However there are certainly points which I disagree with
Please do not take my comments personally
To answer your questions,
A) Certification
The time for the buyer to test in their lab is not long.
"IN FACT ERIC QUOTED 2 – 3 MONTHS FOR MOST ITEMS, HOWEVER FOR BATTERIES LIKE EXPLAINED BELOW"
They can quickly agree or disagree with the spec sheet provided by Lynas. Rare earths are just that because they are a chemical structure that has been formulated by other chemical structures. the level of purity is important and the nature of the impurity although small in percentage can be different from one mine to the next. An example was given by ERIC that it would take time for a buyer that produces batteries to complete certification that the complete product performance had not altered by adding the same element of REO but from a different seller (source)This may be more in the contractual area but I grouped that under certification. 6-9 months was given in this case from memory.
B) Sales
It was defined by Eric that he did not expect the company would receive cash in the june qtr, but sales were expected.
"IF YOU LISTENED CAREFULLY IT WAS INFERRED REVENUE WOULD BE RECEIVED IN FINANCIAL YEAR Q4 HOWEVER ONLY DRIBS AND DRABS"
probing question from a female retail holder asked if there had been any contracts that had been cancelled. It did appear that there had been sales contract cancelled/amended due to delays but they were governed by time issues that had already past.
"THAT IS PUTTING IT A BIT STRONGLY, I WOULD SUGGEST THE INFERENCE WAS “AMENDED” BUT NOT CANCELLED AS IS SUGGESTED"
It appears all the big players are still at the table CORRECT but oversupply issues could slow down initial contract agreements.
"TOTALLY DISAGREE – IT IS NOW NOT A MATTER OF OVERSUPPLY. LYNAS HAS SENT SAMPLES TO USERS ACCORDING TO SPECIFICATION. USERS ARE MAINLY NOW INTERESTED ONLY IN CONTINUITY OF SUPPLY AND QUALITY. REMEMBER WITH ALL THE SALES CONTRACTS THERE IS AN AGREED FLOOR PRICE AND IN SOME CASES BUT NOT ALL AGREED CEILING PRICES"
Got the feeling that once the election is out of the way we will here that sales are happening, but there will be alot of hold um poker being played at the moment and LYNAS could lose alot of revenue by being to quick to agree. Sounds like we will have something for the June qtr and income in the next.
C Margin of Profit
A high teens ($18-$19) cost without phase 2 which did sound a little doubtful.
"WHY IS THAT DOUBTFUL – ERIC STATED THIS IN THE CONFERENCE CALL"
Phase 2 will be governed by world REO supply. I believe it is just adding capacity to phase 1 and is not a different plant. Someone will pull me up on that if I am wrong.
D Current suppliers
When there is any new player in any business the sale price is likely to go down. This should hurt some other players more than Lynas, but the hype around the company is there because they are a big player in this market. It shouldn`t be forgotton that being the new player has some disadvantages but with a new plant they should have technology on their side.
Profit for any company is equal to REVENUE less the COST.
Until those numbers are both inked into a company report there are only estimates of what may be. Have to say i was disappointed it appears that the revenue may still be NIL in the June QTR.
"DEFINITELY NOT – ERIC STATED THERE WOULD BE REVENUE IN THE FINANCIAL YEAR Q4"
It would be great if that was not the case but last qtr was pretty good on the cost side for the staff size and building that the company has underway.
For me the number item to watch at present is the basket price, costs appear to have been estimated accurately by the company.
"EVEN THOUGH THERE IS A BASKET PRICE FOR RARE EARTH METALS –THERE IS ALSO AN AGREED UPON FLOOR PRICE WHICH LYNAS HAS WITH ITS CONTRACTED USERS"
LYC Price at posting:
48.5¢ Sentiment: LT Buy Disclosure: Held
(20min delay)