EDITOR: | December 23rd, 2015 | 41 Comments

Rare earth turnaround: why Lynas is attracting attention

| December 23, 2015 | 41 Comments
image_pdfimage_print

Amanda_Lacaze_TMS2015Anyone surprised that a rare earth company is now the subject of speculative activity in the markets (and in a positive way)? In 2011 that prospect would not have seemed unusual. Today, it does. And a financial newspaper turning out a positive turnaround feature on that same company? Not something many investors, six or nine months ago, would have been expecting.

We’re talking about Lynas Corp (ASX:LYC | OTCQX:LYSDY) which turns out to be the great survivor of the REE crisis.

Not that InvestorIntel readers need be surprised. They have been kept in the Lynas loop. Indeed, in October I posted an item looking at what was happening to this company’s share price. That particular week the stock rose on one day by 26.3% on the back of a very encouraging quarterly report; the next day the price rose another 4.2%. As I pointed out at the time, at that time rare earth prices were continuing to recede and the industry was beset, as Lynas and others pointed out, by all the illegal rare earths being shipped by Chinese producers and that was depressing the market prices for REE.

I added back in October: “I suspect for the share price rise the reason was not so much the results for the three months to September 30 as some of the commentary in the quarterly, commentary that said the sort of things that one expects from a business that can see a way to turn around its whole story. It is not out of the woods, but there now appears a glimmer of hope”.

Today the Sydney-based Australian Financial Review has taken the story further. “Lacaze’s rare turnaround at Lynas” is the headline, going on to say that Lynas CEO Amanda Lacaze did not make it in to the paper’s 2015 outstanding business people list, but he has a chance to be in the 2016 list.

“She has successfully turned around a company that two years ago looked headed for receivership,” noted the AFR. And the newspaper is quite certain that the company is not only going to survive but might actually prosper – not an assertion you could have made a year or two back. The AFR says the test will be whether institutional investors come back on the register.

The articles clearly attributes the key to the Lynas turnaround was when Lacaze took the reins and added a dose of reality to the operation – reality that did not justify expensive offices in Sydney and excessive operating costs.

The problem in judging just how well Lynas is doing is that very volatility now evident in the market; that rather than sober valuation rules at present. In the past 52 weeks the stock price has varied between 0.3c (Australian) and 14c. At midday Wednesday, it was sitting at 9.4c. A week ago, Lynas stock lost 15.4% in that day’s trading; on Friday it lost 16.9%. On Monday it was up 17.2%. In the first half of Wednesday trading this week, the gain was 6.8%.

While that may be partially the result of the volatility in the metals markets generally – hopes raised one day, dashed the next – the volume tells us something else.

Around the middle of today (Wednesday) a spot check revealed the buy/sell bids/offers on the Australian Securities Exchange for rare earth stocks:

  • Northern Minerals (NTU) – 11 buyers, 28 sellers.
  • Hastings Technology Metals (HAS) – 11 buyers, 16 sellers
  • Arafura Resources (ARU) – 31 buyers, 33 sellers.

Now contrast that with Lynas: 409 buyers, 471 sellers.

A glance at the various chatrooms used by the small-time speculators confirms the feeling that the traders have seized on Lynas as one of their current playthings. At the moment, that seems to be the main obstacle to potentially long-term investors being able to get a solid assessment of the company’s market worth. That said, there is little doubt that when the price does settle, Lynas will be looking a good deal shinier than it was a year ago.

Footnote: This latest Lynas development comes within a week of Australia losing another rare earth player – but this time it is not disenchantment with rare earths themselves rather than the project did not meet earlier expectations. Spectrum Rare Earths (ASX:SPX) is disappointed by the results from its Skyfall project in the Northern Territory and believes the mineralogy is too challenging. It is wiping its hands of rare-earths and will relinquish the ground.


InvestorIntel

Editor:

InvestorIntel is a trusted source of reliable information at the forefront of emerging markets that brings investment opportunities to discerning investors.


Copyright © 2016 InvestorIntel Corp. All rights reserved. More & Disclaimer »


Comments

  • Tim Ainsworth

    Robin, look no further than Van Eck REMX holdings for the volatility.

    portfolios.morningstar.com/fund/holdings?t=REMX&region=usa&culture=en-US

    Last week sold off 42M LYC, examine the YTD column to note pretty much the only profitable trade available to a very sick puppy.

    Anyone following their trades over a period of time would understand their ability to pick winners and time trades is rather limited. Moly was a perfect example, as was selling 15M LYC < 4c a couple of months back.

