EDITOR: | December 18th, 2013 | 10 Comments

Eric Noyrez, CEO of rare earth leader Lynas Corp., discusses production, demand and his purchase of Lynas shares

| December 18, 2013 | 10 Comments

Noyrez-LYNASDecember 18, 2013 — Tracy Weslosky, Publisher and Editor-in-Chief of InvestorIntel interviews Eric Noyrez, CEO and Managing Director for Lynas Corporation Limited (ASX: LYC | OTCQX: LYSDY) for an update on Lynas and to discuss the recent AGM, production capacity, future demand, Eric’s recent purchase of Lynas stock, and how entering 2014, Lynas is positioned to achieve its vision of being the global leader in rare earths for a sustainable future. Lynas has the rare and esteemed distinction of being both an operational rare earths miner and producer. A pioneer in the rare earths space outside of China, Lynas mines rare earths from its Mount Weld Mine in Western Australia (the highest-grade deposit of rare earths on the planet), concentrates it onsite and ships the materials to the state-of-the-art Lynas Advanced Materials Plant (LAMP), near Kuantan in Pahang, Malaysia, where the concentrate is refined into final end-user-ready rare earth products. A titan in the REE space, Lynas has successfully built the world’s largest, most advanced and most environmentally friendly rare earths production platform to complement the uniquely rich Mount Weld ore body. As a result, Lynas is able to offer its customers an integrated, sustainable source of rare earths.

Tracy begins with asking Eric about Lynas’ recent Annual General Meeting, specifically in regards to the ramping up of REE production at the LAMP, which is expected to be at full Phase 1 capacity by the end of this year.

Eric confirmed this and said that they are now in Phase 1 (operating since 2011 in Western Australia and since 2013 in Malaysia), producing 11,000 tonnes, with the second phase equalling 22,000 tonnes. Market conditions will be the primary determinant as to when full production capacity is utilized. “So we will be optimized at 11,000 tonnes, and should the market improve in regard to off-take and pricing, we will keep up the pace,” explained Eric.

Tracy, in commenting that virtually anyone who is following the rare earth space today is following Lynas, asked Eric to give listeners an overview as to where the company is today, specifically focusing on the Mount Weld Project — the world’s richest known REE deposit. Eric stated that Mount Weld is a deposit with 10% to 25% rare earth containing ore, whereas with other deposits such as in Inner Mongolia (China) or California, it is closer to 5% to 10%. In the rest of the world, grade is more along the lines of 1% to 2%. Lynas has more than 25 years of reserves on site at full production capacity and additional resources which could later be extracted.

Mentioning a debate which has taken place at InvestorIntel, Tracy remarked that a lot of people like to characterize Lynas as “a light rare earth producer only”. Eric responded: “Yes we are a primarily a light rare earth’s producer, which is correct. But we do have 5% heavy rare earths in our ore, so Lynas is probably one of the biggest — in total terms — heavy rare earths producers in the world. Inside even the light rare earths, we tend to have more valuable products.”

Tracy inquired as to the current demand for light rare earths. Eric stated: “The Lynas project has been a customer-based business model (which means that) the key leaders in the various rare earth elements — meaning lights and heavies — have made the way Lynas is set up today. Initially we had a long-term contract set up for Cerium and Lanthanum, which is supposed to be the longest product in the rare earth’s cart — as a way of making sure that the off-takes of Lynas would be secure. Thus, the company’s Phase I production (of 11,000 tonnes) is fully secured under contract and we can sell everything we can produce.”

Lynas’ goal is to support the rare earths market in growing to its full potential. Lynas believes the market will grow to its full potential when prices are sustainable for both customers and suppliers. The company believes prices need to be higher to secure long term supply visibility to customers. For example, NdPr prices are currently supporting most of RE production cost on the basis of expected future growth. Lanthanum, on the other hand and contrary to market perception, is already short as shown by the export figures from China. Consequently, Lynas has recently announced a minimum price for new lanthanum oxide sales contracts of $15 per kilo, reflecting the actual market dynamic.

In closing, Tracy wanted to ask Eric briefly about the recent announcement of his decision to purchase more shares of Lynas. Without hesitation, he remarked, “I bought shares because I believe in the business and I believe in what we are doing. I’d like to get the reward of it — and not take on the risk. That’s the simple reason why I bought shares of Lynas.”


Tracy Weslosky is the founder and CEO for InvestorIntel Corp. (2001-Present), a leading online source of investor information that since 2001 has provided public market ... <Read more about Tracy Weslosky>

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  • Sunnyvale

    Great interview, thanks Tracy.

