ausheds wrote: 47% of Mt Weld production is Cerium. Page 14, March 11 presentation from LYC clearly shows Demand 52kt/Supply 66kt and doesn't calculate Moly S2 which would add another 10kt to the supply side. Clearly, by LYC's own reserch, nearly half the basket by weight will be in significant oversupply in the near term.
Greetings ausheds! JPM in a note on Moly when they raised their Moly target to $80 said that concerns for future oversupply of Cerium and Lanthanum were "overblown" and sited the point in their reasoning. Also. Moly's XSORBX is patented, but this use by a new Cerium user should be price supportive for everyone in such a small global market.
Lastly, my opinion is that Moly knows stage two is in doubt. They have dropped it from press releases, spent S2 funding (on acquisitions), lost S2 funding (due to BNP Paribas pulling out last quarter), and bought Silmet, an Estonian processor, that will be obsolete after their Phoenix Project is running. Please note Silmet processes no further than their current pilot project at Mountain Pass, California.
On this basis, assumptions about oversupply of Cerium seem more premature than ever. And if Lynas has their Cerium presold into long term contracts this should not matter much since XSORBX will support the overall Cerium price.
Bottom line: If the LAMP produces 10,000tpa by the years end, at a basket of $200/kg at time of production (modest assumption considering current rate of increases), annual earnings of $2 Billion should begin in Q1 2012 and raise further with ramp up and phase two progress.
My conclusion is a reasonable SP by year's end would be $10 based on the earnings and the growth rate in Lynas by year's end. Better buy more ausheds, or risk being left behind IMO.
LYC Price at posting:
$2.45 Sentiment: ST Buy Disclosure: Held
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