Edited Transcript of LYC.AX earnings conference call or presentation 21-Oct-19 12:00am GMT

Thomson Reuters StreetEvents•October 21, 2019

https://finance.yahoo.com/news/edited-transcript-lyc-ax-earnings-090538901.html?guce_referrer=aHR0cHM6Ly9maW5hbmNlLnlhaG9vLmNvbS9xdW90ZS9MWVNDRj9wPUxZU0NG&guce_referrer_sig=AQAAANCnS06KU7C8l3fLDoGhjeSMv0DL8FI27f9kBDfMrqW0xoyKhmxlytRE3vCXZORsFhpVSDoVYIqDssgC5yxyJX9VXWmah3mU5e3jsuhjAIH6NAT-PCTyLoSeY5uz9j4Bsr-jwzn3sqHqrN7qqUQ4y_Ke4h3HS0eczu2duARYNEn4&guccounter=2

Q1 2020 Lynas Corporation Ltd Earnings Presentation

Sydney, New South Wales Oct 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Lynas Corporation Ltd earnings conference call or presentation Monday, October 21, 2019 at 12:00:00am GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Amanda M. Lacaze

Lynas Corporation Limited - MD, CEO & Director

* Gaudenz Sturzenegger

Lynas Corporation Limited - CFO

================================================================================

Conference Call Participants

================================================================================

* Andrew White

Curran & Co - Resources Analyst

* Daniel Morgan

UBS Investment Bank, Research Division - Director and Analyst

* Dylan Kelly

Ord Minnett Limited, Research Division - Senior Research Analyst

* Jennifer Parker

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Ladies and gentlemen, thank you for standing by, and welcome to the Lynas Corporation quarterly investor briefing.

(Operator Instructions) Please be advised that today's conference is being recorded. I will now hand the conference over to the Lynas Corporation. Thank you. Please go ahead.

--------------------------------------------------------------------------------

Jennifer Parker, [2]

--------------------------------------------------------------------------------

Good morning and welcome to the Lynas Corporation briefing for the September quarter 2019.

Today's briefing will be presented by Amanda Lacaze, CEO and Managing Director. And Amanda is joined by Gaudenz Sturzenegger, Chief Financial Officer; and Andrew Arnold, General Counsel and Company Secretary.

I'll now hand over to Amanda to commence the briefing. Please go ahead, Amanda.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [3]

--------------------------------------------------------------------------------

Good morning, everybody. I hope, wherever you're listening from, it's a lovely day. The sun is shining in Kuantan. And as we move into the winter months, it's got a little cooler. It most certainly be -- forecast to be about 31 degrees today.

So the quarter that we've just been through was a fairly unremarkable quarter in terms of the operational details within the business and with the exception of just a couple of areas. I think the first one is that the -- we were incredibly pleased to pass the milestone of 1-year lost time injury free in July. Unfortunately, we broke that record about 10 days ago, but we did make it to 461 days lost time injury free. And on any criteria, that is an extremely good result. We remain absolutely focused on ensuring the safety of each and every one of our employees. And this is not just when they are in the workplace but on their way to and from work, which remains the most dangerous time of the day. Other initiatives have included things like having bike checks to ensure that bikes are road worthy, ensuring that our people are wearing helmets, et cetera. The other thing which happened during the quarter was the release of the -- our first sustainability report. I'm aware that many of you as investors have [a few funds]. Those who are invested in new funds are increasingly interested in whether businesses pass the test in terms of sustainability. And this is not just on the way that we operate environmentally but also in our commitment to our people and our communities as well. We're very proud of our sustainability report notwithstanding some of the political shenanigans that goes on with respect to our business. We are recognized globally as a gold standard. We -- that's received the EcoVadis gold medal for our sustainability, and certainly our customers recognize that our practices and our continuing focus in this area is the best available.

So then when we -- of course, the other remarkable thing in the quarter, which was also external to actual operations, was the renewal of the operating license for a 6 months period but with a clear pathway recognized for continued operation in Malaysia, with the requirement that we pass 2 tests at that time. First is that we have a letter from the Pahang state government approving a specific site for our PDF; and the second, being that we have substantive plans for the relocation of cracking and leaching to Western Australia. And I can advise that we are well progressed on both of those.

