Capital raising?, page-61

Cheers sd13, comments such as "Modern plants have reagent recovery, Heat Recovery, fully separate Nd Pr, fully separate La and Ce. Seprate out 50% to 80% of Ce early in process to avoid cost of processing IT" made it rather clear we had a rather bitter Moly sycophant in the house, and one with little idea of the basic concepts or economics of RE production. Lynas strategic planning was light years in front of Moly's, ultimately so was their execution.

Chatting with a broker analyst today who's followed Lynas closely for sometime, he expressed surprise at the reaction to the FY Fins, as in: "What exactly were the negatives that we didn't know about?" Best I reserve his comments re SH base.

Clearly the balance sheet is as weak as a kitten, and prices dragging along the bottom of the cycle have negated strong performance both operationally and at market, but Sept Q should throw free cash $8/10M and circa $20M H1.

Difficulty is that is not sufficient to repair the balance sheet and invest further in the business so no doubt they are negotiating with JOGMEC ATM. Quick look at JOGMEC shows a brief: "to strengthen the competitiveness of Japan's metal mining industry and ensure a stable, inexpensive supply of metals" with an annual budget of USD22Bn.

For just $200M they have secured +50% of Japan's REO needs, and more if they require it, for +25yrs, and quite probably influenced the decisions of Showa Denko & Daido to shift production back to Japan, a major JOGMEC/Govt objective.

And what are JOGMEC being asked to support? A company that has survived a protracted commissioning at the bottom of the price cycle, now progressing 100% of assets to steady state, both reducing CoP and adding value ASP, competitive to the lowest cost 10% of Sino producers and highly leveraged to prices returning to economic levels. Does anyone seriously think JOGMEC/Jap Govt believe in fairies, that China will continue to sponsor ROW RE demand growth at their cost indefinitely?

But also in the FY Fins was the stunning market segment breakout by value showing 47% China, 47% Japan (incl Vietnam) & 5% France. Would appear that once Lynas has filled Japanese NdPr requirements they are shipping large quantities into, and thru, the Chinese mag makers. Should Japanese demand remain static at the new levels of NdPr production FY17 might look something like 60% China, 35% Japan & 5% France. Add to that probably +50% by volume flowing to Rhodia & BASF and not so difficult to understand there are a number of powerful entities with an inherent interest in Lynas maintaining its independence, though unfortunately they couldn't care less re SH returns.

FY Fins pretty much confirmed where Lynas has been, likely some guidance in the Annual Report (Oct 5th 2015) & the Sept QR will indicate where it's headed.