    It’s been reported that an onsite (@LAMP) employee fatality occurred last week. The SMSL group is attempting to capitalize on this event. For those following Lynas, it’s clear that SMSL can be underestimated and cause problems. It’s not clear if this interview took place after this event. If so, during your off-camera discussions, was this fatality discussed? Any discussion on proactively engaging SMSL to minimize repercussions?

    December 18, 2013 - 7:31 PM

  • Tracy Weslosky

    Thank you for your comment Sunnyvale. Anytime anyone is hurt on the job — or worse, loses his or her life, there are many victims — namely this gentleman’s family.

    As a result of this tragedy, I would like to clarify that this interview took place on Wednesday, December 11th.

    The statement released by LYNAS on the 13th, states that the accident occurred on the 13th. The statement read: “It is with regret we report that a member of our staff has met with a fatal accident at the LAMP site earlier today.

    We are cooperating fully with the authorities to investigate the cause of this tragic accident.

    Lynas has always valued putting the safety of our people as our No 1 priority and continues to do so. Our deepest sympathies are with the deceased’s family.”

    A confidential source informed us that the official cause of death, according to the Doctor at the hospital, was acute myocardial infarction and drowning. Apparently he suffered a heart attack and collapsed, causing him to fall into a storage pond…

    More information on myocardial infarcation may be found at the following http://en.wikipedia.org/wiki/Myocardial_infarction

    I do not think SMSL or anyone else, should ever capitalize on the tragedy of another.

    December 18, 2013 - 9:40 PM

  • Tim Ainsworth

    Hi Tracy, I was aware that Lynas was seeking a price rise for La but can you reference the announcement as in “Lynas has recently announced a minimum price for new lanthanum oxide sales contracts of $15 per kilo”?

    Best wishes to you & your team for the Festive Season and look forward to your reporting on what promises to be a much brighter 2014 in the Materials space.

    December 18, 2013 - 11:56 PM

    • Veritas Bob

      And more to the point, how much Lanthanum, if any, is Lynas selling under new sales contracts at a minimum price of $15/kg?

      Revenue is P*Q, or more generally, Integral(P dQ). If Q = 0, then revenue = 0, regardless of P. I suppose Lynas can continue selling Lanthanum under legacy contracts at less than $15/kg, and so still be getting revenue. Is there another potential “loophole” in the announcement if Lynas sells on the spot market at less than $15/kg – would this not count as a sales “contract”?

      By the way, I’m running a business with fantastic profit margins. I sell Snickers bars for $1000 each. And I buy them for well under a dollar each. Anyone want to invest in my business?

      December 19, 2013 - 12:18 PM

      • Ty Dinwoodie

        VB, I like those margins and I like Snickers bars… I’m in.

        December 19, 2013 - 12:30 PM

        • Veritas Bob

          It would be prudent for you as an investor to find out how many Snickers bars I’ve been selling, and have reasonable prospects to sell at $1000 each. Same with Lynas and its $15/kg Lanthanum.

          December 19, 2013 - 12:39 PM

          • Tim Ainsworth

            Bob, only the very beginnings of answer unfortunately, Lynas have shown the intention to produce La as carbonates from LAMP1, 1350tpa as La carbonate for the FCC & NiMH markets and 4000tpa Ce/La carbonate for the Polishing & NiMH markets. As La makes up 24% of the suite we can estimate it’s portion of the 4000tpa at 1300t to give a total of 2650tpa.
            We can break both product streams down a little further by destination (but not volume), the 1350tpa La carbonate split between FCC & NiMH batteries and the 4000tpa Ce/La carbonate to Polishing & NiMH batteries.
            The FCC & Polishing product goes direct to end market, the only one where ROW retains 65% market share and the NiMH product goes into the MSC for manufacture to metal & alloy then into batteries, a segment where China holds 90% market share.
            While the $15kg number needs some confirmation IMO, which streams are likely to be the more valuable? Direct to low value end markets or into the higher value add MSC, or both, given growing La demand?
            Lynas have placed La in the higher demand growth/shortage quartile of their LT element balance forecast, pge 10: http://www.lynascorp.com/Presentations/2013/Lynas%20Metal%20Pages%20Presentation%20120913%201255014.pdf

            December 19, 2013 - 6:46 PM

          • Veritas Bob

            Actually, I haven’t closed my first sale yet, but the addressable market of Snickers customers is HUGE = $$$$.

            December 20, 2013 - 11:29 AM

  • bourque

    Richest deposit as in highest grade, I think not, playing with words perhaps, a certainty.
    No mention of profitability, unlike the Snickers business. More smoke than mirrors.

    December 20, 2013 - 7:57 AM

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