EDITOR: | June 10th, 2014 | 35 Comments

Amanda Lacaze comes to rescue Lynas

| June 10, 2014 | 35 Comments
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Lynas Corp CEO Amanda LacazeLynas has changed captains, signaling that the Board has decided that it wants to change the Company’s course. The rare earth producer, still unable to overcome its financial difficulties, has replaced Eric Noyrez with Ms. Amanda Lacaze as CEO. The surprise move suggests that Noyrez may have been ‘persuaded’ to resign by the Board due to the ongoing delays in the Lynas’s Advanced Malaysian Processing plant (LAMP) reaching full capacity.

Noyrez, who held his position for just over a year, led Lynas in a difficult period as the Company conducted the commissioning of the mine in Mt. Weld, Australia, and in the wake of Lynas’s start of production after the Company had overcome numerous protests as well as technical and financial problems. Overcoming numerous challenges and achieving a steady production would have led to a transformation of the company and would now make it possible to focus more on commercial success. Amanda Lacaze comes from a telecom background; she was previously CEO of Commander Communications and also served as Vice President of Marketing Australia’s leading telecommunications company Telstra, where she helped to expand and strengthen the Company’s business. Lacazes also has experience in the chemical, heavy industry, technology and marketing – among other things – sectors. Lynas has also had to endure a sharp drop in the price of light rare earths even as it should manage to reach its planned production rate of 11,000 tons per year at the end of June.

No official reason was given for Noyrez’s departure and Chairman Nick Curtis did not offer any reason; however, Curtis and the Board may have pondered the shift toward Ms’ Lacaze’s leadership as early as last December when Amanda Lacaze was appointed as non-executive director to the Lynas Board. At the time, she was said to bring “skills in strategic marketing and her focus on delivering outstanding financial performance”. Curtis also said that, as a Board member, Ms. Lacaze would be “a great contributor to Lynas, particularly as the company continues its evolution from project developer to industrial producer, which is Amanda’s core area of expertise”. Should Lacaze succeed in using her expertise to reach Lynas’s planned production ramp-up, it would help the Company reduce production costs and improve cash flow. This is crucial given that Lynas’s main products, cerium oxide and lanthanum have fallen substantially since reaching peaks in 2011.

Noyrez’s departure comes just as Lynas managed to secure an AUD$ 40 million financing last May to address its cash flow problems. Lynas has close to a billion dollars (RM3 billion) on the Kuantan processing plant and even if it has secured financing to keep going for next year, it still faces the risk of insolvency in the medium term if it cannot meet its production goals and if the price of light rare earths (LREE) continues to drop. If Lynas can manage to run at full steam, it could start to challenge China’s dominance, but it must reach this level quickly in order to take advantage of  China’s ‘sabbatical’ rare earth mining period, as the government tries to confront the country’s massive pollution related to unregulated industrialization. Beijing is also trying to curb the problem of rare earths smuggling, which has flourished until recently, putting further pressure on prices. As for China, Lynas indicated that it will consider all reasonable solutions to improving its performance and to ensure its long term survival and presumably, this must mean that Lynas is open to Chinese investment as well. China is Australia’s main trading partner of Australia and suggests that Canberra may be edging closer to signing a free trade agreement with Beijing.

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Comments

  • Tim Ainsworth

    Bruno, company guidance is to reach the 11ktpa production rate in the current quarter with a breakeven at 750tpm.

    Particularly given the just completed CR, ongoing negotiation with Nomura & the change of CEO do you think Lynas has any obligation to keep the market informed if either of the above has changed?

    Is it too hard to read “Overcoming numerous challenges and achieving consistent production is a significant transformational milestone enabling us to now place increased emphasis on commercial success.” as confirmation of previous guidance?

    We’ll soon see what Amanda Lacaze has to work with.

    June 10, 2014 - 12:06 PM

  • Andrew

    Just by keeping cerium and lanthanum at a low price, Chinese can get lynas in the hands. Not only that, molycorp will have to keep burning money. Negative cash flow will let molycorp getting no chance to be price competitive for alloy business so eventually Chinese can compete molycorps’ downstream business in china after July. Molycorp then go bankrupt. The downstream business is what Chinese hunting for. To make sure lynas and molycorp follow the schedule, china gov even raise the production quota only for light rare earth few days ago by more than 10% to send more ce and la to the market… Exactly using one stone to kill two birds.

    June 10, 2014 - 12:23 PM

    • Tim Ainsworth

      Andrew, why then are the Chinese directly buying Lynas product?
      Surely a much easier conspiracy theory would simply be that they didn’t?

