Malaysia and China, page-65

UBS estimates FY18 > 22

Assumptions NdPr Price (ex VAT) US$/kg 48.57 47.25 52.50 57.50 62.50

Park your cynicism Goofy, UBS did a fair amount of work around LT sustainability NdPr $60kg, Lynas probably not so far off realising that Japanese mkt ATM, while "The share price is factoring in a LT price of US$45kg for NdPr" >

"Is US$60/kg long-term price for NdPr, implyingan EBITDA margin of ~40%, sustainable?

UBS VIEWYes. Our valuation and earnings estimates are based on a LT price of US$60/kgfor NdPr, which implies a Long-Term EBITDA margin of just over ~40%. Lynasproduces several products, but its Neodymium-Praseodymium Oxide product is~90% of revenue at present. This product is also exposed to the high-demandgrowthsegments of electric vehicles and wind energy, which suggests thisproduct will continue to be a big driver of Lynas's economics.

EVIDENCEOur detailed incentive price work of global competitor projects suggests a LTprice of US$60/kg for NdPr and US$23/kg for Lynas’s basket price. This impliesa LT EBITDA margin of just over ~40%. This puts it close to other high-margincommodities. But we have also reviewed the consolidation of the industry, andRare Earths are among the most consolidated commodities that we cover too.Highly consolidated industries tend to earn a better margin. The industry islikely to remain pretty consolidated as new potential entrants do not havemuch financial backing, their ore bodies appear to have more challengingeconomics and would face a 5-7+year build and ramp-up. We have also sense checkedour LT prices against the LT price history of these products and itappears reasonable.

WHAT'S PRICED IN?The share price is factoring in a LT price of US$45kg for NdPr, US$20/kg as abasket. This also implies a LT EBITDA margin of 25%."

Continues with a Incentive Price Analysis with some interesting conclusions:

"The incentive price work suggests a long-term price of US$60/kg is appropriatefor NdPr, which drives the majority of the Lynas investment case."

"In the chart below left we compare our LT price with the 25th percentileproducer of several LT cost curves of other commodities. A ~40% EBITDAmargin would put Lynas’s margins among the highest in long-term mining for aQ1 producer."

Only 12m price target I can see in the report was A$3.30.