2021 Annual Report

1 2021 Annual ReportContentsFY21 1 Letter from the Chairman 2 CEO Review 4 Our Operations 7 Our Values 7 Board of Directors 8 Senior Management Team 8 Directors Report 9 Sustainability Statement 30 Remuneration Report Audited 31 Directors Declaration 47 Auditor s Independence Declaration 48 Independent Auditor s Report 49 Financial Statements 55 Consolidated Statement of Profit or Loss and Comprehensive Income 56 Consolidated Statement of Financial Position 57 Consolidated Statement of Changes in Equity 58 Consolidated Statement of Cash Flows 59 Notes to the Financial Statements 60 Mineral Resources and Ore Reserves 101 Additional Information 104 Corporate Directory Rare Earths Limited | 2021 Annual Report1FY21 Highlights$157mRecord Profit$498mRecord Sales$681mCash and short term deposits 848 Employees and Contractors10+Nationalities in Senior Leadership21%Women Senior ExecutivesZero COVID-19 Workplace Transmission in FY21 External accreditations maintained f rom the ChairmanDear Shareholder, I m pleased to present the 2021 Annual improvements implemented in prior years meant we were well positioned to deliver and grow in 2021, including being able to capture the benefits of much improved market conditions.

2 Lynas achieved a record Annual net profit (NPAT) of $ and sales revenue increased to $ during the financial year. These results were achieved as a result of strengthened market demand and prices supported by continued strong cost external challenges faced during the year, particularly as a result of the continuing effects of the COVID-19 pandemic, total production volumes increased to 15,761 REO tonnes (FY20: 14,562 tonnes) and total NdPr production grew to 5,461 tonnes in FY21 (FY20: 4,656 tonnes).The second half of FY21 was particularly challenging for our team in Malaysia as the country dealt with a 3rd wave of COVID-19. Lynas reinforced and strengthened all health and hygiene protocols and our Lynas Malaysia team members put in an outstanding effort to ensure that operations could continue.

3 Since the end of the financial year, we have achieved vaccination for our Malaysian employees by participating in the Malaysian Government s Public/Private Partnership COVID-19 Industry Immunisation Programme (PIKAS) initiative. I would like to recognise all of our Malaysian team members for their achievements in these difficult the year Lynas benefited f rom favourable market conditions and growing demand for our products. Globally, demand for electric vehicles and wind energy has accelerated and high growth in demand for NdFeB magnets contributed to growth in demand for Lynas NdPr product family and mixed Heavy Rare Earths. The Lynas 2025 growth vision represents Lynas plan to grow with the market and meet this accelerating market demand for Rare Earths. As part of this plan, work on the new Rare Earths Processing Facility in Kalgoorlie progressed well throughout the year.

4 The Lynas balance sheet was enhanced following the successful completion of a $425m equity raise in September 2020 to fund Lynas 2025 foundation projects, primarily the construction of the Kalgoorlie Rare Earths Processing plant and the associated upgrades at the Lynas Malaysia plant. The ongoing COVID-19 pandemic continues to heighten customer and government interest in securing reliable and diversified Rare Earths supply for growing industries. As the only significant producer of separated Rare Earths outside of China, Lynas is engaged with governments around the world to sustainably address this supply chain challenge. Following year end and as announced on 22 July 2021, Lynas was awarded a $ million grant as part of the Australian government s Modern Manufacturing Initiative. The grant will enable Lynas to commercialise an industry-first Rare earth carbonate refining process that has been Globally, demand for electric vehicles and wind energy has accelerated and high growth in demand for NdFeB magnets contributed to growth in demand for Lynas NdPr product family and mixed Heavy Rare Earths.

5 3 Lynas Rare Earths Limited | 2021 Annual Report3developed inhouse at Lynas. The new process will feed the Lynas Malaysia plant as well as the proposed Rare earth processing facility and will be installed during the construction of the Rare earth Processing Facility in Kalgoorlie. During the year Lynas also received support f rom the United States Government as part of its efforts to secure sustainable critical mineral supply chains. Lynas signed two contracts with the United States Government during the year. These were a contract for Phase 1 work on a Heavy Rare Earths separation facility, and a contract for the construction of a commercial Light Rare Earths separation plant in the United States. Lynas recognises the importance of our environmental, social and govern-ance performance to all of our stakeholders, including our shareholders and our local communities.

6 This year we ref reshed our ESG reporting in line with international common metrics initiatives and, in September 2021, we confirmed Lynas commitment to the Science Based Targets initiative. The full ESG Report is available at the Lynas website. The Board is pleased to continue to build value for our shareholders. Lynas position in the market as the only producer of scale of separated Rare Earths outside of China and the Group s performance underpinned a significant uplift in market capitalisation during the year. We are proud to have been rated as the 4th highest performing stock on the ASX measured by Total Shareholder behalf of the Board, I would like to take this opportunity to thank Amanda Lacaze, her executive team and the entire Lynas team for their continued hard work and dedication to the business throughout the year, particularly with the ongoing challenges presented by COVID-19.

7 The Board would also like to thank you, our shareholders, for your continued support of the business. While the challenges of the pandemic are likely to remain in the short-term, Lynas unique position in the market and Lynas 2025 growth vision ensures the Group is well positioned to benefit f rom accelerated market ReviewThis year the Group delivered a record profit f rom record sales revenue. This is a testament to the resilience of the business and the excellent performance of our people in overcoming the challenges presented by the COVID-19 pandemic. This has been a significant transition year for our business. Forecasts for strong demand growth for Rare earth materials, particularly magnetic materials, were exceeded in FY21, driven by strong consumer demand for new green technologies.

8 In addition, governments around the world intensified their efforts in relation to securing Rare earth supply for industry. While the ongoing pandemic continued to present challenges to the way we operate, pleasingly, our business showed that we are sufficiently agile to manage these risks and our people have stepped up and made the changes needed to achieve continued success. Overcoming the challenges of COVID-19FY21 was a year of two halves and the conclusion of the financial year was fundamentally different f rom the start. We commenced the year with low COVID-19 case numbers in both Malaysia and Western Australia. Unfortunately, a vigorous third wave of COVID-19 in Malaysia led to daily cases rising to around 20,000 by the financial year end. This big step change has presented a number of challenges for the business.

9 Ensuring the health and safety of our people and our communities is always our first priority, and even more so as we managed operations during the pandemic. During the year we enhanced our health and safety procedures in line with Malaysian Government SOPs as well as our own policies. This has stood us in good stead and we have been able to continue operations in Malaysia, albeit at 75% of our Lynas NEXT rates. This is an outstanding achievement and highlights the strong compliance of our employees in implementing our extended safety procedures in both their work and home lives. We are continuing to implement these strong protocols in recognition of the continuing risks to our people f rom the risk management procedures have enabled the team to mitigate logistics risks related to shipping delays, including by holding more stock and carefully managing inventory.

10 We have been pleased to provide COVID-19 vaccines to our Malaysian staff through our participation in the Malaysian Government s Public/Private Partnership COVID-19 Industry Immunisation Programme (PIKAS) initiative with of our people now fully vaccinated. Our Lynas 2025 growth vision is designed to develop our resource for the future, leverage our downstream processing capability and expand our industrial footprint to meet accelerating market demand. 5 Lynas Rare Earths Limited | 2021 Annual ReportPlans were progressed for the construction of a Permanent Disposal Facility (PDF) for WLP residue in Malaysia during the year, notwithstanding constraints presented by COVID-19 conditions. In recognition of these constraints, the regulator in Malaysia has extended the deadline for satisfaction of the licence condition related to the commencement of construction of the PDF to 2 March 2022.