"We note that notwithstanding the risks around the balance...

"We note that notwithstanding the risks around the balance sheet, the stock is trading at a substantial discount to our valuation of $1.96 per share. We estimate that the share price is implying rare earths oxide price forecasts ~28% below our current estimates. Rare earths oxide prices have stabilised in recent weeks following substantial declines since mid-2011. However, considering historical prices, it is still not inconceivable that they could be below our forecasts.
Downgrading to Hold: We are downgrading Lynas to a Hold largely on the basis of balance sheet concerns. We would be more comfortable in owning the stock once it has started the operations and can prove operating costs and demonstrate incoming cash flow."