lynas leads the way

http://rareearthfuture.com/2012/04/15/lynas-leads-the-way/

With Lynas’s Advanced Materials Plant virtually complete (LAMP), they will be the largest producer of rare earth oxides and carbonates outside of China. Having survived a high court challenge against the Temporary Operating License (TOL) permitting last week, the only item in the way is the Minister’s hearing of an appeal against process deficiency of the government’s Atomic Energy Licensing Board (AELB) which is to be heard next Tuesday 17th April 2012.

The minister has stated that the complainant’s need to provide NEW evidence of failure of process or of any danger from the plant. As the Lynas plant has already been reviewed by numerous bodies including the AELB and International Atomic Energy Associated (IAEA) which have all provided a clean bill of health, it is highly unlikely an adverse result will be forthcoming.

Lynas has confirmed that all requirements for the issuance of the TOL has been met, which means upon issuance, Lynas can commence production of its phase 1 program of 11kt/year REO equivilent.

Malaysia is on the fast-track to becoming a major international high technology centre, and with Lynas supplying the vital high-tech materials, this will strongly encourage other producers of end-products to join Lynas in Malaysia, thus significantly boosting the economy, providing new opportunities for employees, and increasing Malaysia’s global strategic value.

But what about excess supply – would that further depress rare earth prices? In our opinion, a resounding NO! This is because Lynas has long term supply contracts which will effectively lock-out any upcoming aspiring junior REE producers, and will enable any REE producer access to purchase junior’s tenaments at rock bottom prices into the future with ongoing cashflows. Demand is continuing to increase, and will do so a lot stronger once reliable supplies are available (which has been a major problem in the past).

Lastly, vertical integration to all sorts of end products are possible (eg magnets, lighting, etc) is being actively pursued to protect any possibility of future margin squeeze if pricing were to decrease. This is evidenced in Lynas’s letter of intent with Siemens to create a joint venture for magnet production.