In terms of the operation, it is disappointing to us that we are yet to finalize our discussions with the local regulator with respect to the amount of lanthanum concentrate that we can process. And however, we continue to engage, as we always have done, productively with the regulator on this matter and remain optimistic that it will be achieved before the end of the calendar year. However, given that we don't have it and as indicated previously, we've made a specific and explicit decision to manage the rate at which we're producing such that we don't go into a full shutdown as we did last year. Certainly, we expect that, if we don't do that, our January results will be better than they were last year. At the same time, we are certainly doing everything that we can to optimize the rare earths which are contained within the lanthanum concentrate that we are able to produce, including focusing on -- we mentioned in this, we've installed a dryer in Mt Weld. Certainly, lanthanum concentrate can come in with variable levels of moisture. The lower the moisture, the higher the rare earths. That's pretty clear. And certainly focusing on recoveries, which we do at all times right through the process.

Having said that, NdPr production at 1,242 tonnes were certainly lower than we would like it to be and lower than we could place in the market. And so this is a high priority within our business, to resolve this matter. Notwithstanding that demand continues to be high and the significant forecast growth, particularly within the Japanese market, globally, conditions are soft. So that's sort of -- and that's very much driven by the lack of confidence inside China as a result of the trade tensions. The result, the NdPr price is pretty flat, but we -- Pol and I still have our "start of the quarter" bet on what we think the price is going to be, and one day, one of us will be right.

But so within that context, within the context of a relatively subdued market and with flat pricing and the fact that we've had to constrain our production rate, we're pretty happy with the results. We continue to build cash. And that, of course, is incredibly important ahead of our Lynas 2025 investments.

And so finally just a few words on that. We are continuing to build our team that is working in Lynas 2025. And we have -- significant progress has been made in this area. Of course, most of -- we have 2 parallel streams here, 1 which is really about identifying what is the right location. And this has a significant number of issues associated with it, including availability of infrastructure in particular. And then on the other hand, the engineering work and really designing what we think is going to be the very best facility as we move forward. 2 weeks ago, I was in Western Australia for the In the Zone conference. This is run by The University of Western Australia. It was very high-profile event. They were -- In the Zone means about the West Australian time zone. That -- as well as that, it included -- so it included representatives from governments within the time zone but also a few from outside the time zone, like the U.S. government and the Japanese government. Its focus was critical minerals. It was a very extraordinarily well-attended event actually and gave us a good case to showcase -- gave us a good opportunity to showcase Lynas on the world stage with sort of some key stakeholders. And we remain very confident about the level of interest and support for a proven non-Chinese supply source of rare earths.

So with that, I'm happy to stop and take some questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Certainly. (Operator Instructions) Your first question today comes from the line of Daniel Morgan from UBS.

--------------------------------------------------------------------------------

Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [2]

--------------------------------------------------------------------------------

Amanda, first question I've got is just on pricing. Your pricing in the quarter was a little bit ahead of what I was looking for. And I was just wondering if you could give some insight into was it partially a greater mix of NdPr that you're selling in a quarter versus production. Or was it actually that you're getting higher realized pricing from putting more product into Japanese markets? Just wondering if you could give some insight into that issue.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [3]

--------------------------------------------------------------------------------

Yes to both of the above, Daniel. So it was a little contributed by product mix and a lot contributed by customer mix.

--------------------------------------------------------------------------------

Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [4]

--------------------------------------------------------------------------------

Awesome. And the just wondering if you could provide an update on the separation performance on your Nd and Pr lines.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [5]

--------------------------------------------------------------------------------

Yes. All is going well, as far as that's concerned. We are optimized -- we really are trying to maximize the production as separated Nd. There is significant market demand, and at this time, we're probably only just keeping up with sort of our key customers in that area. And for the first time, just I think within the last couple of weeks, the pure Nd price [just] inched ahead of the NdPr price. Historically Nd is sold at the same price as NdPr and Pr is sold at a premium, but now we are seeing the Nd sort of inching forward. So we are producing at design through that or close to design through that separated unit, but yes, we're looking at ways to continue to push the Nd production.

