??halfway through our sin bin time

Hi All - recent summary from Trevor Sykes on Lynas and it's possible ( I hope ) turnaround

The recent trajectory of Lynas Corporation will be familiar to any veteran in the mining industry.
Riding on a boom in rare earth prices in 2010, the company looked as though it was going to produce quick, strong profits - and attracted a horde of speculators to its register. In 2010, chairman Nicholas Curtis forecast the rising prices would stay strong for five years and that its processing plant would take the first feed in September 2011.
Then commodity prices collapsed, Lynas' processing plant suffered problems and delays (now there's a surprise!) and the group's share price tanked from $2.25 in 2011 to around 33¢ at present.
When a company over-promises and under-delivers, it will be sin-binned by investors until it has demonstrably turned around. My guess is that Lynas is now about half-way through its sin-bin time.
Lynas owns the Mt Weld mine near Laverton in Western Australia, which is claimed to be the highest-grade-known rare earth deposit in the world. Rare earths are a group of 15 chemical elements known as the lanthanides which have a wide range of high-tech uses. Mt Weld is particularly rich in lanthanum and cerium.
Mt Weld produces rare earths in concentrate, which go to the company's processing plant in Malaysia. That plant produces rare earth product, comprising the eight materials in the table below, which are shipped to customers around the world.
Rare earths are indispensable in modern technology, but are only used in tiny quantities, so the market is sensitive to changes in supply. Back in 2010 a whole bunch of new products were being marketed, including iPads and iPhones, for which certain rare earths were essential components.
The prices of rare earths started climbing, speculators jumped in and drove them higher, then customers panicked and bought heavily to ensure they had adequate inventories.
The result was a price spike in 2011. Since then, customers have been absorbing their inventories and the prices have collapsed dramatically. The wild ride is shown in rare earth prices has been extreme
China is the giant in this market, producing around 90 per cent of the world's supply of rare earths, of which more than half is taken by Chinese industry.
The Chinese government is consolidating its rare earth miners, many of which are producing illegally. Lynas is hoping this will lead to a more stable, regulated market in future. No such stability will be achieved without China, which (fingers crossed) appears to share the goal.
The Malaysian plant (the largest of its kind in the world) did not start up until November 2012, more than a year late, and is not expected to reach nameplate capacity of 11,000 tonnes per annum until this quarter.
In 2011, the combined cost of constructing the Mt Weld concentrator and the Malaysian plant were estimated at $570 million. By 2013 the investment in the two was stated at $1.3 billion.
An added irritant has been the SMSL (Save Malaysia Stop Lynas) group, which has been campaigning to close the plant on the quite bogus ground that it is dangerously radioactive. Unfortunately, a few Australian politicians have adopted the cause without checking the facts. Worse, an ugly rumour is circulating that China was funding the protestors.
More pressing is $US45 million ($51 million) in debt repayments due by December. Lynas currently has $60 million cash so should be able to squeeze through, given no further CAPEX requirements.
A recent research paper by JP Morgan (who underwrote the company's last big equity raising) recommended investors to be overweight Lynas because it appeared to be getting a premium price for its products.
Lynas is achieving premiums, apparently by withholding some production from market. Once the group has positive cashflow it could be a great turnaround situation, but that probably won't happen this quarter. And Chinese goodwill would be very helpful.
DYOR - definitely not investment advice ( as I'm generally terrible at it )