EDITOR: | December 3rd, 2013 | 10 Comments

Pioneering Rare Earths Producer Lynas is Years Ahead of Competition

| December 03, 2013 | 10 Comments

MALAYSIA-AUSTRALIA-CHINA-RESOURCES-MINING-ENVIRONMENTAustralia’s Lynas Corporation Limited (ASX: LYC | OTCQX: LYSDY) has the rare and esteemed distinction of being a rare earth element operational miner and a producer. A pioneer in the rare earths space outside of China, Lynas mines rare earths from it Mount Weld Mine in Western Australia, concentrates it onsite and ships the materials to the Lynas Advanced Materials Plant (LAMP), near Kuantan in Pahang, Malaysia, where the concentrate is refined into final end-user ready rare earth products.

Last Friday, Lynas held its Annual General Meeting in Sydney. Founder and Chairman Nicholas Curtis addressed shareholders — and the leader of a prominent Malaysian anti-Lynas NGO, sitting in the audience — immediately acknowledging that 2013 has been a tumultuous year for the owner of the highest-grade deposit of rare earths on the planet. That said, many of the issues Lynas has experienced must be put in proper context, in the sense that they mark the reality of the industry leader’s status as a REE producer. In recognizing that the past year contained “a number of difficult developments” (from an underperforming share price trading at all-time lows, to delays in achieving the nameplate Phase 1 production run rate on a sustainable basis, to the challenging macroeconomic environment), Mr. Curtis was understandably quick to highlight the major milestones Lynas has successfully achieved. For starters, the Lynas Advanced Materials Plant (LAMP) is complete and operational. 2013 saw Lynas produce its first rare earth products for end users and generated the company’s first sales — arguably Lynas’ most significant achievements to date.

Admittedly, Mr. Curtis looks forward to the future when Lynas will be detailing highlights in terms of production, sales and financials. But for the past year, however, Lynas has had to measure achievements in terms of concluding its construction phase and gradually transitioning into sustainable production.

Concentrate loading and gas treatment

The Lynas Advanced Materials Plant (LAMP) in Malaysia.

“In collaboration with a number of international research bodies, we have successfully transformed the solid residue from LAMP into commercial products,” commented Curtis. “Independent laboratories have confirmed that these commercial products are not radioactive, are not toxic, and are not unintentionally leachable. While issues encountered while ramping up production [at LAMP] are not that unusual for a plant of this nature, it is also true that we were surprised by some of them. We were so focused on the completion of our [12-year] long journey to production that exuberance carried us away. The LAMP issues are largely dealt with and the plant is on track for target production by the end of the year. The year of initial production substance will be 2014.”

Faced with a series of technical and operational problems over the past three years (coupled with opposition from local residents and environmentalists), LAMP had been an ongoing source of delay and difficulty for Lynas; nevertheless, the company has managed to (slowly) turn things around. Although formidable Malaysian activists staged protests outside the AGM, it should be noted that six international bodies (inspecting for radiation and pollution) have audited LAMP. All six have come back clear, with the plant operating within local and international standards. Furthermore, Lynas recently ran a tour for 80 health officials, aimed at improving the public’s perception of the plant. It appears to have worked, as numerous local officials have made public statements proclaiming LAMP’s safety. Addressing the prominent anti-Lynas protestors in attendance (members of Save Malaysia Stop Lynas — or SMSL — environmental group, who staged a similar protest in 2012), Mr. Curtis commented: “Another factor contributing to the delays we have experienced are the frustrating actions of this group. Much of what has been said about our company by them is not correct. Whether this is by design or simply because of incomprehension is not for me to say. However, the facts are clear. LAMP is a chemical processing plant and not a nuclear facility. Lynas and LAMP are both fully complaint with all license and regulatory conditions and obligations.”

lynas 3

Lynas’ Mount Weld Rare Earth Mine in Western Australia.

The state-of-the-art, industry-leading processing plant has received production limit approval thus far (11,000 tonnes of rare earth oxide per annum; Lynas anticipates achieving the target run rate in the first calendar quarter of 2014) for Phase 1 production, with Stage 2 approval to increase production to 22,000 tonnes per year. One of Lynas’ key advantages is the significant scalability of its business. Mount Weld has defined reserves to support LAMP for more than 50 years (at the current target production rate), while LAMP now has installed capacity that can allow Lynas to double that production rate, when market conditions support the need.

Mr. Curtis restated Lynas’ long-held strategic aim of establishing a secure and sustainable alternative supply chain for rare earth consumers and the company is confident that as it demonstrates this production reality over the coming months, shareholders will also see some recognition in Lynas’ share price. “Commodities markets (generally) have experienced price volatility and erratic demand — and rare earths were no exception,” said Curtis. “We do, however, believe a corner has been turned and that there are emerging signs that market conditions are beginning to improve.”