--------------------------------------------------------------------------------

Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [6]

--------------------------------------------------------------------------------

Okay. And then just the last question is in the release you highlighted that the Mining Campaign 3 ore has got greater levels of crandallite and carbonate levels within it.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [7]

--------------------------------------------------------------------------------

Yes.

--------------------------------------------------------------------------------

Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [8]

--------------------------------------------------------------------------------

And just wondering if you could expand on is there something that's impacting the recoveries and -- or can you remediate that through the options you've been taking? And what's the operating cost impact? Just trying to get a feel for quantifying that or the magnitude of this issue going forward.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [9]

--------------------------------------------------------------------------------

Yes. So Daniel, that's a really good question. And if you were really [chapter immersed], I'm going to tell you [how the chapter can] (inaudible), but what I can tell you is that, unmanaged, it has a significant potential to affect production and recoveries, all right? So both the crandallite and the carbonate. Now the carbonate -- both of these things, we expect to continue to be an issue, to continue to be a feature of the ore body. And so therefore, what we need is to put in place alternate processing to deal with it. The most significant part of that is the pre-leach circuit at Mt Weld. And it appears to be doing the job that we require it to do, but the metallurgists are continuing to do work to ensure that we are optimizing the flow sheet as we move into new ore profiles. So anytime that you process -- and I don't have to tell you guys. So anytime you're processing an actual resource, you're going to get variation. One of the things that we are -- I think we've demonstrated a capability to do it, but we are really focused on continuing to improve that capability of managing our response to changes in the ore. So yes, it could have a significant effect. It is not right now because we are managing it appropriately.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

(Operator Instructions) But your next question comes from the line of Andrew White from Cowen & Co (sic) [Curran & Co].

--------------------------------------------------------------------------------

Andrew White, Curran & Co - Resources Analyst [11]

--------------------------------------------------------------------------------

Amanda, just a quick question on the PDF that's happening. As I understand, it's with Pahang state and the AELB. Maybe you can correct me on that, but I just wanted to -- or just I was hoping you could walk me through the major issues that need to be resolved in finalizing those details. And what are the major roadblocks in getting this approved? And what role does the central government have? Where will it be making its decision in that pipeline?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [12]

--------------------------------------------------------------------------------

So the requirement in the license, in the 6 months license, renewal as it stands is quite explicit that we require a letter from the Pahang state government approving a specific site. Clearly, the intention is that we should not only have an approved site but we should have a plan. Again, this is for us. It's not specific to the license renewal, that we should have a plan for that site and the ability to build PDF. So we're working through that process at present. We don't see any major roadblocks right now and expect that we will be able to meet the conditions of the license renewal as provided to us.

--------------------------------------------------------------------------------

Andrew White, Curran & Co - Resources Analyst [13]

--------------------------------------------------------------------------------

Okay. Do you have a rough time line? What would be holding them back from approving that immediately?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [14]

--------------------------------------------------------------------------------

We have a requirement to do this ahead of the 6 months period, and so we are managing to the government's time line.

--------------------------------------------------------------------------------

Andrew White, Curran & Co - Resources Analyst [15]

--------------------------------------------------------------------------------

Yes, okay. Just on the Blue Line facility: It seems that things are progressing. Though, what -- can you just shed some light on what's the main focus on that Blue Line? Is it design work or otherwise?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [16]

--------------------------------------------------------------------------------

Sure. So actually Pol and Gaudenz have just returned from the U.S. about a week or so ago. And as well as that, we've had our engineers and our technical folks there. The #1 task at Blue Line is to construct a heavy rare earths separation facility. And the engineering is -- the technical design work is done. A lot of the engineering work is done. And we had some -- having done these things, we now need to move to a stage where we formalize sort of commercial arrangements and sort of continue the engagement with the sort of relevant stakeholders. But everything is moving absolutely in the right direction.

