EDITOR: | January 25th, 2017 | 10 Comments

Lynas’s Record Results – A Return to Rare Earth Confidence?

| January 25, 2017 | 10 Comments
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Lynas Corporation (ASX: LYC | OTC: LYSDY) (“Lynas”) caused a stir in the Australian markets earlier yesterday, becoming one of the biggest movers with a 9% gain at morning trade. The shares of the rare-earth miner have bounced up twice this month, surrounding the release of the company’s second quarter update published on Tuesday; Lynas revealed record PrNd production of 1,331 tonnes, an impressive 13.2% increase on the previous quarter, beating their own projections.

Lynas commented that the production increases were the result of operational improvements made with the intention of boosting performance.

“The changes to output volume are expected to be long-term and this seems to have boosted confidence in the team, in spite of a tough year for rare-earth prices. Saying that, this January has seen a slight boost to the RE market, with many claiming it to be the beginning of the end of the slump.”

Additionally, the company noted that despite continued low prices for rare-earth products, its operating cash flow improved significantly, rising from A$1.7m to A$5m.

During the December quarter, planning was also finalised for the first mining campaign at the company’s Mount Weld Project in almost ten years. The Western-Australian volcano stabbing mission, which should provide one year of mill feed, is set to start this month at a cost of around A$3m. The Mt Weld Central Lanthanide Deposit (CLD) is one of the highest grade rare-earth deposits known. Mt Weld also hosts a further three undeveloped sites rich in mantle-borne-treasures such as niobium, tantalum, titanium, zirconium and phosphate that present excellent future opportunity.

The Mt Weld deposits are concealed inside a two billion year old volcanic plug; An estimated 1.8km of which has been weathered during this time to form a high grade supergene rare-earth-oxide (REO) deposit. Lynas processes the ore on-site at the Mt Weld Concentration Plant, that concentrated product then finds its way to the Lynas Advanced Material Plant (LAMP) near Kuantan in Malaysia where it will be further refined into materials such as Neodymium/Praseodymium (Nd/Pr).

Despite being a rare-earth element and never being found in its free form in nature, neodymium is as prevalent in the Earth’s crust as nickel, copper, and cobalt. It is used in a range of scientific and industrial applications and perhaps best known for creating super-strength magnets when combined with praseodymium.

The LAMP produces Nd/Pr oxide, cerium carbonate, cerium oxide, Lanthanum/Cerium carbonate and Lanthanum/Cerium oxide, and SEG oxide, as well as iron phosphogypsum and magnesium rich gypsum products which are stored on site in dedicated facilities. The company is well-advanced on developing commercial uses for these additional materials, further assisting with efficiency and financial performance. The plant is built on a 100 hectare site that is adjacent to established manufacturers of key chemical reagents, and has access to a skilled labour force and excellent infrastructure.

The company noted that their recent improved financial outcomes were underpinned by boosted production, but the second-quarter update had yet more to give, revealing that Lynas achieved record sales of A$65m, up from A$53.8m in the September quarter.

“We expect demand to remain strong over the coming period and are hopeful the recent firming of lanthanum and cerium prices may also be reflected for other rare earth products.”


Lara Smith

Editor:

The Founder and Managing Director of Core Consultants in June 2009, Lara and her team are committed to supplying high quality commodity market research, analysis ... <Read more about Lara Smith>


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Comments

  • Chris Hughes

    Lara, thanks for your positive comments on Lynas. I would however like to correct one of your statements. The total REO production for the quarter end 31 December 2016 was in fact 3,913 tonnes of which 1,331 tonnes was the valuable NdPr which you comment on later in the report. This now makes Lynas the second largest ROW producer of NdPr after Baotou Mining from China. This is no small achievement and the Lynas team are to be complimated on this achievement. A continued increase in REO pricing will see Lynas quickly become a cash cow.

    January 25, 2017 - 7:53 PM

    • Lara Smith

      Dear Chris, thank you for picking up that we left out a word! Your point about Lynas being the second largest PrNd producer is an excellent one and is not to be understated. The company is a true turnaround story. PrNd is the raw input for permanent magnets, a sector which is poised to grow 8% CAGR until 2020, driven by applications such as wind turbines, acoustic transducers, electric cars, bikes, trucks and air-conditioning.

      January 26, 2017 - 1:57 AM

  • Kris VD Cruyce

    The most important statement in de report is “There was some upward movement in market prices for Lanthanum (La) and Cerium (Ce) materials during the quarter, reflecting the intent of Chinese suppliers to recover profitability after experiencing severe profit reductions over the past 18 months.”

    Hopefully Chinese continue to rise the prices … then revenues and profit will follow. This the real good news.

    January 27, 2017 - 7:14 AM

  • bob kennedy

    Time to revive Great Western Minerals! They had the best mine on the planet.

    January 27, 2017 - 10:32 PM

  • John

    Does anyone know what the sudden interest is all about??

    February 14, 2017 - 12:28 AM

    • KrisVDCruyce

      Well the new shares were issued at 10cent. Assuming the owners of these shares know what they paid for … 10cent is the bottom. Unless more loss is coming.
      Additionally we can only conclude that prices of La, Ce, … are going up. On Asianmetal one can follow but would be nice if there is an alternative link a bit more clear. Like on metal-pages.
      If anyone knows … much appreciated. Perhaps Lynas could show China FOB prices of their most important product once a week.

      February 14, 2017 - 2:38 PM

      • Tim Ainsworth

        Kris, major issue that has gone unreported to my knowledge is that China, in conjunction with consolidating production into Big 6, has also consolidated spot sales into two major new exchanges:

        “Baotou Rare Earth Products Exchange ended 2016 Nian 12 Yue 31 days, the Baotou Rare Earth Products Exchange 2016 annual turnover of more than 1300 billion yuan, an increase of more than 400%.”

        The more recent: “The trading volume of rare earth products trading center in the Southern Exchange has reached 12.4 billion in 2016. For the rare earth industry, the new regulations have been introduced, and the rectification, supervision and upgrading, commercial purchasing and storage, and cross-platform joint development have become the development of the industry.”

        There are a number of Chinese sites reporting daily price movements from these new, formal mktg platforms, the most detailed just introduced charts based at last Nov, incl major end use groups, along with daily average prices incl tax.

        http://www.repe.com.cn/index.php?option=com_content&view=article&id=13&Itemid=155

        I can provide links to other sites, Info-Re, ACREI, newmat.chinaiol (focused NdFeB & reports Sth X + metals), all with daily pricing if the one above survives.

        February 15, 2017 - 9:43 AM

    • Chris Hughes

      Possibly the reported increase in Chinese NdPr, plus 9.3%. This is very significant for Lynas as approx 70% of revenue currently generated by the NdPr. This on top of CeLa prices which have also lifted in last couple of weeks. Lynas COP is consistently trending lower, so reasonable to expect cash generation is accelerating with higher RE prices. The other issue is Lynas shareprice has according to those analysts that cover the company, been trading below fair market value for a long time. Maybe also an element of catch up to fair market value in current price movement. The key is RE pricing as Lynas is leveraged very heavily to gain from any increases in this market.

      February 14, 2017 - 4:30 PM

      • Tim Ainsworth

        3 way leverage, recoveries/CoP/revenues, and they haven’t finished feeding the beast yet.

        February 15, 2017 - 9:56 AM

        • Kris Vd Cruyce

          All, thank you for the feedback. Hope prices continue to recover.
          Site is indeed interesting.

          February 15, 2017 - 1:44 PM

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