    December 23, 2015 - 2:59 AM

  • Lok Chong

    Robin are you not too early to call the sensational Amanda’s wake by her appearance at an InvestorIntel conference a turnaround? She would not predicted the hundred of millions of stock that have changed hands in such a short span.
    Buy before she shows up at the next Investor Intel Conference. Then again you did watered down your “turnaround” with reference to Molycorp’s last moment before kicking the can the last time.

    December 23, 2015 - 6:30 AM

  • Jeff Thompson

    What Lynas has achieved recently is impressive and came at an important time in the sector, to serve as it does as a counterpoint to the demise of Molycorp. Especially important for the larger economic community who only follow rare earths from a distance to know that the development of a rare earths supply chain outside of China can be a successful venture even with bear market prices, when done carefully and methodically and with the right people running the company. Best wishes for Lynas’ continued success.

    December 23, 2015 - 8:48 AM

  • James Backus

    Your use of percentages is misleading and does little to bolster Lynas. When numbers are low, movements become large when considered as percentages. It is dramatic but it does little to help the industry as all too many people do not understand Lynas nor the Rare Earth industry.

    December 23, 2015 - 10:45 AM

  • JJBeswick

    In the current horrible RE market it appears no producers are doing well and most are losing money; in China and elsewhere.
    In addition, Lynas have had (more than) their full quota of production startup issues.
    So it’s certainly impressive that they’ve been cashflow positive in the latter stages of their rampup given the current market.
    Will the next QR be cashflow positive?
    I rather doubt it with even lower RE pricing, but if they come close it’s a very strong signal IMO.

    December 23, 2015 - 11:22 AM

  • Robin Bromby

    Lok Chong — if you read the post again, you will see it is the Financial Review calling it a “turnaround” not me. But certainly there is a turnaround in sentiment.

    December 23, 2015 - 2:28 PM

  • Alex

    Lynas has 13-15 USD per kg operation costs . If Nd-Pr consists 20% it means that they donate their buyers because Nd-Pr have to be estimated for 55-65 USD per kg – La and Ce price.
    f La and Ce Oxides costs 1-2 USD and Nd-Pr – 35-40 USD you can easy calculate dotations from Lynas to Buyers. And they have to return CAPEX costs to investors also.
    The only reason to support Lynas is for Japanese – security supply chain.

    December 24, 2015 - 2:15 AM

  • Lok Chong

    It is a circus out there. Amanda is certainly a performer under the floodlights and the Chinese wielding the wane/wipe to strange new tunes.

    December 24, 2015 - 3:52 AM

  • Tim Ainsworth

    Alex, apart from the fact operating costs are circa USD11kg, constantly amazes me that punters choose to view Lynas real data as static rather than acknowledge a WIP, still a long way off optimising 75% of production assets. The point of initiating SX4 may provide first indications on a number of levels, subject of course to demand.
    Maybe you should spend a little effort on the impacts of Ce/La recoveries & achieving 4.5 nine’s on basic economics, even with currently depressed pricing, as quite obviously collars & cuffs on existing LT contracts has escaped your attention to date.
    Reality finally dawning at market, as the field hollows.

    December 24, 2015 - 7:33 AM

  • Jack Lifton

    All,

    “Alex” first language is clearly not English, but his logic is universal. I think he is entirely accurate that it is the Japanese who are both protecting their investment(s) and also capitalizing security of supply who are in both ways floating Lynas’ boat.
    Amanda Lacaze strikes me as a professional financial manager who wants no risks, so she rules by the (B-School) book. I suspect that sooner rather than later we will see one of the following events:
    1. A Japanese takeover of Lynas with a CEO from the takeover entity; or
    2. A Singapore based takeover of Lynas with the installation of a more industry oriented and experienced CEO; or
    3. An Indian takeover of Lynas with an Indian CEO placed in charge; or, last but not least
    4. A Malaysian takeover with a Malaysian CEO installed.

    The last is the least likely, I admit, but I urge the Malaysians to joint venture with any of the others in my list!!

    Of course there are two more options:
    1. A mainland Chinese takeover of Lynas; or
    2. Bankruptcy

    I doubt that the present situation with Lynas will last until the end of 2016. One of the above will occur.

    Am I the only one who remembers that Ms Lacaze stated when she took the helm that hers was to be a short term tenure, and later on that she wished to sell the company?

