Deciphering Lynas (Part 2)

For another discussion point, I decided to have a look at cost of production (CoP) over the weekend, as this is a key element in estimating the earnings potential for us. Given that NdPr is by far the most important product by revenue (80-90%) I've used this as a measuring stick.

First I was curious to see how CoP has behaved through time. In the left panel, you can see that the yearly estimated CoP is going down with time despite lower op profit, illustrating our continued cost efficiency improvements (in processing and recoveries). On this yearly chart, CoP lands around $45.

I also wanted to see the effect of scale. In the right panel, I've tabulated half-year CoPs vs NdPr production. IMO this nicely illustrates that we have the benefit of scale. In other words, the more we produce, the cheaper it becomes. In this half-year chart NdPr-CoP lands around $40 at ~6,000t/y.

In my CoP calculations, I've put all costs/profit/loss against NdPr. As such, I suspect real NdPr-CoP is a bit lower, but these charts may provide some guidance/discussion at the very least. As an example, if current NdPr price (~$100; $60-65 in op. profit) would hold over a FY and at full NEXT rate (7,200t), we'd be looking at an operational profit of >$450m. This is not including profits from our other products.. and obviously before Kalgoorlie, US etc etc

All IMO, DYOR




Notes:
- CoP is calculated by NdPr earnings +(operational loss)/-(profit) divided by produced NdPr.
-Operating profit/loss is far more useful in these calculations as all previous debt restructures/MK bonds complicates things.
-AU$ is calculated from yearly average exchange rates with US$
-China NdPr prices are trailing 1 full quarter (e.g. the average price from Q1 is used in Q2)
-I've taken into account inventory items (i.e. included earnings for NdPr when produced, not when sold)