Past issues aside, moving forward, the fact remains that Lynas is years ahead of its Australian (and rest of world, outside of China) competitors, with an operational mine and processing facility. Should rare earths prices rise as demand increases (with consistent growth in existing and new technology product applications), Lynas could be a true opportunity for investors at current prices.

In closing, Mr. Curtis stated: “We have built the world’s biggest, most advanced and most environmentally friendly rare earths plant to complement the uniquely rich Mount Weld ore body. This allows us to offer customers an integrated, sustainable source of rare earths and makes our vision of being ‘the global leader in rare earths for a sustainable future’ truly achievable.”

Ty Facts about Lynas:

  • LAMP is the world’s premier rare earth production platform
  • Lynas’ operations are now scalable, cost effective and ready to respond to improved market conditions
  • Demonstrably high-quality, long-life assets with favorable long-term fundamentals
  • ISO Standards (quality, health & safety, and environment) compliant for both Lynas sites
  • Offtake arrangements in place (contracts, premium/sustainability-based pricing) with major rare earth-consuming companies in Europe, Japan, Asia, and the US


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  • Nevada George

    Still Holding and Waiting … to see what their
    status is going to be in 2016.

    Perhaps? … in 2014 some of the Big Stock
    Houses will disseminate some positive news
    on Lynas to reinstate investor confidence.

    The stock needs to begin the climb back up.
    I hope we have seen the last of cash burns and
    stock dilutions.

    December 3, 2013 - 11:08 AM

    • vacuum

      ca. 2,000,000,000 shares and a heap of debt, what’s not to like? Now that the mechanics have got the mine humming, the float needs an Earl Scheib so that in 2014 some of the Big Stock Houses will disseminate some news. Big Stock Houses tend to like shares priced at $5 or at least $1. A 20:1 lacquering would roll out a bright spanking model 2014.

      December 5, 2013 - 1:48 AM

      • Nevada George

        Please,… no reverse splits.
        I would prefer that the stock climbs
        back up on its’ own merit.
        … A few kind words from “JP and
        the Boys” might help to accomplish

        December 6, 2013 - 12:40 PM

  • Chris

    I think it is also worth noting that the LAMP produces REO to customer specification and the Company has achieved more than 25 product qualifications across the customer portfolio to date. Although Lynas has had some issues with the cracking and leaching section of the LAMP, that have now been fixed, the separation section is working fine.

    December 3, 2013 - 11:16 AM

    • Ty Dinwoodie

      Indeed. Furthermore, based on current customer agreements, Lynas has stated that the company expects to sell its annual Phase 1 production (11,000 tpa).

      “The way of the pioneer is always rough.”
      — Harvey S. Firestone

      December 3, 2013 - 1:53 PM

      • Chris

        And what a rough ride it has been for Lynas.
        On a side note, it must be a real slap in face for Molycorp seeing that Lynas has secured a long term contract to supply REO to a customer in the FCC sector in the USA.

        December 4, 2013 - 3:06 AM

  • hw looi

    What really intrigues me about this company is the incredibly large discrepancy between it’s intrinsic value and that of its present market value.

    Lynas has a reserve of 1.9 million tonnes of rare earths if we include the Duncan deposit.

    In other words, if we assume the basket selling price of the REE is $30 per tonne, the gross value of the Mount Weld deposit is about $57,000,000,000!

    And yet it’s present market value is only a miserable $570 million!

    Something is definitely not right here.

    It’s shares may actually a valuable lump of diamond which all investors have erroneously perceived to be nothing more than a piece of worthless stone!

    Dr Looi

    December 5, 2013 - 2:43 PM

  • looi

    Typo: “… the basket selling price of the REE is $30 per tonne, ” should read as ” the basket selling price of the REE is $30 per kg,”.

    December 5, 2013 - 3:38 PM

  • vacuum

    Today, in the context of a teetering SP500, and looking towards Dec 31st, Lynas has a lot of shares. A r/split of these coincidental with a Zen moment would be clutch. After a year plus some months run, Zenyatta chart has just had a 50/200 simple-MAvg crossover. Meanwhile, there’s a gap below current price on its chart in the month of February this year. (Though keep in mind where it is at now could afford a bounce.) If it fills that gap, that would probably indubitably mark the bottom of the entire REE-graphite sector, as it would suggest the last bastion of the hot money momos having been cleansed from the sector, which can then begin the process of establishing the new cycle regime, which would include the pricing-in of all the fundamentals involving HREE as well as the StarTrekian future of graphene.

    musical accompaniment, cf. Youtube: “Maroon 5 – Pure Imagination”

    December 5, 2013 - 3:52 PM

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