    Merry Xmas and a Happy New Year to all

    Jack

    December 24, 2015 - 9:33 AM

  • Tim Ainsworth

    Jack, in that statement you have brilliantly illustrated the enormous vacuum in the broader RE commentary and in the great majority of the industry itself.
    Never ceases to amaze me the copious volume and level of detail applied to the front end, only to dramatically tail off the closer it gets to a product, and virtually fall into a vacuum when it comes to monetising that product.
    Peer comparison of “wot’s in the ground” remains popular (while they drop like flies), exotic process now the great white hope of turning clearly uneconomic resources economic, incl the recent boast of 2500tpa “heavies” production.
    Kingsnorth’s recent 2015 Demand/Supply data puts total Eu, Tb & Dy demand at 1505t vs 3300t existing supply, bulk of the remainder SEG/HRE selling circa $5kg and ranges from 150% to 300% oversupplied.
    2500tpa “heavies” produced in Nth American, wonderful, but can anyone put any vaguely believable detail around how that would be monetised?
    The real challenge of a rare earth business starts at the END of production, the ability of a marketing specialist to discover & meet customer needs, a pricing strategist to maximise opportunity, particularly to re-engage, all the more effective if your team includes a depth of REAL downstream interface.
    While RE prices need to return to some sort of economic basis they will very much be capped by thresholds relevant to the various market segments. While suite balance obviously critical it will be the ability to maximise opportunity across the competing market segments that will determine success or failure IMO, and to that end I’d suggest Lynas has a pretty unique skill set.
    In the spirit of Xmas I’ll leave the rest of the diatribe alone.

    December 24, 2015 - 7:17 PM

  • Robert Richardson

    Tim, once again several commentators here (and fellow LONG-TERM Lynas investors) can appreciate the depth of your research into RE production and demand going back over many years.
    I have difficulty understanding the basis of Mr Lifton’s antipathy toward Lynas as demonstrated here, given his knowledge of the Lynas business over all the years I’ve been following the Company’s remarkable development history – and travails.

    December 25, 2015 - 8:08 AM

  • Jack Lifton

    Mr Richardson,

    I think that you need to look at your own words for a personal motive, not mine. I have no antipathy towards Lynas as an operation. As I have said before, and as I advised the Malaysian government at their request, the LAMP, of all of the SX plants I have seen, is the most modern and efficient in the world when operating at its designed capacity. Certainly no other SX unite designed to separate light rare earths, including those in China, can even come close to it for OPEX.
    Although it is hard for me to say that no one could have predicted the rare earth boomlet and price cycle in fact the global commodity Supercycle simply drowned out rational thought among retail small investors.
    But, magical thinking and accounting legerdemain cannot disguise the fact that a combination of a global consumer slowdown and dumping of inventories by a restructuring Chinese rare earth industry have literally destroyed the market.
    Business in a free market is governed by one simple principle; Make it (or buy it) for less and sell it for more.
    If Lynas can find a capital-rich backer, or buyer, who is willing to hold on then it may well survive. Governments (such as that of China) are willing to deploy and lose capital to maintain advantage. Private equity not so much.
    I now think that it’s the Bank of Japan, Japan’s national and governmental institution that controls when, where, and how much capital may be invested with its guarantees, that will determine if and with what ownership Lynas survives.
    Amanda Lacaze may be in a no-win situation. I respect her, but I do not envy her.

    December 25, 2015 - 12:38 PM

  • Tony

    The Chinese rare earth producers are being supported by the PRC

    Lynas is being supported by it’s Japanese lenders

    All rare earth producers do not appear to be viable at current rare earth prices and with borrowings on normal commercial terms

    How much longer can this madness last !

    December 25, 2015 - 1:41 PM

  • Tim Ainsworth

    Jack, in my book respect entails confirming detail before regurgitating third hand sensationalist “journalism”, and you have had the same face to face opportunity to do as I have done.

    How exactly do you morph the following taken from the original interview:

    ‘Ms Lacaze told Business Spectator there was no current outside corporate interest in Lynas, despite the fact the firm’s house was now in order, but said there may be M&A opportunities in the future, thanks to growth market for rare earths.

    “There is no one to my knowledge right now lining up with a big cheque to buy us,” Ms Lacaze said. “That might be a bit seductive but there isn’t anyone with their pen poised right now.” ‘

    businessspectator.com.au/news/2015/8/17/resources-and-energy/lynas-says-yuan-devaluation-challenge

    To your statement: “that she wished to sell the company”?

    Did you get a very different answer to the one I received?

