Thank you Wayet, This is the most comprehensive summary of the...

Thank you Wayet,

This is the most comprehensive summary of the waste issue that I have seen from Lynas.

It appears to me that there are really only two options that I have summarised below.

I still have some questions that others may be able to answer.

1. commercial reuse (preferred option)

Lynas have developed a product called ‘condisoil’ that, if approved, will enable waste to reused as a fertiliser or road base (or similar type use)

Current status:

• Applications were submitted for approval to the regulator from 15 June 2017 (https://www.lynascorp.com/Shared Documents/Action Plan for Residue Management 2018.pdf)

Questions:

• If commercial reuse is approved what happens to the funds deposited with AELB?

2. Permanent disposal facility (PDF) onsite

If Lynas does not obtain approval for condisoil, Lynas will be required to develop a PDF onsite.

Questions:

“WLP Residue Storage Facility is designed and constructed to meet PDF standards” (https://www.lynascorp.com/Shared Do...ental Management Presentation August 2018.pdf)

• Are Lynas implying that this existing facility can be further augmented to become the PDF if required?

My thoughts:

Lynas have already provisioned for a PDF:

“We have deposited over US$30m with the AELB and will deposit up to US$50m by December 2019, an amount sufficient for a PDF and site remediation, if the need arises.” (https://www.lynascorp.com/Pages/Residue-Tailings-Management.aspx)

Foster have factored this to their current $2.85 valuation:

“LYC set aside a further A$30.9M security deposit in December 2017, and will commit US$7.8M at the end of each of CY18e and CY19e.” (http://www.fostock.com.au/LiteratureRetrieve.aspx?ID=237464).

On this basis I feel that the risk is already built in to the share price and, all other things being equal, the share price will respond strongly if condisoil receives approval. If Lynas need to build a PDF then the share price will may decline but not significantly given the Foster valuation of $2.85.

This is the risk and reward equation for short term punters.

Long term punters should ignore and concentrate on the future demand for NdPr which looks strong.