Current purchase value of Lynas

Takeover possibilities. I keep reading in different posts that this company will be taken over by another company at a favorable SP. I do not think this is going to happen. For this example I am going to use a stock price of 10C and 15 C a share at purchase time.

Shares there are currently 3.732 B shares issued. There are also 98M unissued shares to employees end of H1. During H1 there were 34M new grants to employees. I assuming same for H2 I will add all these up, 3.864b shares, and say that during any near term takeover there will be 4B shares outstanding. H1 report page 22.

4B shares x 10C = $400M
Clearing of debt.
Mt K US 225 = AU $ 300M
Jare US 200 = $ 267M
Deferred debt I will ignore to make up for rounding up of Shares.
Cash on hand -$30M positive cash is a deduction to cost.
Final cost $AU $937M

4B shares x 15C = $600M
Clearing of debt.
Mt K 3B shares 15 cents $ 450M
Jare US 200 = AU $ 267M
Deferred debt I will ignore to make up for rounding up of Shares.
Cash on hand -$30M positive cash is a deduction to cost.
Final cost AU $1.29 B

Now what do buyers of Lynas receive? Going to H1 report page 11 current equity after removing the loans is AU $ 563M So at about 14 C this is a 2 x premium over value. I have seen premiums over equity paid many times. Up to 4 or 5 X but one of two things have to be true. Company is very profitable and a price of 20 to 40 x of yearly profits is used. Lynas still has no profits.

The company being bought has a unique advantage in their market place. Lynas does have a unique position in the free world market place a very unique position with Japan. They can fetch a premium for product in these markets. The worldwide market is still under the control of China. Look how people on this board watch China's control of internal industry for price direction indication. Though unique in free world this exclusivity is limited as far a value.
Equity in the company will decrease in H2. I hope not allot, hopefully less than the $20M. You are welcome to say why you think Lynas would be bought for over equity value. AN Equity value purchase would result in less than 2C a share. To say it would be worth more, without giving any reasons is just empty. This is true no matter how many people say it, if no reasons given, it has no value. Companies do not pay more than the numbers indicate just because many stock holders say they should. Of course the stock holders can reject any offers, I am sure an offer of 5 C would be rejected, probably even 10C. That leaves us just where we are today, which is not bad. There are no offers because the people that might buy know that any offer they would see as reasonable would be rejected. This is the number one reason for no offers if it is a car, house or company.


Taking a whole different approach let’s look at offer for MCP MT Pass facilities. Yes there are many negatives and problems with Mountain pass. Mountain pass sold for $2 m and had only 3 bidders, none of which were big players in the mining industry. (Used the GE turbine generators with heat recovery are worth more than $10 m each) That gives a solid idea how many people are willing to bid on a REE facility no matter what the state. Tell me Lynas is worth 50X more than Mountain Pass I agree and you do not need to even say why. 100X possible, I would like to hear reasons. 500X I doubt it. Remember MT Pass ran profitably with quality during the boom from the pilot plant, Lynas has never been profitable. I believe Lynas will be profitable Q1.
100X times Mt Pass is US $200M = Au $ 250M. AU $ 567 M is needed just to cover JARE and Mt K debt. Even 500 X MT, $1Billion, pass only yields a stock price of 11C. I think Mt Pass gives a good idea what companies think entering this market is worth to them.

Please understand I am not saying Lynas is only worth this much. I would not be a stock holder if I thought it was. I am just saying the market is not willing to pay very much today. For example if you tried to sell a house in 2009 in the US, if you even received an offers, it was well below what you thought it was worth. Much less than it is worth today. At that time that is all you would receive, no matter how many arguments you made about past building cost and long term value.

I think the reason for low value is, not many companies want to be a small fish in a pound with a very big fish called China in it. Of course if everyone took this view we would never had an Intel, Apple, Microsoft, Amazon, and Berkshire Hathaway would be a bankrupt textile company.

If this does not bring AUS out of retirement nothing will, I even put a few non critical errors into it.