstream business. The rest is sourced from others (inside and outside of China), as is common practice in the magnetics industry in general.

• Having the most integrated supply chain is an advantage to Neo, but is not a limiting factor for Magnequench growth.

• Neo has announced four (4) MOUs for offtake agreements from upstream projects for SX in Europe.

Concern 4: MQ Volumes have not been growing

The story around RE Magnetics is clearly compelling and indeed generational. But why hasn’t that translated in MQ growing volumes in recent history?

• In 2022-2023, all RE magnetics suppliers had lower volumes due to short-term economic growth. No change in longer-term forecast for industry.

• MQ has historically focused on Bonded Powders which represent about 5% of total RE Magnetics. Thus, MQ has expanded to Hot Deformed Powders, Bonded Magnets, Magnet Assemblies and now Sintered Magnets.

• In Bonded Powders, MQ’s growth has been masked by larger reductions in Legacy Businesses (eg. Hard Disk Drives). This historical decline (from 2,196 mt in 2016 to 458 mt in 2023) has offset growth in magnets for Traction and BLDC motors.

Response

Response

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Addressing Investor Concerns

Concern 5: North American Magnet Strategy

Others have announced their RE Magnets for North America strategies (and received funding awards) – acknowledging the massive growth prospects in this space. Why has Neo been slow in this regard?

• Neo has not announced a North America magnet strategy (and accompanying funding) as yet, but is conducting the market assessment currently. The market is big and Neo could be a meaningful participant.

• Neo was the first to announce its European magnet strategy (ahead of most North America announcements). Neo received Just-Transition-Fund funding in Europe.

• Neo believes the pull from European OEMs for Outside-of- China supply was much stronger than North America OEMs and Neo followed the customer’s requirements.

Concern 6: Shareholder and Public Awareness of Neo’s Story

Neo’s story sounds great and the opportunity is immense. Yet, the story hasn’t taken hold with the broader market. What is missing in the adoption of Neo’s story?

Response

Response

• Neo has a generational opportunity in front of it with the right technology, expertise, experience and capacity, yet the market cap is less than Cash + Working Capital and is merely a fractional of the book value of tangible assets – there is something missing.

• Neo will be making more investments in time, energy, money and accountability to increase public awareness, media coverage and shareholder engagement.

• Recently Neo has had positive coverage in Deutsche Welle, Wall Street Journal, Globe & Mail and Investor News about our new sintered magnet plant under contruction in Europe.