Rare earths play Lynas in $400m capital raise, two brokers hired
Aug 15, 2020
Street Talk
Lynas Corporation is set to unveil a $400 million capital raising when it hands down 2020 financial year earnings on Monday, Street Talk can reveal.
Investor sources told Street Talk that the $1.9 billion rare earth metals producer had hired Bank of America and Canaccord Genuity to oversee a deal which would see new equity raised via a placement of shares and a rights issue.
The brokers were seeking to secure early backing from key institutional investors and underwrite the deal over the weekend, sources said.
The mooted capital raising comes as Lynas races against the clock to build and commission a cracking and leaching plant at Kalgoorlie after being ordered to stop producing low-level radioactive waste at its operations in Malaysia.
Lynas, the , is aiming to truck rare earths from its Mt Weld mine near Laverton to the Kalgoorlie plant before sending the semi-processed material on to Malaysia.
Funds raised would be used to help finance the plant. Lynas has previously told shareholders and analysts it required a $500 million investment to be able to perform the required early stage processing in Australia.
Lynas shares last traded at $2.61, having started the year at about $2.30 and closing as low as $1.08 in March.
The raising looms as the first big test of faith for Lynas chief executive and its board after the company rejected a . Wesfarmers offered $2.42 a share, having initially talked to Lynas about a joint venture agreement, and instead acquired Kidman Resources.
Lynas' biggest shareholders include Ausbil Investment Management, Greencape Capital and Vanguard.
The deal comes as analysts expect an ugly set of numbers for the year to June 30. UBS analysts, for example, told clients the result would represent a disruptive year for the company and forecast a $41 million loss at the adjusted net profit after tax line. Consensus forecast was a $22 million loss, UBS said.
It's interesting to see Bank of America pop up on the equity raising. The investment bank has no previous public mandates with the company, according to S&P Global Research's database. Lynas most recently raised equity in 2014 in a deal underwritten by Patersons Securities, .
The raising also comes only days after Lynas confirmed it was in talks with key stakeholder and funder, Japan Australia Rare Earths (JARE), to help fund its heavy rare earths separation plant. JARE has already lent Lynas $US145 million, and Lynas said interest repayments were deferred until October 2021.
Lynas' plans to build the new plant in Australia process on Friday after the Department of Agriculture, Water and Environment (DAWE) said it had suspended its time frame for making a decision on the Lynas plans.
A department notice said the revised statutory time frame for what the Morrison government and other nations regard as a strategically important project is now 15 business days after it receives additional information requested from Lynas.
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