      June 10, 2014 - 4:02 PM

      • Andrew

        Recently Chinese did a lot of research to analyst the reasons why chinese companies always fail in international acquisitions. For rare earth industry research they took china nonferrous and lynas in 2009 as an example. The main conclusion were
        1 confirm the advantage of international acquisition not only the product but also the possible capital appreciation from the investment.
        2 china nonferrous was too aggressive to get more than 50% control, showing many chinese companies do not know international rule and international game at all.

        Just last month, china nonferrous lead a presentation to the gov regarding the international acquisition topic. I guess china nonferrous want to try again.

        June 10, 2014 - 8:24 PM

        • Andrew

          Sorry, me again, I forgot regarding the 50% control, the paper also stated that many Chinese companies are very weak to construct good contract and agreement as an alternative to meet their objective instead of getting control of the company.

          June 10, 2014 - 10:44 PM

    • B Lynch

      For strategic reasons, the USA, Japan and Europe will favour
      non-Chinese suppliers even if that may mean paying slightly higher prices. Two years ago China let these Western markets know what it is capable of doing when it had a monopoly on
      rare earths products and Western users, particularly the USA
      is not going to sit idle and watch China bullying either Molycorp or Lynas in its quest to maintain world dominance
      in rare earths.

      Perhaps BHP, RIO & Vale should get together and restrict
      supply of iron ore just the way that OPEC does with oil so
      that China pays a premium price for its iron ore! If the ball were to be on the other foot, then China would show us how
      monopoly supply works, comrade !.

      June 10, 2014 - 4:22 PM

      • Daniel

        Let cut though the BS. China invades Australia and take over all their resources.

        June 10, 2014 - 4:56 PM

        • Chris

          Daniel

          BS indeed.

          June 10, 2014 - 5:22 PM

  • B Lynch

    An Australian/China free trade agreement will have little or no effect on on
    LYC’s access or product price in supplying China. LYC’s REE products come from Malaysia and not from Australia and China does not have import
    duty or import restrictions on REE imports.

    LYC’s target markets should be Japan and Europe. These markets are
    currently supplied by China who levies a 25% export tax on REE products
    destined for these markets. So, logically, why should LYC sell to China at
    Chinese domestic prices if it can sell to Japan and Europe at Chinese
    domestic prices + 25%. I guess this is why LYC has appointed a marketing
    guru to replace an engineer as CEO.

    If Chinese exporters of Cer. and Lan. with a 25% export tax on their products can compete with Lynas in Western Markets then good luck to them because the Chinese may be good but not that good.

    LYC has signed a Japanese distribution deal with Soljitz for the Japanese market and the current Sino/Japan conflict about a few silly islands should
    position LYC to sign up some good long term Japanese supply contracts
    profitably.

    June 10, 2014 - 4:07 PM

    • Daniel

      Last I read the Japanese got tired of waiting for Lynas and moved their whole mfg chain right into China to get access to critical rare earth.
      Lynas is finished producing at a loss and at current prices no level of production would make it break even.

      June 10, 2014 - 4:59 PM

      • Chris

        Daniel
        That is interesting. Can you elaborate further on what you mean by mfg. Any sources of info on this would be appreciated.

        June 10, 2014 - 5:18 PM

        • Daniel

          Hi Chris
          I think its here under Japan paragraph but if not than I most likely read it from Jack Lifton’s report to Congress.
          The India jv is dead.
          http://www.fas.org/sgp/crs/natsec/R41347.pdf

          June 10, 2014 - 5:52 PM

          • Daniel

            Here:
            http://www.rsc.org/chemistryworld/2014/04/analysts-shrug-rare-earth-trade-ruling
            ‘The Japanese don’t have a mine. They have been moving a lot of stuff to China. Hitachi said it would never move magnet production to China, but now it is. The guys in the rare earth market are saying, “We will work with China. What else are we supposed to do?”’

            June 10, 2014 - 6:18 PM

          • Chris

            The only reference I can find is this.
            “The Hitachi Metals of Japan announced plans to build a rare earth permanent magnet facility at the company’s site in China Grove, NC.”
            As far as I am aware, Hitachi expanded their magnet manufacturing operations in North Carolina in 2011/2012.

            June 11, 2014 - 4:07 AM

          • Chris

            If Hitachi is moving magnet production to China, any information about this move is not currently available in the public domain. Maybe Jack Lifton is privy to inside information.