    December 25, 2015 - 5:13 PM

  • Tim Ainsworth

    Jack, as to your statement “If Lynas can find a capital-rich backer, or buyer, who is willing to hold on then it may well survive.” are you not aware of this announcement:

    Lynas Announces New Long Term Debt Structure – 17 August 2015

    lynascorp.com/Shared%20Documents/Investors%20and%20media/Announcements%20and%20media/2015/150817%20Debt%20Restructure%20Announcement%20FINAL.pdf

    Effectively a 3yr runway with circa 2.8% coupon and cash claw back allowance as/if required. Is anybody here truly so naive to think such an agreement/investment would be written oblivious to TO potential?

    Then again after the blind faith exhibited at some of Moly’s financial engineering I guess anything is possible.

    December 25, 2015 - 5:28 PM

  • Jack Lifton

    Tim,

    I recall that sometime in the summer or early Fall I was told that Ms Lacaze had said publicly that Lynas was for sale or available. Perhaps I was misinformed, but I remember a conversation I had about that “announcement” with a former board member of Lynas.

    As to Molycorp I think that the investment community was sold the bill of goods that Molycorp was the gold standard of rare earths’ projects, and it became too embarrassed as the disaster unfolded to admit that such confidence and admiration had been a really bad mistake. The memory hole is deep. I have been told by several so-called “analysts” who touted Molycorp to the sky that they never believed it had a chance. ‘

    Jack

    December 25, 2015 - 8:38 PM

  • JJBeswick

    LOL Jack your list of possible scenarios above missed a few possibilities such as:
    1. Lynas is taken over by a Columbian drug cartel and a Tibetan Llama is appointed as CEO. The facility is adapted for the manufacture of Ice, or EVEN
    2. Lynas survives intact.
    I certainly think the 2nd is more likely.
    Your endorsement of Alex’s logic (and I don’t challenge the logic) failed to check the data used. Garbage data in, garbage conclusion out, Jack. However sound the logic.
    If you’d bothered to read Lynas’s reports you’d know several basic facts (as of Sept 30th, the last quarterly):
    1. Cash at hand A$56m,
    2. Quarterly costs A$51m,
    3 Quarterly receipts A$56m.
    How does that point to a “done deal” that Lynas won’t survive? I agree prices are off a bit but the Lynas cost cutting continues as well.
    Takeover? It’s worth noting that the top 20 shareholders (including nominees) hold less than 50% of Lynas script according to the latest annual report. Seems any purchaser will have to convince a hell of a lot of small(ish) holders to part with their shares. Of course we all have our price, but mine’s nowhere close to ten cents.

    December 26, 2015 - 9:50 AM

  • Chris

    Jack, is ever there was cause for Japan having a need for Lynas to survive and prosper, I suggest the information contained in this link provides all the evidence required http://www.abc.net.au/news/2015-12-26/armed-china-ship-near-disputed-east-china-sea-isles/7055082

    Looks like JJ has summed the TO scenario very succinctly. The current register would make it extremely difficult for a raid to be mounted at anything less than fair value, plus an allowance for a significant uplift from future potential of the Lynas business. A recent broker valuation of A$0.30c/sh based on NdPr prices staging a modest recovery from a low of US$36/kg to US$47/kg then growing at 2.5% above inflation. Patersons also updated there research notes in September and set a valuation of A$0.12c with sensitivity analysis disclosing a 10% lift in REE prices moved their valuation to A$0.209c per share.
    One would expect any suitor would be required to pay a premium over these valuations to obtain an controlling interest. While I personally do not want to see this happen, any offer over A$0.35c per share would possibly loosen up sufficient shares to allow a suitor to engage in a successful take over. This would value Lynas at circa A$1.2b which given the funds invested would seem to me to be the lower end of an acceptable offer range. If this scenario played out over the next 12 months, I am sure recent investors would be more than happy with their return on funds invested in Lynas.

    December 26, 2015 - 2:04 PM

  • Pennie

    Lynas will never sell rare earths into China (ice to the Arctic)
    Lynas production has ground to a halt and the Malaysian employees have all left because of the female CEO.
    Lynas will be bankrupt or taken over by a foreign entity in 12 months.

    On the above pearls of wisdom regarding Lynas spouted months ago, he has twice been proven incorrect. Will he finally get lucky with 1 out of 3 and, more importantly, does anyone even take him seriously anymore?

    Don’t know about those sources in high places, someone’s having a lend, it seems. All the more reason for fastidious fact checking before spouting more ‘gems’ methinks.

