Lynas claim (AGM presentation p 5) an impressive 17% reduction...

Lynas claim (AGM presentation p 5) an impressive 17% reduction in total costs; if true this should be reflected in a robust free cash flow (we’ll use EBITA).

I’ve looked at some numbers in the Q’ly to do a rough analysis of free cash flow and an equally rough sensitivity analysis.

Here are rounded numbers from the Q’ly.

REO production was 2600t of which half is NdPr.

The total COP (including admin and royalties) was $93m.
So per kilo COP is $93m/ 2.6m kg = $36/kg.
Average REO sales price (ASP) was A$49/kg.

That’s a $13/kg or a13/49 = 27% margin. IMO that’s damn good in a terrible market.

Notes:

- ASP x Sales volume = A$141.2m as in the marketing table (p3). AL stated there was some sell-down of inventory so a better measure here is ASP x Production volume = $128m reflecting actual activity in this quarter.

- I’ve left out the rehabilitation liability as it’s essentially capital works; provisions made for clean up at end of site operations.

- There’s clearly La/Ce discard in the processing as the NdPr proportion of the REO is much lower (a bit under 25% for both CLD and Duncan) in the ore.