ntu, page-12

Borisdog,

I think we are in broad agreement. However, since I started this, let me explain.

I agree Lynas's immediate focus must be on the LAMP. Lynas will then have 2-3 years of "first mover advantage" where it can set prices for what are essentially LREEs. After that competitors will start processing and price competition will become a factor. Expect prices of LREEs to fall after 2-3 years in that competitive context, unless demand continues to outstrip supply. As an example, some Japanese companies have identified India to process REEs, by passing LYC. The Americans should have caught up by then also.

Even if Lynas has only 2-3 years of first mover advantage, that should bring in a fortune, a significant increase in market capitalisation (which is currently around $1,983m) and (one hopes) a multiple increase in LYC's share price - $4, $10, $20, who knows?

But if competition does arrive in (say) 2015, LYC's profits may suffer from price competition with a consequent trimming of its SP, depending on supply-demand for LREEs. Still (a hypothetical) even if the steady state SP for LYC falls to around $5-9, that is still a juicy multi-bagger on today's SP.

Here comes the point about NTU. Rare earths are NOT commodities. Different miners have different profiles of individual REEs in their mineral ore bodies, which will suit different end-uses and end-clients.

Because NTU has a high proportion of high-value HREEs and yttrium, it will fit hand in glove with particular end-uses and clients in areas which Lynas cannot satisfy from Mt Weld. In a vertically-integrated system from mine ore to end-use REE oxide, the same client may deal with LYC for uses which require specific LREEs and with NTU likewise for uses requiring specific HREEs.

Currently, NTU has a market capitalisation of only around $90m, but that will appreciate significantly with imminent production with signing of MOUs. Yue Conglin’s investment company has just under the 20% trigger (19.4%) and Lynas has 7.5%.

Hence, while not losing focus on the immediate commissioning LAMP, I believe that Lynas should (and probably) is thinking strategically about HREEs and when it should make a move.

I mostly agree with what you say: “LYC may be in a position to take a larger interest in NTU when the LAMP is running and the cash is flowing but, until then, why not let NTU get on with their own game of further proving the ore body's viability.”

Actually, NTU may be more advanced than you think. 2012 marks a JORC resource and advanced discussions with strategic off-take partners. They already are testing at a pilot-plant level. In 2014, NTU intends to start producing sufficient supplies of HREEs for a diverse portfolio of off-take partners, with main production gearing up for 2015. NTU may look like a minnow now compared to LYC, but its strategic significance cannot be understated.