Excellent article. Particularly:1. �To put it simply, world...

Excellent article. Particularly:

1. �To put it simply, world class assets are not sold for 20 million and a couple of options.�
And the comment that I would have expected to have been brought up significantly more until now:
2. (in referring to 2007 presentation) �Lynas say the Crown resource has �over $50 billion metal content�. Prices have increased since 2007 which would value the resource significantly higher today. So a resource that the company itself has valued at over $50 billion is now being sold for $20.7 million plus options? �

http://www.thetradercentral.com/featuredstocks

Full article:
There has been a lot of talk about Rare Earth Resources of late. Globally there has been an increasing demand for the resource with the growth of electronic and energy efficient products. Catalytic converters are one of many uses for the resource, with automotive production forecasted to increase in Japan and China prices for the resource are likely to continue upwards. The Chinese stranglehold of the resource has resulted in a scramble to secure rare earths. China controls 95% of supply of rare earths, giving them a virtual monopoly of the resource. In September last year China halted all rare earth resource supply to Japan over a political disagreement causing a slowdown in several Japanese industries. The importance and restricted supply of rare earth resources provides a golden opportunity for rare earth produces outside of china.

Lynas Corporation
Lynas are a rare earth resource company based in Western Australia. Lynas� most advanced operation is the Mount Weld Rare Earths project. Mount weld involves the development of a mine, concentration plant, and an advanced materials plant. Mount Weld currently has a REO of 1.4 million tonnes. Lynas plan to truck ore produced from Mount weld to the Fremantle Port where it will then be shipped to their Malaysian processing hub. Lynas aim to produce 11,000 tones of rare earth resource in 2011 and double that figure to 22,000 in 2012. Mount Weld is a world-class project, the size and quality of the resource can be compared against most rare earth metal mines in the world.
The current status of the project is the following:
� Concentration plant completed, awaiting government approval to start plant
� Advanced materials plant under construction with first feed scheduled for late 2011
� 8 buyers have signed an agreement to purchase RER from lynas
Back in 2010 the Foreign Investment Review board rejected an offer by Chinese Non-ferrous Metals Mining Company to acquire more than 50% of Lyans. As a result Lynas� share price languished for some time with investors unsure where the required capital to fund their projects would come from, however The Foreign Investment Review Board has now approved of significant investment by Japanese Oil Gas and Metals National Corporation. Under the deal JOGMEC will invest $325 million into lynas in the form of a loan and the placement of shares.
Last Month, Lynas agreed to sub-lease several areas within Mount Weld (Crown) to Forge Resources. The transaction involved Lynas receiving $20.7 million in cash and the option to purchase 7 million shares in Forge as well as the right to purchase resource produced in the leases. Lynas will also receive royalties as part of the transaction. The deal looks likely to be met by strong opposition from shareholders who argue the value of the leases are being significantly undervalued. An independent expert backed the transaction citing the deal was �fair and reasonable�. Shareholders will vote on may 18th.
Analysing the deal we see the following:
Investor presentation in March 2010 states that the crown polymetallic deposit is � a world class niobium asset and contains 475,000t REO�. To put it simply, world class assets are not sold for 20 million and a couple of options. Calculations of the resource have put it well in to the tens of billions, the decision to sell these �world class assets� so cheaply is interesting to say the least. The following image is a slide taken from a lynas presentation in 2007:

Lynas say the Crown resource has �over $50 billion metal content�. Prices have increased since 2007 which would value the resource significantly higher today. So a resource that the company itself has valued at over $50 billion is now being sold for $20.7 million plus options? Investors are very interested in what has changed for Crown to be considered a non-core asset and to be valued at so little when the company previously valued the resource at tens of billions more than it is being sold for. Either the company over-valued Crown by 49.8 billion dollars or there is another reason unknown to everyone.
Despite the controversy surrounding the deal with Forge, Lynas have one of, if not the largest rare earth resources project in the world. With the restricted supply from China, the demand for their resource will be significant; this is already shown by a total of 8 customers entering into agreements with Lynas. The ever increasing demand for rare metals and the limited supply is most likely to drive the price of rare earths in the long term resulting in greater Margins for Lynas.