            June 11, 2014 - 4:20 AM

          • Tim Ainsworth
            June 11, 2014 - 5:40 AM

          • Daniel

            Chris
            I would think its in the public domain if the Diplomat is reporting on it.
            http://thediplomat.com/2014/04/chinas-rare-earths-advantage/
            Japanese diversification efforts have not prevented Japanese REE-based intermediate manufacturers from moving operations to China. That, of course, reflects the fact that Japan has essentially managed to only secure sources outside China for LREEs such as neodymium, and not for heavy REEs (HREEs), which are far less abundant and can at the moment be economically mined only in the lateritic ion-adsorption clays of Southern China, which accounts for 90 percent of the world’s supply. A lack of access to HREE dysprosium, whose addition to a neodymium based magnet enables it to retain its magnetism under high temperature conditions, forced Hitachi Metals to relocate to China in 2011. More such instances are in the offing. The importance of HREE’s can be gauged from the fact that while they account for only 5 per cent of total demand by volume for all REEs, they represent almost 40 per cent of the total value of the market.

            June 11, 2014 - 11:42 AM

    • Chris

      Right.
      So according to the diplomat, Hitachi metals relocated to China in 2011.
      According to Hitachi:
      “Tokyo, Japan, December 21, 2011—Hitachi Metals, Ltd. (TOKYO:5486) (ISIN:JP3786200000) has today announced plans to construct a new plant in the United States that will produce neodymium magnets designed for use in hybrid and electric vehicles. The facility will be located at Hitachi Metals North Carolina, Ltd., the company’s ferrite magnet manufacturing base in the United States. The launch of this neodymium magnet production facility will bolster the ability of Hitachi Metals to satisfy the expanding demand projected for this type of magnet not only in the United States, but throughout the rest of North America and Europe as well.”

      I believe Hitachi, not the Diplomat.

      June 11, 2014 - 5:47 PM

      • Daniel

        Chris
        I believe both Hitachi and Diplomat and I know you cant tell the difference bwn light rare earth Nd and heavy rare earth.
        Molycorp process light rare earth in the US not heavy rare earth so there is a supply of Nd in the US while Molycorp sends their heavy rare earth to China to toll.

        June 11, 2014 - 6:04 PM

        • Daniel

          PS the subject matter is Lynas and their heavy rare earth which the Japanese got tired of waiting so they moved their heavy rare earth processing/mfg to China because they have the only supply in the world other than Solvay which Lynas backed out of the deal and now there is room to process other rare earth miners.

          June 11, 2014 - 6:09 PM

          • Tim Ainsworth

            Daniel, you are spouting pure nonsense. Where doing you think LAMP SEG/HRE is going as I type?
            Perhaps do a scintilla of research before you do.

            June 11, 2014 - 7:35 PM

        • Chris

          Probably the reason why Hitachi metals never relocated to China, less Dy needed in manufacturing magnets.
          “Hitachi Metals’new manufacturing method uses a specialized vapor deposition/diffusion technology that makes controlling the Dy concentration distribution within a magnetic material possible. Surprisingly, not only has this technology proven to be the most effective and easiest production process developed for this purpose, it also helps improve the performance of magnetic materials.”
          http://www.hitachi-metals.co.jp/e/eh2009/p04.html

          June 12, 2014 - 5:03 AM

      • Daniel

        Tim
        I don’t see any sales from LAMP

        June 11, 2014 - 7:57 PM

  • JJ

    The reason for appointing Amanda, who has a strong finance and marketing background, is because Lynas in the year or so will not exist in the current form. It will be restructured or taken over. Their debt is large already and they cannot keep raising money. The forecasted production will not be enough to keep them in the cash flow and to repay the debt. Therefore another set of skills in the CEO required.
    Eric was/is the right CEO for the rare earth producer and the marketer of the finished product be it oxide or the metal. We are talking about over 20 years of intimate knowledge of the rare earth market. Amanda is the transition CEO to take Lynas into another direction…possibly merger or takeover or some sort of restructuring. Hence requirement for communication expert.

    June 10, 2014 - 7:49 PM

    • Nevada George

      JJ
      I agree.
      I suspect that Lynas had previously approached Amanda at MLC Consultants… seeking advise on Corporate Finance. Lynas has had so much cash burn and is still dealing with ongoing adversity at LAMP… so, they have limited alternatives… M&A or ???
      I believe that Lynas took Amanda on-board as their last
      hope at Business Continuity.
      Amanda has taken on a gigantic challenge.
      I hope that she is “the one”.
      I went “all in” on Lynas… I am now wondering if there will
      be any crumbs left over on the table.