    December 26, 2015 - 9:28 PM

  • Tim Ainsworth

    Lol Jack, I’m sure Eric would be a wonderful font of reliable gossip re Lynas.

    Personally I went direct to the source and was told the following specific quote was a response to a rather mischievous Q at the conclusion of the interview:

    ‘Ms Lacaze told Business Spectator there was no current outside corporate interest in Lynas, despite the fact the firm’s house was now in order, but said there may be M&A opportunities in the future, thanks to growth market for rare earths.

    “There is no one to my knowledge right now lining up with a big cheque to buy us,” Ms Lacaze said. “That might be a bit seductive but there isn’t anyone with their pen poised right now.” ‘

    businessspectator.com.au/news/2015/8/17/resources-and-energy/lynas-says-yuan-devaluation-challenge#sthash.wzlwqfC2.dpuf

    Now can ANYBODY, incl Robin Brumby who first reported third hand here, put any real substance behind your statement: “that she wished to sell the company”?

    December 26, 2015 - 10:43 PM

  • Jeff Thompson

    I think Chris’ reference to the most recent chapter in the territorial dispute in the East China Sea, along with related problems in the South China Sea, is a key dynamic affecting both the Chinese and Japanese involvement in the only producing REE companies in the world. The crucial point is that it is not even necessary for a hot war with military engagement to develop; merely the potential threat of the territorial disputes are enough to keep sufficient motivations on both the Chinese and Japanese sides (as well as other involved countries in the region) to continue to support their respective supply chains, either at a government level or at a private industry level. In some ways, the situation is analogous to the state of “Cold War” that existed between the Soviet Union and America for many years, and the indirect but substantial effects on other countries the actions of the two larger ones had.

    The Chinese and Japanese willingness, and perhaps necessity, to offer limited protections to their respective supply chains in my opinion cannot be understated for its effect on distorting the natural market prices of rare earths. We are seeing a somewhat parallel story play out in the oil sector with Saudi Arabia/OPEC playing a game of “chicken” with the rest of the world by intentionally oversupplying the oil market in an attempt to retain market share and stifle some competitors’ efforts to increase technical efficiency/lower cost of extraction (for example with horizontal-drill fracking). Given that the oil market is many, many times larger than the rare earth market, and the price of oil has been driven down enormously from $100/barrel to $35/barrel by the motivations of the several largest players, a similar effect is being seen in the much less liquid/more volatile rare earth market when the two largest players, China and Japan, make movements (government or private) to protect their supply chains.

    The ongoing territorial disputes in the East China Sea and the South China sea are worth paying attention to because with more sand being dumped in the oceans to create artificial islands with military airstrips and spurious ownership claims all the time, this doesn’t strike me as a situation that is going to fade away, rather I see more fuel being added to the fire every month. The unpredictable consequences are significant that prolonged cold war standoffs or limited hot war engagements could have for those in the rare earths industry either as one of the few current producers, or as one of the many exploration companies attempting to attract funding to become a producer. In my mind, the key point is that these standoffs have the ability to move the rare earth prices in BOTH directions. The natural market prices will continue to be distorted by the bigger geopolitical picture, and I can see this conflict both/either driving rare earth prices even lower than they already are AND then just as quickly driving them higher again as sentiment changes in response to perceived or actual threats.

    The difficult thing is figuring out which of the many possible scenarios drive rare earth prices lower (governments/private industry providing further protections/subsidies/capitalizing security of supply) and which scenarios drive rare earth prices higher (supply shocks due to regionalization/nationalistic concerns), and do the prices stay low for a long enough period of time to drive companies out of business or do they stay high for a long enough period of time to justify funding capex on several of the better ones to get them into production. Definitely a lot of rare earth price volatility ahead, and interested to hear different people’s perspectives on the ways this may play out.

    December 27, 2015 - 10:49 AM

  • Jack Lifton

    Jeff,

    I am in total agreement with your premises as to factors that can directly, and in a very short time, impact the prices of rare earths.

    But the prices of “rare earth raw materials” processed and in stock or inventory are not the same as the prices for the shares of publicly listed rare earth ventures. It is important to remember that the very opaque and illiquid “rare earth markets” are based on finished forms of the elements upon which all are agreed as to quality.

    It is very clear at this point that the rare earth juniors were completely over their heads with regard to the market they wanted to serve. Almost none of them knew anything about the rare earth supply chain or how to process their “mixed cons” to where they could enter the markets at the best value point.

