LYC 0.52% $7.79 lynas rare earths limited

Lynas and LAMP Residue Issues, page-46

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    Now that is very interesting.


    paragraph 5 is news to me. It confirms that the LAMP was a political football in Malaysia from the start. Lynas never told us that. All they said was that they’d been invited to consider an alternative site at Kuantan, not that they’d been refused access at Kemaman. Funnily enough, it was their 27th August 2007 ann. that persuaded me to sell the rest of my LYC - something just wasn’t right about that announcement. Obviously being “asked” by a government to relocate is tantamount to “relocate or else” but I thought that it was just one political group pulling more weight than another. That’s sovereign risk. Lynas will do as they’re told.

    But to have one political group telling them to go away for environmental reasons, that’s sovereign risk at a much higher level IMO. And to compound that by never having a long term operating licence, leaving the company at the mercy of whatever political winds are blowing every two or three years, I think makes the SR very high. What was Curtis thinking, investing $1bn of shareholders’ funds without security of tenure? The norm for projects like this, long term processing plants like oil refineries, is an operating licence of 20, 30, 40 years with conditions that have to be met for the licence to be maintained. So long as production, safety, community obligations specified in the licence continue to be met, operations are guaranteed. So you sort out the terms of operation, including waste disposal, what’s safe etc. before you turn the first sod rather than hoping that she’ll be right later.

 
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