EDITOR: | November 9th, 2016 | 7 Comments

Lynas CEO Amanda Lacaze on negotiating time and an estimated $70 million in interest savings

| November 09, 2016 | 7 Comments

“The most important thing is the time because, as you know and as everybody who’s observed the rare earths market knows, the rare earths market at present the price does not reflect demand.” – Amanda Lacaze, Lynas Corporation

Amanda Lacaze, CEO and Managing Director of Lynas Corporation (ASX: LYC | OTC: LYSDY), in an interview with InvestorIntel Corp. CEO Tracy Weslosky discuss the recent debt amendment and Q1 announcement. In this interview, Amanda touches on some of the subtle complexities and associated advantages of the debt amendment negotiations with the two debt facilities which includes time and an estimated $70 million in interest savings.

Tracy Weslosky: We’re delighted to interview you because we want to talk to you about the debt amendment that you recently facilitated. Can you give our audience an overview of what Lynas just negotiated?

Amanda Lacaze: What we actually negotiated is virtually all elements of the amendments. The most important thing is that it’s time. We’ve negotiated additional time through to mid-2020 on the JARE facility and the 30th of September 2020 on the convertible bond. As well as that we’ve significantly reduced the interest liabilities. The current interest rate on JARE is 6%. It drops to 2½%. The current interest rate on the convertible bond is 2.75%. It drops to 1.25%. As well we had fixed our amortization schedule for repayment of principal on the JARE facility and now all of that is due at the end of the loan and will only make payments in the interim based upon how much cash we have in the business. It’s much more tied to cash flow of the business and it’s recognizing the market volatility. The most important thing is the time because, as you know and as everybody who’s observed the rare earths market knows, the rare earths market at present the price does not reflect demand. We expect that at some stage those two things will come back, will normalize and at that time we’re in a very good position to deliver a good outcome.

Tracy Weslosky: I understand there are numerous complexities in this deal. One writer commented that in addition to time that the interest rate savings might exceed $70 million. Can you talk to us a little bit about the numbers?

Amanda Lacaze: Yes, certainly. The interest rate savings are around about $70 million. That’s on the JARE facility and then as well there’s simply the savings in the liabilities based upon the interest rate over the remaining duration of the loan. In addition, under the current agreement we actually have $50 million U.S. payable as principal between now and the 31st in December 2017 and all of that has been pushed out to the end of 2020. People might say, well, what have you had to give in return for this? In terms of the things that Lynas has needed to bring to the table, and one of these is very important and our shareholders will need to vote on it on the 30th of November at our AGM, is that we’ve agreed to reset the conversion price with the convertible bond to $0.10 per share. That’s still at something like — just over 40% premium to the price that it’s currently trading at, as well as that we have granted 10% warrants at an exercise price of $0.05 and we have agreed new availability offtake agreement with JARE to ensure that we continue to supply the Japanese market with their NdPr. We think that it’s actually a very, very good deal for shareholders. We hope that the shareholders will vote positively for it.

Tracy Weslosky: Of course, what I would really love to ask you, because we’re seeing signs of increasing interest in rare earths and a potential, we believe that it’s inevitable, that there has to be an increase in rare earth prices. Amanda, obviously you have a better understanding of this than we do. What do you think we as shareholders and new potential shareholder should anticipate say in the next 6 months to a year with rare earth prices?

Amanda Lacaze: Oh look it’s very difficult. I think that I have actually probably done better picking when 35 is going to come up on the roulette wheel then I have been picking when rare earth prices are going to change. It’s, sort of, the rare earth market is such a complex market. We find demand is strong and you would have seen in our quarterly report that we continue to sell everything that we produce and that we’re producing more than we have every produced before. Customers are still wanting to buy from us. That normally would say therefore price should be strong. We would hope that this amendment is a good signal to everybody that Lynas is here to stay….to access the complete interview, click here

Disclaimer: Lynas Corporation is an advertorial member of InvestorIntel.



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  • Tracy Weslosky

    This is a purely outstanding interview by Lynas CEO Amanda Lacaze and I would like to personally recommend that our audience watch and/or listen. Also, I would like to thank Byron Fillmore of UCORE who has designed the new beginning of the InvestorIntel interviews, and of course our new Creative Director – Kelly Bird. Expect more video interviews – faster, and sharper….on InvestorIntel

    November 9, 2016 - 11:59 AM

  • John

    Thanks for the informative interview Tracy. I must say that Amanda is a million miles in front of the previous CEO as far as shareholder interaction and information. She has done a fantastic job at Lynas, it probably would have folded by now, if not for her efforts.

