Competition no worry for Lynas
NICK EVANS AUST 30 August
Lynas chief executive Amanda Lacaze says she is not concerned at signs other mining majors are starting to pay attention to the rare-earths sector, saying she believes Lynas’s first-mover advantage will preserve its position in the market. But Ms Lacaze conceded some uncertainty still remained about whether Lynas would still need to go through a new full review of its operations in Malaysia before winning a long-term licence to operate.
Lynas delivered its second successive annual profit yesterday, declaring an after-tax net result of $80 million, up from $53.1m the previous year. Ms Lacaze said Lynas’s fullyear figures were an excellent result for the company, given prices for its products had softened on the back of uncertainty around global trade tensions.
The full-year net profit came on the back of softening revenue, down $10.6m to $363.5m, despite a lift in production of Lynas’s core rare-earths products. The company declared earnings before interest, tax, depreciation and amortisation of $100.7m, down from $121.9m the year before, and total group debt of $193m, down $32.1m.
But as Lynas’s financial position strengthens, trade tensions between the US and China, which has threatened to withhold supply of the critical materials, have increased interest in the rare-earths space, as the US looks to Australia as a strategic supplier of the metals , critical ingredients in missile systems, high-performance magnets and other hi-tech components .
West Australian junior Northern Minerals, on the critical list only a few months ago, has raised more than $50m this month alone on the back of renewed interest in the sector, as well as recutting its offtake-agreements to direct a portion of its future heavy rareearths product away from the Chinese market. Mineral-sands major Iluka is about to begin shipping an unprocessed rare-earth ore concentrate, and has stepped up feasibility studies on a Victorian rare-earths and mineral-sands project.
But Ms Lacaze said she was not concerned about renewed interest in the sector, saying the surge of interest would probably benefit the company, and she was not worried by signs of mineral-sands miners dipping their toes into the market. “In terms of shipping concentrate to China, I don’t see that as a big threat to our business,” she said.
She said Lynas saw Northern Minerals’ plans to ship heavy rare earths products as “complementary” to Lynas operations, which produced a different mix of the 17 elements that made up the rare earths product basket. “You always have to understand you’re in a competitive environment. Northern Minerals is complementary to our business in many ways. We have a good relationship with Northern Minerals,” she said. “The time that it takes to be able to stand up separation capability is quite long, so I think the activity there is good for the market. Markets grow quickly when there is a lot of activity, either at the demand or supply side. That’s where I see it generally being a good thing for the rareearth market.”
Lynas won a temporary extension of its Malaysian operating licence last week, giving the company six months to arrange a new plant — most likely in WA — to conduct early-stage processing of its ore, and to arrange a permanent storage facility for some of its Malaysian waste. Ms Lacaze said the short-term renewal gave Lynas a good “pathway” to a full renewal of its licence, but conceded the company did not have any certainty that the full licence would be automatically conferred if the company met its new conditions.
“When we normally go through a licence renewal process we create a lot of new information around operations and performance against our various plans — our environmental impact plans, or our radiological assessment plans. The Atomic Energy Licensing Board then audits those, and audits the plant,” she said. “That has been done as part of this licence renewal and our understanding is that, on the basis we meet the new conditions, it would be not a full licence renewal process but it would be an administrative decision.”
But Ms Lacaze said she was not concerned that Lynas could be pushed back into a full licence renewal process even if it met the new requirements imposed by the Malaysian government. “We have a reasonable degree of confidence that this is giving us a good path forward with a couple of gates we need to get through, but we understand those gates and we understand our ability to meet the requirements,” she said.
Lynas shares closed up 4c at $2.36 yesterday.
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