--------------------------------------------------------------------------------

Andrew White, Curran & Co - Resources Analyst [17]

--------------------------------------------------------------------------------

Okay. Excellent. And that -- just lastly, that investment you make in Blue Line, is that going to be within the $500 million envelope or outside of that?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [18]

--------------------------------------------------------------------------------

We will provide further advice on funding as it's -- as we move through the various options.

--------------------------------------------------------------------------------

Operator [19]

--------------------------------------------------------------------------------

Your next question comes from the line of Dylan Kelly from Ord Minnett.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [20]

--------------------------------------------------------------------------------

Amanda and same, I just want to circle back to the points around production and the weakness during last quarter. You said 1,200 tonnes was below what you wanted, more so what you can probably put into the market. So can you just break out, first, what's going on and why it was weaker? I mean, is this a function of 80% concentrate import limit sort of restrictions? Is this partially Duncan ore blends coming in and mixing up recoveries? Can you just give us some more details and try to quantify what's going on and your ability to ratchet this back up quite quickly once you get the permit?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [21]

--------------------------------------------------------------------------------

We can ratchet it up once we get the increase.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [22]

--------------------------------------------------------------------------------

Can you elaborate?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [23]

--------------------------------------------------------------------------------

Sorry. So it's pretty simple. We -- if we get the increase, then we turn everything up again.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [24]

--------------------------------------------------------------------------------

Okay. Great. So in terms of recoveries and the impact that Duncan is having on this, is there anything to say at this point what the influence of that is or what you've managed to see, so far?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [25]

--------------------------------------------------------------------------------

Well, the influence of Duncan is that we get more SEG in our material, and given the current market of the dysprosium and terbium, that's a good place to be. That's the key effect of Duncan. Duncan is mineralogically very similar and is being processed similarly. It's not -- as I understand the geology, it's not Duncan which gives us the crandallite and the carbonate. That's simply factor -- a feature of the ore body is (inaudible) ore body.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [26]

--------------------------------------------------------------------------------

Okay. Fair enough. So with some of these heavy prices quite strong, does this change or influence your longer-term plans around what portion of Duncan ore that you process relative to the CLD? And where do you think you're running at, and where do you expect to get that sort of blending towards?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [27]

--------------------------------------------------------------------------------

So we are working on optimizing blend for market conditions. And we expect that over time we will be able to significantly -- or substantially increase may be a better term. SEG is typically about 5% of total production. We would think that we would head up, maybe increase above 50% as we move into the Duncan ore body.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [28]

--------------------------------------------------------------------------------

Okay. So just to tidy up some of the points that you made around the Texas JV. What sort of commercial arrangement at a high level are you trying to achieve there in terms of like an equity share, CapEx contributions? Is there anything that you can divulge there about plans at the moment and how they're coming together?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [29]

--------------------------------------------------------------------------------

No.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [30]

--------------------------------------------------------------------------------

Okay. Any sense on the timing when we can find out more?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [31]

--------------------------------------------------------------------------------

However, we've always said that we target at the end of this calendar year that we are able to provide further detail. And so there are quite a lot of moving parts. I think that you know that. And to ensure that we have something which is optimized in terms of delivering really excellent shareholder value, we just need to make sure that we have all those moving parts properly managed, but we certainly would be hoping to be able to provide something with more detail but by the end of this calendar year.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [32]

--------------------------------------------------------------------------------

Okay. Just to follow -- just to finish off on that point around what you could do. I mean we've got -- in terms of longer-term SEG sort of output number, you're currently, what, 1,200 tonnes a year. And you've got Lynas 2025, what, a 40% increase in NdPr output. Could we expect, say, a similar order-of-magnitude SEG production by 2025 for the site? Or is that all going to be largely Duncan dependent?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [33]

--------------------------------------------------------------------------------

I think it will be more than that, Dylan. I don't have those numbers specifically to hand, but we will get the uplift which is part of just the processing uplift and we will get the uplift associated with the Duncan enrichment. And everything that we're doing in terms of thinking about engineering and otherwise, everywhere, we're thinking about how we process our material; and if ever there is an economic alternative, then how do we actually process third-party sources of rare earths in those facilities as well.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [34]

--------------------------------------------------------------------------------

Okay. Wonderful. I'll leave it there for someone else.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [35]

--------------------------------------------------------------------------------

I thought you're going to ask me about costs.