    It takes years to develop a deposit into a mine; and it takes years to qualify a processor or fabricator of rare earth raw materials. Therefore the correlation between rare earths’ prices and the prices of shares of junior rare earth enterprises is specious at best.

    There is perhaps just one major producer of customer specified rare earth forms (blends and separated light rare earths), Lynas. I say “perhaps” because I don’t know if Indian Rare Earths/Toyota is in production.

    Japan has a domestic supply chain except for a mine. China has a complete domestic supply chain. Vietnam may now have or will soon have a total domestic supply chain, owned all or in part by Japanese and (competing) Chinese interests. I suspect that India will follow soon.

    The commenter, “Pennie,” whoever she is implies that I am not Nostradamus. I agree. He predicted both outcomes of every bifurcated event, so that he was never wrong. I still hold that Lynas was shut down earlier this year by a Malaysian labor dispute and that it has been “rescued” by Solvay personnel from both France and China. I still hold that it is for sale, and I note that no one who has ever dealt with the Chinese business world thinks that they have a level playing field. At this point Chinese rare earth businessmen know everything about Lynas as do Japanese businessmen. Their decisions will not be based on any but their own domestic and export markets. Geopolitics and Malaysian politics may bring Singapore middle-men into the game but it is China v Japan that is the game to watch as you have so ably pointed out.

    Americans do not like to be a side-show, but the tune that was played from Sputnik, “The East is Red,” seems to be moving back up the charts.

    Jack

    December 27, 2015 - 11:55 AM

  • Jeff Thompson

    Thanks for your thoughts, Jack. Perhaps like the launches of the first satellite Sputnik and first manned spaceship Vostok invigorated America to double-down on their efforts with the Mercury and Gemini missions, ultimately leading to the Apollo moon landings, the standoffs in Asia between China and Japan, and those countries they involve, serve to remind us of the value of developing an independent supply chain in Canada and the United States, to insulate ourselves from the volatility that persists. It doesn’t have to be a race/competition as it was with the Soviets in the past, rather we should quietly do our own thing with the strong prospects located in North America so that we may supply both ourselves and export to other countries in the world who also wish to bypass the drama and market volatility that is likely to persist in Asia.

    December 27, 2015 - 1:37 PM

  • Pennie

    ‘Americans do not like to be a side-show’
    And this seems to inform the sour-grapes commentary on Lynas.

    December 27, 2015 - 5:40 PM

  • CD

    I agree with Jack on the 5 possibilities with event #1 as most likely. Has anyone seen exactly how the Malaysian plant runs currently? I bet none of us here has. I strongly recommend that you take a look at the condition of the Leaching plant and the Waste Gas Treatment plant before you give the company the thumbs up! The new CEO’s efforts in cleaning up inefficiencies at the Australian HQ and Malaysian plant are commendable. However, slashing important OPEX at the Malaysian plant is a telltale sign that the costly maintenance of the equipment and facilities directly in contact with the 98% H2SO4 is not going to end up well. Not forgetting how much more waste/byproducts (if you still remember the contentious issue with the local folks that led to massive protests and boycotts of the plant) can be stored at the Malaysian plant . We haven’t heard of any concrete plans for the use of the waste/byproducts, have we? Any commercial use of the waste/byproducts? None so far.

    And of course, being cash flow positive for 3 quarters in a row is a really a big accomplishment. Being cash flow positive is important for the company as a testament to the Japanese lenders that the company can be profitable if it wants to. But whether the company is cash flow positive for real is something the investors must ask from the CEO cause pushing due payments to another quarter to make the balance sheets look ‘good’ this quarter only invokes more questions on its survivability.

    So, a Japanese takeover is highly possible when the debt payment is not met. At current condition, that debt payment does not bode well for the company. A Chinese takeover is also possible if only the Japanese allow it. But a Malaysian takeover is impossible at this juncture due to political reasons.

    December 30, 2015 - 1:14 AM

  • Tim Ainsworth

    Twice, in a little over 12 months, was it you standing at the gate with the “Bugger Off Lynas” placard?

    Mgt extremely focused on LT sustainability, incl plant, and not waiting about for higher prices, driving down the cost curve, and up the value chain, to customer needs.

    www .google.com.au/maps/@4.0101563,103.3772487,3408m/data=!3m1!1e3?hl=en

    Total payments due next 18 months:

    30 June 2016 US$2m
    21 December 2016 US$5m
    30 June 2017 US$15m

    If Lynas can’t make those there will not be a ROW RE industry, period.

