My Saved Articles Print License article Lynas should be confident ahead of review: analyst

https://www.copyright link/business...ident-ahead-of-review-analyst-20181008-h16ck8

Investors in rare earths producer Lynas have "every right to be confident" the company will emerge from a Malaysian government review unscathed, according to an Australian analyst who toured the company's controversial refinery and met with Malaysian officials in recent days.

Lynas shares were sold down heavily in recent weeks on signs a long-standing opponent of the company's refinery, Fuziah Salleh, would lead a hostile review into its environmental impact, but positive signs have emerged in recent days after Malaysian Prime Minister Mahathir Mohamad vowed the review would not be dictated by Ms Salleh's opinions.

CLSA analyst Dylan Kelly inspected Lynas' Malaysian operations last week and said he was reassured by what he saw.
"In our meetings with local politicians, protest groups and ministries we were struck by the notion that no one expects the plant to close," he said in a note to clients.

"So long as the plant is environmentally compliant, it appears to have little to fear from the review."

Lynas mines rare earths in Western Australia and refines them in Malaysia, and is the only significant producer of rare earths like neodymium and praseodymium (NdPr) outside of China.

"It was also curious to hear authorities state they understand the highly strategic nature of the plant, acknowledging its closure would be a major international incident which would immediately hand China a global monopoly on rare earth supply," said Mr Kelly in the note.

"Our view of political risk has improved incrementally and we urge investors to see through the noise. We reiterate our view that risk-reward is firmly skewed to the upside and we expect its share price to revert to its pre-election levels once the review is complete by Christmas."

Lynas shares rose by more than 9 per cent in the final hour of trading on Friday on the back of Dr Mahathir's comments, and the stock rose a further 2.8 per cent on Monday to close at $1.835 per share.