--------------------------------------------------------------------------------

Dylan Kelly, Ord Minnett Limited, Research Division - Senior Research Analyst [36]

--------------------------------------------------------------------------------

Come on. You've listed (inaudible) have to. Kind of, what's on your mind? So just -- is it purely on your lack of scale, with operations down slightly? What's happening?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [37]

--------------------------------------------------------------------------------

No. There's a big chunk of that which is actually related to Wesfarmers defense costs, which we paid those up and sort of closed out. It's a feature of our system that there are all those costs associated with this sort of corporate activity. And there was also some of it which was related to sort of FX and the Australian dollar weakening versus the Malaysian ringgit during the quarter. And there was a little which was contributed by the sort of the reduction in volume, of course, because there are scale benefits to that and -- but on the other hand, the operations team are very focused on they're really trying to ensure that we're not increasing acid production and otherwise as those volumes go down. But there are scale benefits. But most of it was actually the more extraordinary items which were non-production related.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

(Operator Instructions) And your next question comes from the line of [Chris Hughes].

--------------------------------------------------------------------------------

Unidentified Analyst, [39]

--------------------------------------------------------------------------------

Report, I thought, was actually very positive, so thank you for that. And also thanks for the [legal] report. It sounds like (inaudible). And the -- thanks...

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [40]

--------------------------------------------------------------------------------

(inaudible).

--------------------------------------------------------------------------------

Unidentified Analyst, [41]

--------------------------------------------------------------------------------

I was tongue-in-cheek. Thank you for clarifying the cost-of-production issue because that was top of my list for clarification. So that's good news. The second one, I think -- congratulations to everybody concerned. And the team is such a highly rated gold standard [through international] sustainability, truly a magnificent result, is -- and a credit to all concerned. And with that thought, I -- the -- to the restrictions [which you've been living in the past on] Lynas by the Malaysian regulators. I'm just asking a question: Have you quantified what this is costing Lynas and, if so, the real thoughts of [decline of] compensation? Because as a shareholder, how can we agree that these people can be treating Lynas a wonderful corporate citizen with such disdain?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [42]

--------------------------------------------------------------------------------

[Chris], yes. Every day, I think, gosh, we do everything that is expected of us as a foreign direct investor [plus]. And we do that because it is the right thing to do. And yes, as I look at the performance of other industries in Malaysia and the fact that we are subject to such political nonsense is very frustrating. And even as we're sitting here right now, I'm sort of reading something which have come through about questions to be asked in parliament today. The fact that we are interesting enough to have questions asked about us in parliament is just sort of nonsense. On the other hand, suing anybody is always a risky pathway. Suing a government is an even riskier pathway. And we won't be doing that anytime soon, particularly not as we are working to build something which is good for us and good for Malaysia. So we talk about some of the silliness here. On the other hand, we have some really substantive organizations. I've said this many times, that the Prime Minister remains steadfastly supportive. He wants the message that Malaysia is open for business out far and wide. He wants to build a 4.0 economy. He wants downstream activity in the rare earths market. So I think that we are much better focusing on these things and about the value that we can continue to bring to Malaysia rather than moving into sort of additional conflict with the government.

--------------------------------------------------------------------------------

Unidentified Analyst, [43]

--------------------------------------------------------------------------------

I understand. I just wish you luck with these people. It must be so frustrating sitting there and having these wonderful assets. The markets are going to evolve to being able to satisfy the demand. Clearly frustrating experience.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [44]

--------------------------------------------------------------------------------

Yes, there is a degree, but on the other hand, we have very full days with much work to be done. So that's okay as well. There's lots to keep us busy and motivated.

--------------------------------------------------------------------------------

Operator [45]

--------------------------------------------------------------------------------

Your next question comes from the line again, with a follow-up question, from Daniel Morgan from UBS.

