An anonymous director reports

NEO CONCLUDES STRATEGIC REVIEW AND ACCELERATES CURRENT STRATEGIC PATH

The board of directors of Neo Performance Materials Inc., on the recommendation of Neo's special committee of independent directors, has determined to continue to accelerate the execution of Neo's current strategic plan, with a focus on building upon Neo's long-standing leadership in rare earth magnetics and critical materials. The strategic review process was initiated in June, 2024, to assess opportunities to maximize shareholder value, including the current strategy of the business, opportunities to optimize its portfolio, Neo's approach to capital allocation, and the potential for an en bloc sale of the company or asset-level transactions.

Upon completing its determination, the board stated: "Neo is at an important inflection point with substantial momentum in its projects, and its recent performance validates Neo's focus on downstream opportunities, with significantly less exposure to rare earth price volatility.

"As the special committee evaluated a number of alternatives in the course of the strategic review, it concluded that there were opportunities for value creation through the accelerated execution of Neo's strategic plan and that the deal completion risks associated with an en bloc sale were significant given current geopolitical dynamics.

"Neo's end-markets continue to grow as its customers see a growing need for a diversified supplier base. The company is scaling its European magnet operations and evaluating additional supporting capabilities, such as heavy rare earth separations. Neo also continues to achieve enhancements in its cost of capital, capital efficiency, and its long-term return on capital by exiting low-profitability businesses and allocating capital to more attractive growth opportunities.

"The board is confident in Neo's strategic direction and the management team's ability to unlock value for all shareholders."

Key findings of the strategic review

Potential for en bloc sale

The special committee and its financial advisers conducted a comprehensive outreach to strategic and financial counterparties and considered potential en bloc sale opportunities. After giving consideration to the potential value available and in light of the associated transaction risks, including in the context of the current geopolitical environment, the board determined to end the strategic review process and continue to execute on the company's strategy.

Strategy for advancing the business

The special committee determined that becoming a premier global supplier of rare earth permanent magnets and critical materials is a transformative and value maximizing strategy for the company. In this regard, the company's permanent-magnet facility in Europe is expected to be completed on time and on budget and start commercial production in 2026. Neo has executed numerous offtake agreements with upstream providers, has begun engineering and design for a pilot heavy rare earth separation line in Europe, expanding on its light rare earth capabilities already in production, and will look to expand its production capacity in Europe and elsewhere (including the United States).

Portfolio optimization

The special committee recommended continuing asset optimization to simplify and focus the business while unlocking value for shareholders. During the course of the strategic review process, Neo successfully completed sales of its majority equity interest in non-core Chinese separation facility assets, known as JAMR and ZAMR, at premium valuations, divested its gallium trichloride business in Quapaw, and closed the hydrometallurgy portion of its niobium and tantalum business. Neo also completed the construction of its world-class and highly automated emissions catalyst facility, which is currently running at scale and has qualified products with all of its customers.

Capital allocation

Neo maintains a strong balance sheet and liquidity position. Neo's exit from its China separation facilities reduces its exposure to volatile pricing and freed up working capital and cash balances in China. Substantial completion of major capital projects and securing favourable loans and government grants have reduced Neo's capital exposure. The board intends to maintain Neo's current dividend policy and, subject to approval by the Toronto Stock Exchange, reinstitute a normal course issuer bid.

About Neo Performance Materials Inc.

Neo manufactures the building blocks of many modern technologies that enhance efficiency and sustainability. Neo's advanced industrial materials -- magnetic powders, rare earth magnets, magnetic assemblies, specialty chemicals, metals and alloys -- are critical to the performance of many everyday products and emerging technologies. Neo's products fast-forward technologies for the net-zero transition. The business of Neo is organized along three segments: Magnequench; chemicals and oxides; and rare metals. Neo is headquartered in Toronto, Ont., Canada, with corporate offices in Greenwood Village, Colo., United States; Singapore; and Beijing, China. Neo has a global platform that includes manufacturing facilities located in China, Germany, Canada, Estonia, Thailand and the United Kingdom, as well as a dedicated research and development centre in Singapore.

We seek Safe Harbor.