Positive

Positive broker report out to clients today with upgraded recommendation to buy, below is part of it.

The final solution: better than today's market reaction suggests

Column 1

0

Lynas (LYC target A$0.45/sh, NPV A$0.63/sh) has announced both the debt and equity component of the recapitalization. The Sojitz debt repayments are now weighted to later in the term, and the equity component comprises an A$83M share issue now, with A$66M in September 2015 as a result of options exercise. The issue could have been much larger, but was restricted to the current size to minimize dilution. In mid 2016, a major refinancing may be required if the Mt Kellett notes are not converted, but by then, Lynas will have demonstrated it is a sustainable business, and the re-financing should not be a problem. That sustainability is less about the level of reported spot rare earth prices, and more about Lynas’ ability to reliably deliver quality specialty rare earth chemical products into the Japanese and European markets. With clarity on funding, we have upgraded our recommendation from Speculative Buy to Buy. Over the next 12 months, shareholders will see rising sales volumes, improving specifications, rising premia to spot, and falling unit costs.