Chatting with Amanda (and also with other board members and Execs after the meeting, all very happy to talk with shareholders, btw) it was very clear how excited she was with the NEXT initiative. This has obviously had a lot of thought put into it, and will require some time to implement throughout 2018. Here are some highlights worth thinking about for investors IMO:
‘An increase in production to 7200 tonnes/annum NdPr, implies over 26,000 tonnes/annum of total REO. As we plan to implement this change, it is important to understand the capability of our Resource to support the increased production. Therefore, the first step in the Lynas NEXT programme has been to invest in additional drilling to upgrade our understanding of the Mt Weld" ore body. We have today announced the first results of the first part of a planned 6 part drilling programme. The preliminary results were released to the ASX today, and they confirm our expectations of a depth extension of the Rare Earths mineralization.'
‘……a particular focus on reducing revenue volatility by de-emphasising our reliance on market benchmark pricing, which as we all know can be highly unpredictable. We will achieve this by agreeing long-term supply agreements with key customers and by increasing the proportion of products produced to meet differentiated customer specifications.’
‘In addition to increasing throughput, we will improve our product mix, including adding separated Nd and Pr, additional separated La and Ce and more grades of La and Ce products.’
‘(NdPr) throughput is only one part of the formula for consistent cost effective production and reliable production outcomes….. Our production challenge is a continuous cycle of “Throughput, Quality, Recovery”.’
‘most recently we have been producing 500 tonnes/month, with the exception of our current month with its planned regulatory shutdown of 2 of our kilns. Our talented production team has achieved this throughput increase, whilst also improving quality of initially our NdPr and then our La and Ce products. Throughout…. they have progressively addressed sub-optimal elements of the original plant design. However, certain elements have continued to challenge their ability to deliver consistent production outcomes…… particularly in the Cracking and Leaching facility. The ability to run the kilns at 200% of nameplate has shielded us from the effects of certain of the reliability issues. However, these underlying issues must be addressed to support consistent delivery of 600 tonnes/month of NdPr.’
……
‘Moving now to the market and how we plan to win the business of our target customers. …..(We are) addressing some of the residual perceptions of the Rare Earths market formed during the 2010/11 Rare Earths “crisis”. At this time Rare Earth materials came to the attention of senior management – and the concerns generated at that time linger in the memories of some customers today…….This provides Lynas with an excellent opportunity to differentiate our offer and our operations from other suppliers. ……By investing in this market communication, we will be able to ensure that technology choices are made on the basis of the best technology, not on outdated assessments of supply options.’
‘The last overhang from the Rare Earths crisis is the establishment of a published reference price for Rare Earth materials….. We are doing this by engaging at various stages through the Rare Earths value chain and by focusing on our key benefits:
Ability to commit to long term contracts which guarantee supply.
Preparedness to offer predictability of price. We have no desire to see the extreme high prices…..
We have reached agreement, in principle, with Bosch, a leading supplier to the automotive industry. Under this agreement Lynas will provide long term secure supply of NdPr to meet Bosch’s needs, thus supporting their ability to engage with end users on new technology solutions. Subject to finalizing documentation we will provide further detail on this agreement in the near future……
Lynas expects to make further announcements relating to commercial agreements in the coming months, including agreements that have been struck with users at various stages of the supply chain as we explore different “go to market” strategies to satisfy our customers’ needs and to positively influence the dynamics of the total market.’
‘The other key part of the Lynas NEXT project is to deliver a product portfolio that allows us to continue to increase the value of the material we sell. The new product mix, which includes separated Nd and Pr for the first time, more separated La and Ce and new grades of La and Ce will allow us to enter new segments that we do not serve today. As we enter these segments seeking higher purity materials and more specific grades, we will improve our average received price, create barriers to entry and build the basis for long term loyal relationships with our customers.
With the Lynas NEXT Sales & Marketing programme, we seek to establish ourselves as the supplier of choice to key target customers in the automotive market. We have strong relationships with our Japanese customers and high market share in the Japanese market. We will continue to work hard to earn the business of our Japanese customers. We are now adding to that by focusing on growing our share of the large “rest of world market”.[/QUOTE]
LYC Price at posting:
$2.14 Sentiment: Hold Disclosure: Held
(20min delay)
