Despite the debt restructure just announced Lynas remains a very high risk investment.
It appears to me the lenders were more concerned with maintaining supply of rare earths from a non-Chinese based supplier.
What does that tell you about how very important rare earths are to Japans manufacturing sector and economy.
The downside from this is that if other non-Chinese suppliers come into production and the Japanese then have alternative non-Chinese suppliers, will they be so generous next time. My guess is NO.
Will there be a next time? Well to me it appears inevitable, Lynas still has a massive debt, the principal of which it has no chance of significantly being paid down based on the most recent June quarter results.
.... and it appears Amanda has just signaled Lynas is for sale but there are no takers ...
Lynas has no control over the price of the goods it sells and is therefore inherently high risk.
In fact it's worse than that, because the price of the goods that Lynas sells is set by it's main competitor the Chinese.
The debt restructure deal just announced also results in possible further dilution for long suffering Lynas shareholders. The debt restructure provided bondholders with the issuance of 174,365,466 Warrants to Mt Kellett bondholders at a strike price of A$0.038 per share. That's on top of a share registry which already looks more like a shipping container filled with confetti with 3.4 billion shares already on issue.
The debt deal done defies all economic logic with lenders keeping Lynas alive at a huge cost to themselves.
So what's really going on here....
Lynas I believe has become a political football stuck in the middle of a massive geopolitical battle:-
Japan wants non-Chinese based suppliers of rare earths for it's manufacturing industries, and Lynas is the last man standing so the Japanese lenders have to keep it going.
China want the last remaining non-Chinese based competitor eliminated - the low rare earth prices set by China indicates that to me
So based on my reading of events this is now Japan v's China, with Lynas stuck in the middle.
The Chinese have the economic muscle and will to win, and all they have to do is keep rare earth prices low for another 2 years (30 June 2018 new debt rollover date)
that's nothing for the Chinese who think in decades and plan accordingly
at the end what will be left for Lynas shareholders ...
LYC Price at posting:
4.0¢ Sentiment: Sell Disclosure: Not Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)