    November 9, 2016 - 11:31 PM

  • Andrew

    2020 is not a good ending time. 2021 is better. By 2021, China will have its 14th five year plan including the conclusion of 13th five year plan. Understand Lynas need to stay in the same boat during its 13th five year plan, it will only be save when Lynas has one year buffer more thanthe card sharks. The MtK debt extends 2 years from 2018 to 2020 it is not overall a lot but shareholders need half of the blood. 3 years extension is suggested.

    November 13, 2016 - 7:05 AM

  • John

    Its all about the REE pricing, particularly NdPr. Amanda said that demand is increasing and yet the price is still rock bottom. Either demand isn’t all that great or the Chinese have plenty in reserves to keep feeding the market. The only hope is that China will set limits on its production at some point but that would be rather out of character.

    November 13, 2016 - 10:24 PM

  • Theo

    Quite obvious the Chinese will keep prices low to hang on to their monopoly. Government pays a rebate to the producers and push the downstream value add. Question is what can Amanda Lacaze and Lynas do to counter this. It seems they are still playing at the rare earths casino, despite efforts to obtain price premiums from greedy consumers. We need something more concrete than general notions of joint ventures, price premia, etc. etc. Still watching the space Amanda, but time is marching on.

    November 17, 2016 - 6:08 PM

  • CDanvers

    You may be good at counting money, but hopefully there’s still more space to store all the solid waste, Amanda.