    Save your scary stories for the village.

    December 30, 2015 - 6:19 AM

  • jjbeswick

    CD seems to me the time for SMSL scare campaigns about massive radiation and the like are gone.
    The LAMP is operating and will continue to do so. So the question is, who would you prefer to be running it??
    Japan/Mitsubishi? I doubt your neighbours would agree.
    You really do need to get out more…
    Production figures etc are a matter for the public record and they all looks fine so far, after an admittedly slow ramp up.
    Your silly claim that “pushing due payments to another quarter to make the balance sheets look ‘good” is ignorant given your agreement that they have been cash flow positive for 3 quarters.
    Of course, artificially delaying payments can make a single quarter look better. But of course the next quarter looks worse by an equal amount. Care to explain how any business can achieve that for 3 quarters?? The obvious answer is NO!

    December 30, 2015 - 10:26 AM

  • CD

    Getting out there instead of inside Lynas doesn’t get you anywhere. Let’s see if production can really run smoothly without them having to sell their lanthanide ores to someone else to make the balance sheets look good. Just in case you’d be running your sorry butts around begging for more.

    December 30, 2015 - 6:31 PM

  • CD

    Owh the LAMP is definitely running JJ. Don’t get me wrong, don’t be so agitated. But for how long given the shoddy maintenance works on site? They can’t even afford for a major turnaround last year given the market conditions. Imagine if they have nothing to sell for a month? My investments will be down in the drain.

    With all kilns running, but only at a single phase capacity? Plus, sales receipt only dependent on PrNd which makes up around 20% of the ores. If the solvent extraction plant encounters problems, which it almost always does ( any sane mind running a solvent extraction plant would know), it will be difficult for LAMP to get the PrNd extracted the way you and Tim Ainsworth would want it to be. Owh I forgot, maybe selling downgraded/offspec PrNd would do.

    By the way, I don’t care whether or not the SMSL days are gone. One of the requirements for LAMP is to get the waste/byproducts recycled. Any official commercial sale from the waste/byproducts made it into the quarterly report as of now? Use a drone and try flying by the lagoons. See how much space they would have for the storage.

    December 30, 2015 - 6:50 PM

  • Tim Ainsworth

    https://www.google.com.au/maps/place/Kuantan,+Pahang,+Malaysia/@4.0087381,103.3751651,3591m/data=!3m1!1e3!4m2!3m1!1s0x31c8b9f8e826e005:0xa44c16aafb214f62!6m1!1e1?hl=en

    Not sure what happened to the link above but anyone can see LAMP won’t be running out of space anytime soon.

    Kilns are capable of 140% of nominal capacity after optimisation, pointer to the future. Only two required at current capacity, one on warm standby, the fourth in maintenance cycle.

    Undoubtedly SX a delicate beast, but tell us something we don’t know, rather than scaremongering.

    December 30, 2015 - 11:33 PM

  • Alex

    Japanese need their own security supply chain to keep their profits in magnets.
    USA-Canada -Australia need their own security supply chain.
    But this chain need only in a case of conflict China-Japan.
    I belive Chinese are peasefull , so only 5% possibility that it will be conflict next 3-5 years.
    Why Investors need to pay for second supply chain ?
    Only who want to bet (like casino gamblers) for war or organizers of war (insaiders) able to invest.
    I don’t see reasons for ROW (other country exept Japan and USA) to participate at second supply chain – it will easy to keep buy rare earth at China.

    December 31, 2015 - 12:41 AM

  • JJBeswick

    Alex every system needs to build in some redundancy if it wants to be resilient.
    Supply chains tend to be multiply interwoven; for example Lynas sells REO to China, Japan and several other places. Similarly Moly’s US RE concentrate ends up in Neo’s Chinese metal plants and Chinese REO are smuggled into Vietnam to be made into magnets by the Japanese.
    Does this bring stability?
    Clearly the answer is yes while trade is free and uninterrupted.
    The crutial question is of course, “What happens a particular player (China) stop playing ball”? As they did with the Japanese not so long ago, provoking the global RE “crisis”.
    The ROW needs RE mining, REO separation, metal production and (in particular) magnet production, independant of China who are demonstrably willing to be belligerent both geopolitically (South China Sea) and economically (Japanese RE export freeze).
    Would a ROW RE supply chain also need redundancies? Yes indeed, particularly if Russia is a major player!!
    CD: your many unsourced claims about Lynas sounds to me like the winges of an ex-employee sacked for incompetence. Care to provide some links or other support for your rants?

