lynas admits further output trouble

Rare-earths miner Lynas admits further output trouble

RARE-EARTHS miner Lynas is set to report another quarter of reduced output from its Malaysian processing plant as it continues to work on operational issues.

The company updated the market yesterday on its Advanced Material Plant and, while it says it has fixed issues previously announced to the market, it said further work was needed.

Shares in the company closed the day 2.44 per cent lower following the update yesterday.

Lynas had outlined in its June quarterly report that its processing plant had encountered "clogging and premature wearing" of equipment in the early stages of Phase 1. While the cracking section of the plant has been refurbished, work continues on the leaching plant.

Chris Terry at Deutsche Bank said yesterday's operations update would put further pressure on the balance sheet.

Lynas had outlined two weeks ago that it was given debt-payment relief on a $US225 million ($241m) loan from Japan's Sojitz because of weak global markets and start-up delays at the Malaysian plant.

Under the terms of the Sojitz debt facility, Lynas needed to meet certain production and profit targets by January or make an early payment of $US35m. This agreement has now been extended by 13 months to March 31, 2015 and will see the company pay a $US10m instalment in January and another $US35m in September 2014.

The company added yesterday that it expected to defer beyond 2013 a substantial amount of working capital, which was necessary to pass some production-based tests. Details will be provided in the September quarterly report when it is released on October 31.

Deutsche analyst Mr Terry said Lynas's cash position looked likely to fall further, but he said he believed it could repay the first $US10m to Sojitz in January.

"However, repayments past this point will require debt refinancing or equity on our estimates," he said.

"We forecast the unrestricted cash position to fall from $US126m to $US50m over the next 12 months. We forecast a funding shortfall of $US140m by the middle of 2015 based on the current scheduled Sojitz repayment profile."

Lynas said commercial production of its rare-earths products from the LAMP remained at reduced volume until the work programs were concluded.

"As such, rare-earth production in the September 2013 quarter remained at low volumes," the company said.

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