    December 18, 2016 - 2:49 AM

  • Timothy Ainsworth

    Let the “rare earth function +” become a new economic development momentum
    Source: China Metallurgical News
    December 16, 2016, the Ministry of Industry and raw materials division inspector, director of rare earth office Jia Yinsong China Rare Earth Society in the Sixth National Member Congress, said: “As a rare earth workers, I think China should have a ‘rare dream’ Is to work hard to achieve China’s reform and opening up the chief architect Comrade Deng Xiaoping’s ‘Middle East oil, China has rare earth, must take the rare earth thing well, the rare earth advantage to play out’ grand vision, is the ‘rare earth function’ Become the new momentum of national economic development!
    “Rare earth resources is mainly reflected in the strategic function of rare earth materials, vividly speaking, rare earth materials have three levels of function, that is, industrial monosodium glutamate, vitamins, vitamins, to achieve rare earth materials, functionality and application of close integration, Development and efficient use of rare earth materials, application functions, need to further understand the basic characteristics of rare earth industry, collaborative innovation and development of new features of rare earth. “Jia Yinsong further pointed out.
    Grasp the characteristics of “three characteristics” of rare earth
    — Strategic, functional, and scalability
    Jia Yinsong pointed out that the characteristics of rare earth can be summarized as “three”, namely, strategic, functional, expandability.
    About strategic, Jia Yinsong introduction, rare earth is a non-renewable strategic resources, rare earth is the 17 elements collectively, its mineral resources in the natural distribution of species diversity, elements with different points. Therefore, it is necessary to further strengthen the scientific management of rare earth industry, according to the rare earth resources, the scarcity of different elements at different levels of management. Rare earth resources can be divided into strategic, critical and general, must be sub-elements, sub-species, sub-functions to be scientific and standardized to create a more conducive to rare earth resources market rational allocation of a good market environment, to achieve rational development and efficient rare earth resources The use of organic unity.
    On the functional, Jia Yinsong said that the production of rare earth raw materials should be refined. Rare earth resources mining, ore separation, smelting and metal smelting and other production processes is basically the production process of raw materials, the main products for rare earth oxides, rare earth chloride and other salts, rare earth metals, rare earth alloys and other primary products, not yet reflect the material Functional, but the subsequent deep processing of functional materials have a great impact. In the follow-up development of functional materials, must be refined production, improve product purity, optimize the size of the composition of functional quality indicators, so as to enhance product value and application function level.
    On the expansion, Jia Yinsong pointed out that the rare earth functional materials need to functional devices and product development. Rare earth permanent magnet materials, for example, from the rare earth metal to the rejection of tablets, magnetic powder, sintering (or bonding), rough, processing, devices, until the application of functional new material products, is a whole industry chain manufacturing process, Development and upgrading of rare earth function of the system, fully embodies the scientific management of enterprises, product development and functional level of intelligent manufacturing level. At present, some enterprises have been moving towards this goal, for example, some rare earth magnetic powder production plant has expanded its business scope to mass production of servo motors, mobile phones with micro motor and other rare earth permanent magnet high-end products.
    Development of rare earth three functions
    — basic functions, application functions, high-end features
    “Rare earth has three levels of functionality, that is, basic functions, application functions, high-end features.” Jia Yinsong pointed out.
    On the basic functions, Jia Yinsong said, rare earth materials, the basic function of the development depends on the level of scientific research and technology to enhance. Rare earth permanent magnet materials, for example, with China’s scientific and technological progress and the development of functional materials, permanent magnet materials in the application of rare earth in the past 30 years, an increase of 70 times. Rare earth permanent magnet materials industry, represented by sintered NdFeB magnets, has become the fastest growing and largest industry in rare earth applications. This is mainly based on the breakthrough of rare earth permanent magnet mechanism, the development of basic functions, the realization of the revolutionary magnetic material Upgrading.
    On the application function, Jia Yinsong that the application of new materials, rare earth application development and industrialization need to work closely with the upstream and downstream. Low-carbon economy The strong demand for permanent magnet motors has stimulated the rapid development of permanent magnetic materials in emerging markets. At present, China’s electrical system accounts for about 60% of the national electricity consumption, but many of the motor even less than 50% efficiency, development and use of energy-saving motor has a very important strategic and economic value. Permanent magnet motor is a typical low-carbon energy-saving industrial products with high efficiency. Compared with the traditional induction motor, the efficiency of the rare earth permanent magnet motor is increased by 10% to 15%. In addition, because of good speed performance, rare earth permanent magnet servo motor has been widely used in a variety of manufacturing equipment, as the core of intelligent manufacturing components. But at the same time, a large amount of traditional asynchronous motor replacement work progress is a bit slow, which requires rare earth permanent magnet materials manufacturers and users work closely together to promote and need some policy support.
    On the high-end features, Jia Yinsong pointed out that the rare earth high-end function of new materials research and innovation needs of basic theoretical research and original innovation. The future rare earth permanent magnet motor in addition to the rapid development of traditional areas will also be renewable in the new energy — permanent magnet wind generators, energy-saving emission reduction — ultra-efficient permanent magnet motor and efficient permanent magnet motor, alternative Energy – a new type of power vehicles with permanent magnet motor, rail motor and other fields with rapid development. With the continuous expansion of applications, rare earth permanent magnet motor will gradually to high-power, high torque, high temperature, intelligent and other direction, the overall performance of rare earth permanent magnet materials also put forward higher requirements. To this end, the state has established a rare earth functional material gene pool for the R & D and application of functional levels continue to enhance the lay a solid foundation.
    Application of New Materials with Three Layers in Promoting Rare Earth Function
    Jia Yin Song pointed out that the problem-oriented, goal-oriented, demand-driven, closely around the “Made in China 2025” identified the top ten areas of rare earth functional materials demand, solid promote the application of rare earth functional materials. Specifically, you can start from the following three levels.

    First, highlight the features. Rare earth materials with magnetic, catalytic, hydrogen, light, polishing, modification and other functions, but the application of the various functions there is a big difference, to be personalized requirements, to take customization, functional upgrading, integrated development And so on, in accordance with the whole industry chain management, and promote collaborative innovation.
    Second, enhance market vitality. Rare earth functional materials with a wide range of applications, production volume is small, fast product features such as upgrading, to adhere to market-oriented operation, take a demand-oriented flexible mechanism; to actively adapt to intellectual property protection and scientific and technological personnel can part-time reform Direction, explore and improve the “standardized management plus flexible mechanism” development model.
    Third, a clear R & D path. To the “Made in China 2025” identified in the high-end demand, as rare earth functional materials technology research and development and product industrialization of the main direction of the layout of the chain around the demand chain, around the industrial chain layout innovation chain, around the chain of innovation funding chain.
    “To continue to develop and enhance the new features of rare earth materials to promote the application of new materials in the high-end applications of new development.” Jia Yinsong finally stressed.

    Lynas vs Dragon, what downstream support?

    January 6, 2017 - 12:31 PM

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