    December 31, 2015 - 11:27 AM

  • Alex

    JJ – I am not from Lynas. I am from Russia.
    I don’t think that Russia will play any significant role at RE world, because it can not be part of Japanese or USA security supply chain. Just Russia need their own supply chain for their own military applications, but not so many. As for supplying other countries rare-earth now it means that you need dotation for them is not economically good for Russia. So, you think that someone need to pay CAPEX (1 000 000 USD) just that Japanese keep their profits ? I belive that Japanese need to pay this money, not private investors instead of them.
    The creation of second supply chain need additional CAPEX investments and create additional supply on the market. This additional supply fall down prices. And who will pay for this “securuty” ?
    Japanese, USA goverment ?

    December 31, 2015 - 2:36 PM

  • Robert Richardson

    Alex, you raise an important issue in the need for international diversification of RE supply chains.
    I agree with JJB that recent history very clearly shows why Japan has been very keen to ensure that at least one fully viable alternative supply and processing source independent of the centrall Wholly Government directed RE industry in China. At present, Lynas clearly provides the most viable such facilities, along with final processing in Japan and Europe.
    In hindsight, had China’s strategic planners been more careful instead of announcing the sudden and rather brutal regulatory RE supply restrictions some years ago, there would have been much less impetus for both ROW industries to quickly seek ways to avoid the use of suddenly more expensive and risky RE supplies AND to be frightened by the example of China virtually cutting off supplies to Japan for indirect international strategic reasons.
    Because the parable of the boiling frog illustrates how slower pressure would probably have lulled the world into complacency about the growing long term reliance on China RE, whereas what actually happened has in my opinion severely damaged the hard-won Chinese international technological advantage in RE processing and supply, and more broadly China’s international trading reputation.

    January 1, 2016 - 4:49 PM

  • Jeff Thompson

    Yes, China has run the gambit from massive (and intentional) ROW undersupply to massive (and possibly intentional) ROW oversupply in a five year period, limit testing the market’s response to both polar opposites. There’s no telling when something else will set them off and we’ll come full circle again. Could be never, could be next month, could be a couple of years from now. But it’s never a good idea to have all our eggs in one basket anyway, even if the market participants were somehow predictable, which they never are. The dynamic has changed in a very positive direction since then with additional stability now provided by Lynas, but three or four geographically-separated egg baskets still sound better to me.

    January 1, 2016 - 6:59 PM

  • hackenzac

    US Rare Earths UREE is out of business. They were off 94% on low volume on December 31st. Here’s the 8K. See ya Tommy Franks. http://biz.yahoo.com/e/151231/uree8-k.html

    January 2, 2016 - 10:54 AM

  • Alex

    The garantee of stable supply needs minimum ‘two eye fortress” for live. that means good idea to support Molicorp and Lynas , because CAPEX already paid, and now this is only financial question to keep it. Keepeng it means prevent from situation of increasing prices in future by Chinese.
    But that means that investors never get their money back and never get profits on their investments.

    January 2, 2016 - 11:48 AM

  • CD

    How could someone even provide links other than those ‘rosy reports’ dished out by Lynas, and probably only you JJ? What other sources can you get from Lynas other than their quarterly reports and some optimistic speech by the CEO?

    Do I need to be an employee to be able to see through whatever that’s going on inside? Clearly you have been an oblivious investor throughout the year to set your eyes on only the superficial numbers? Or you probably are one of the employees at Lynas, most likely in the senior management team?

    January 3, 2016 - 9:48 PM

  • JJBeswick

    Hi CD, Merry Xmas if you celebrate it.
    For the record, I’m invested in Lynas but don’t work for them and never have.
    You want links to news about Lynas not issued by Lynas? I suggest you re-read the article above and then the pieces linked there!
    It’s worth remembering that all reports issued by Lynas have to meet strict guidelines regarding completeness and accuracy; otherwise it’s potentially a criminal offense.
    But of course you know better and can “see through” what’s really going on; without a shred of evidence. Not even pointing to previously published untruths about Lynas.

    January 4, 2016 - 3:04 AM

  • CD

    Hi JJ,

    Merry Christmas to you too. Yeah, your probably right. With the stringent guidelines, no way anyone with a sane mind would be able to lie their way through. The so called strict guidelines would probably have kept many big corporations out there like Enron and the Lehmann Brothers from going bankrupt.

    January 4, 2016 - 4:43 AM

Leave a Reply

Your email address will not be published. Required fields are marked *