--------------------------------------------------------------------------------

Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [46]

--------------------------------------------------------------------------------

Just to follow up, Amanda, on the AELB trust fund or payments you have to put aside for the long-term storage of residues. Just is there still another payment to be made? I have one in my model. I just want an update on that.

--------------------------------------------------------------------------------

Gaudenz Sturzenegger, Lynas Corporation Limited - CFO [47]

--------------------------------------------------------------------------------

Yes, Daniel, that's -- Gaudenz here. Yes, I think it will be prudent to keep that in your model. We will have to make this payment before the end of the year. So in this quarter, you will see the roughly USD 8 million, a bit less than USD 8 million which will be made.

--------------------------------------------------------------------------------

Daniel Morgan, UBS Investment Bank, Research Division - Director and Analyst [48]

--------------------------------------------------------------------------------

Right. And the discussions for a permanent storage facility, can any of that be used? Or is it a discussion still ongoing regarding that?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [49]

--------------------------------------------------------------------------------

Yes, we don't know the answer to that question yet.

--------------------------------------------------------------------------------

Operator [50]

--------------------------------------------------------------------------------

Your next question comes from the line of [Tim Ainsworth].

--------------------------------------------------------------------------------

Unidentified Analyst, [51]

--------------------------------------------------------------------------------

Amanda, just reading your comments. You very much describe a 2-speed market, Amanda, with some softness in China and obviously demand from Japan. Japan is still good now, and the forecast robust. Can you just describe the difference or the segments of demand in those 2 markets that are setting them apart at the moment?

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [52]

--------------------------------------------------------------------------------

So yes, I think that there are a few things that set them -- that are different. The first thing is -- I know that you know there are within NdPr -- or NdFeB magnets. There are high-performance magnets, and there are non-high-performance magnets. And Japanese magnet makers are focused on the high-performance magnet segment. And whilst Chinese magnet makers today have, I think, 80% or thereabouts of the total NdFeB market, within the high-performance sector, the Japanese don't have about 50%. So I think that what you would see is that growth in high-performance magnets is ahead of sort of overall growth in the magnet market, which is of course what you would expect when you look at what are the drivers for NdFeB magnet growth which is sort of technology sectors. So I think that, that is one thing. I think the second thing is that we've had the opportunity to access the market for separated Nd in China, which -- so it gives us access to a market that we haven't had previously. And so that's actually fueling some of the growth that we have. And then the magnet makers themselves, the sort of growth they're getting, I think part of that is that Japanese industry is performing pretty well, when we look at things like the emission control legislation which will come into effect in Europe. I think it is next year. I think Toyota is the only company that currently can meet those emission controls, and that's got a lot to do with the sale of their hybrids within the European market. So I think all of these things -- and then finally, I think that you've got some readjusting from outside-China customers to maybe putting a little more business with Japanese magnet makers. Although, it is disappointing to see that in the U.S. it appears that sort of the response from many there to the trade tensions is to stockpile material rather than to open new supply chains, but I guess that's a bit of the U.S. approach to business. But I think there's quite a few contributors and they're all good.

--------------------------------------------------------------------------------

Operator [53]

--------------------------------------------------------------------------------

(Operator Instructions) I have no further questions at this time. Please continue.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [54]

--------------------------------------------------------------------------------

Sure. Okay. That's terrific. Thank you. Jen, did you just want to close out, or am I okay to do that?

--------------------------------------------------------------------------------

Jennifer Parker, [55]

--------------------------------------------------------------------------------

Yes, go ahead, Amanda.

--------------------------------------------------------------------------------

Amanda M. Lacaze, Lynas Corporation Limited - MD, CEO & Director [56]

--------------------------------------------------------------------------------

All right. Well, look, thanks, everybody, again.

And it was, as I said at the beginning, to some extent sort of an unremarkable quarter, but then when I really thought about it, it's just that some -- all those things are a long time ago even that was only 2 months ago. So there were a few remarkable things but primarily relating to the external environment rather than sort of internally.

So thank you very much, and I look forward to seeing all of you. I think the next time will be at the AGM. Bye.

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

Ladies and gentlemen, that does conclude today's conference call. Thank you for all participating. You may now all disconnect.