I must admit I am very impressed with with the entire senior management team. It is diversified a far as age and gender and nationality something Amanda touched on during an informal question and answer session. Amanda feels strongly that diversified talents make for a more balanced team allowing the different perspectives and ideas to emerge...
To be quite honest I did not know what to expect when I met Amanda. What I found was an outgoing very confident leader that has surrounded herself with great people. Amanda also has a great sense of humor and I really enjoyed listening her stories during our visit...
Amanda has also created a corporate culture that encourages Malaysia women to assume management roles within the company and she is practicing what she preaches. I can't remember the exact increase in the number of women in the company but it is significant...
I really enjoyed watching Aus trying to shake more information from Amanda than she was willing to provide. Aus would ask particularly difficult question such as the Lynas long term expansion plans adding that Amanda might not be able to answer the question. Amanda with a stone face responded quite simply "yes" meaning yes she was not at liberty to discuss that particular issue. It was entertaining to watch the good-natured cat and mouse game played by Aus and a couple of the analysts in attendance...
OK, let's address elephant in the room, the relationship between Lynas and Malaysian government. The official position is that to the best of their knowledge, Lynas is doing everything right. They feel that they are in compliance with all of the conditions set forth in the licensing process and the actual operation of the plant has scientifically proven that Lynas in intrinsically safe. Also Lynas is quick on their feet so any deficiency can be resolved quickly should the need arise...
So just where does this leave Lynas with respect to sovereign risk? Amanda noted that Malaysia is low on the list as far as sovereign risk is concerned meaning that the country is relatively stable. While the election presented some concern for Lynas, Amanda pointed out that Mahathir's stated policy is that Malaysia is a country of laws. This is very good for Lynas who is complying with all of the rules and regulation governing the Lynas operation in Malaysia...
Amanda spent time discussing the importance of approvals and the approval process... She made it clear that the approval process is dynamic meaning that there is virtually always some form of approvals taking place at anytime. Lynas does not receive a blanket permanent operating license with the idea that the licensing would be the final step in plant operation...
The actual approval process is ongoing and is constantly being modified as the situation requires. For example, building new permanent PDFs structure requires additional engineering and to be submitted to the proper government agency for evaluation and approval. It is my impression that Lynas has an excellent relationship with all of the agencies they work with on a continuing basis...
One thing that both Aus and myself noticed is the general great attitude of the work force. While I did not interact personally with the workers it seemed that they all had smiles on their faces and seemed to enjoy what they were doing. Now this may be because we were with Amanda but Aus pointed out that the good spirit and attitude is also prevalent at the Mt. Weld site. In any event the corporate culture seems to alive and well at Lynas...
The NEXT program has manifested itself as a program of many little changes as opposed to a major redesign of the system. One of the stated goals is to eliminate the bottlenecks in the system. This goes hand in hand with objective of increasing the recovery rate. Amanda indicated that increasing the recovery is preferable to increasing throughput within the system. This is not to say that throughput is ignored as is evidence by addressing bottlenecks but it would appear that both attributes are being addressed concurrently...
I was very impressed with the scale of technical devices designed and implemented by the teams at Lynas. For example, the software for the control systems is written in-house, probably out of necessity as Lynas is a first mover in this nascent technology. In any event this allows for the modification or even rewriting of in-house programs. There are several advantages to this including quick turnaround, reduction in vendor costs' and probably most importantly it puts valuable IP in the toolbox for future ventures...
Since there is no recipe for building and operating a rare earth plant on the scale of Lynas,every mistake carries a lesson so the same mistake is not made twice...
The bottom line, and in my opinion, the pieces of this journey have come together as is evidenced with the hundreds of packed 1,000 Kilo bags in the warehouse. Recently Lynas has suffered some unfortunate political fallout from the election it would appear that it has somewhat shaken the investment community...
The appointment of the Fuziah/Wong committee by the Minister of Science and Technology could result in good things. Judging from the organization and cleanliness of the LAMP facility I think they will find that Lynas is indeed well with the parameters of the approvals and licensing agreements. In any event this will give the committee the opportunity to tour the LAMP, ask questions and review the actual data gathered during it's operation. Hopefully the entire operation will be reviewed objectively and the Malaysian government will see Lynas as an asset or even as a benchmark for rare earth processing...
I am not a numbers guy, so I will leave the task of any financial analysis to the analysts' but I am very optimistic about the big picture. I was having breakfast with a particular Australian analyst and as we went over the facts, opinions and circumstances surrounding Lynas as an investment and were both having a hard time trying to reconcile the current share price with the actual potential of Lynas as company. It hit both of us that the current valuation is ludicrous, there is the first mover advantage, the IP, the assets of the LAMP, the Mt. Weld mine, the barriers of entry and excellent management making Lynas an incredible investment...
Excellent management has taken a company from being on the ropes to a company that has rapidly emerged as the leader (ROW) in the rare earth industry. As Aus pointed out, it is much better to have a mediocre company with excellent management than it is to have a great company with mediocre company management. It is somewhat a rare occurrance but it appears that Lynas maintains both... JMHO...
Btw, special thanks to Aus who takes a the time to explain the complex issues to us mere mortals... His knowledge and understanding of RE's and Lynas transcends that of most analysts and many experts in the industry. We are very privileged that he readily shares his information with us...
LYC Price at posting:
$2.37 Sentiment: Buy Disclosure: Held
(20min delay)