      June 11, 2014 - 9:27 AM

      • Tim Ainsworth

        George, go back to the Dec 13 Ann. of AL as a Lynas Director: “Her particular area of expertise is in strategic marketing and pricing.”
        https://www.lynascorp.com/Announcements/2013/New%20Director%20-%20Amanda%20Lacaze%201286928.pdf
        Further: ““Amanda is highly-regarded for her skills in strategic marketing and her focus on delivering outstanding financial performance. Her expertise will be a valuable addition to the Lynas board.”
        She is an experienced CEO and also a Director of ING Direct.
        But the key I believe is what has evolved since that statement 6 months ago as in ““I have no doubt Amanda will be a great contributor to the strategic direction of Lynas, particularly as the company continues its evolution from project developer to industrial producer, which is Amanda’s core area of expertise,”.
        Will in fact Lynas met the stated targets this Q? 11ktpa production run rate, 750tpm break even and 11ktpa sales level. If she has that substance to work with her strategic mktg/pricing & organisational skills will be invaluable. Cometh the time, cometh the women?

        June 11, 2014 - 3:29 PM

        • Daniel

          What was the prices used initially to estimate the break even point? and what is the price today?
          Lynas is a price taker not a price setter when they have zero influence on the heavy rare earth demand/supply.

          June 11, 2014 - 4:26 PM

  • Tim Ainsworth

    There has been no change to April 14 guidance:
    “Based on the continuing and accelerating improvement in performance in all operational areas, Lynas management is confident of achieving the targeted production run rate of 11,000tpa REO from the LAMP on a sustainable basis during the June 2014 quarter.
    Mr Noyrez also noted that at current prices, the Company expects to be operating cash flow neutral at a monthly sales rate of around 750 tonnes REO.”
    https://www.lynascorp.com/Announcements/2014/Operations%20Update%20April%202014_CLEAN%20final%20-%20correction.pdf
    I disagree with your proposition that Lynas is a “price taker” in that the production target is currently set at 11ktpa, a level where they are working to fulfill LT contracts.
    Perhaps it might be sensible to hold the speculation and the “off the cuff” commentary until the June Q results. IF they finally meet guidance after 12 months of disappointments a lot of prior conjecture may look rather silly. Not long to wait.

    June 11, 2014 - 4:46 PM

    • Daniel

      Tim
      Does Lynas have any revenue? I don’t think so. Do you think 11,000tpa is significant? I don’t so.
      I disagree with Mr Noyrez. PERIOD!
      I don’t have to wait until June to use common sense in a simple break even formula especially when there is no sales.

      June 11, 2014 - 5:52 PM

      • Tim Ainsworth

        As above Daniel, suggest a little research might introduce some relevance to your commentary. A starting point might be:
        https://www.lynascorp.com/Quarterly%20Reports/2014/Q1%202014%20Quarterly%20Report_final%201324839.pdf

        June 11, 2014 - 7:43 PM

        • Daniel

          Tim
          Why don’t you learn to read…NO SALES.

          June 11, 2014 - 7:54 PM

          • Daniel

            PS that 21.9 is NOT SALES but amortized tax break.

            June 11, 2014 - 7:59 PM

          • Tim Ainsworth

            Strange how 21.9 sums to “TOTAL INFLOW OF FUNDS IN THE QUARTER”.
            Bizarre, at best, must ask where they shipped that 751t. Or are you perhaps suggesting the tax office bought it?

            June 11, 2014 - 8:56 PM

      • Daniel

        Tim
        There is something very strange with the link to that quarter. No BS nor IS but a Cash Flow statement that looks extremely…
        You can ask the Auditors…third this month.

        June 12, 2014 - 11:10 AM

  • Lifton and Weslosky on Noyrez's departure from Lynas, the Tesla Gigafactory and the critical materials market today | InvestorIntel

    […] Jack praises Noyrez as one of the most experienced and best informed professionals in the rare earths sector. So, a rather perplexed Jack puts it rather bluntly: ‘why is he being replaced by a ‘bean counter’?” The concern is no way intended as an insult. Accountants are usually brought in to lead a company after the technical issues have been resolved. Jack suggests that Lynas has yet to address a variety of technical issue and that it seems rather ‘optimistic’ to be putting accountants in charge. Therefore, Jack does not think the move will be beneficial to Lynas. Tracy shares Jack’s respect for Noyrez but cannot hold back her enthusiasm for the fact that there is finally a female CEO in the rare earth sector — Amanda Lacaze. […]

    June 16, 2014 - 1:12 PM

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