Let's not forget the LAMP was set up in Malaysia for reasons of tax incentive and employee cost savings in both setting up and running the plant.
Malaysia has a GDP per capita of less than 20% of Australia. So Australian wages would be around 5.5x that if the LAMP were here. I can't find more accurate figures I'm sorry, the annual report and cash flows coupled with the complex nature of employee benefits and management remuneration don't give much detail.
There are 750 employees local to Kuantan. If we assume in Australia the average wage was $100k for working at an equivalent LAMP, then perhaps they get $18k in Malaysia. $82k X 750 = $61m. That's huge compared to the current profits. Even half that, $30m, makes Lynas profits shaky (2018 NPAT $51m).
Add the CapEx required to build here vs Malaysia and who knows how much more it would have cost. The fact that the media speculate $400m for just a C&L train here, given the knowledge and IP Lynas now have, and the fact that the entire LAMP cost $800m just a few years ago and you can see why decisions were made.
Trusting Malaysia was a mistake of course. But Lynas only barely survived and I doubt would have survived with the costs of a LAMP built in Australia and the wages required to run it.
Thailand, Indonesia even the Philippines could have been options (I wasn't a holder during this phase so I'm not well informed on the discussions at the time). But I don't think there would be a Lynas if it was decided to build in Australia.
LYC Price at posting:
$2.11 Sentiment: Buy Disclosure: Held
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