I’m using a new thread as I believe it is important to understand what is being valued in the stock. To date the stock shows a market value of $400,200,000 (share price x shares - 2.49 billion). The LAMP alone is worth $600 million plus so immediately the shares should be at or near $0.17 which would indicate that the share price could move up easily to $0.17 based on assets. As can be seen, evaluations of Lynas are based on “viewable” assets. Everything above ground is being valued while everything below ground receives no consideration.
My opinion is that the Mt Weld facility should be added to the market value of Lynas. Taxes do present a problem so the asset is left off the books. This is understandable as Mt Weld would represent a huge value and there is nothing to offset the value other than Good Will (in the US it’s called Good Will which is a catch-all for excess values not easily assigned). However, Amanda has indicated the considered value of Mt Weld in the October 5 Resource and Reserves Update (from which I got the 2.549 billion kg number.) No value is given but the mere fact that she acknowledges there being 2.549 Billion kilograms of REOs should excite the market.
Let’s say for example that after taxes, recovery costs and transportation and other assignable costs a kilogram of RE is 20% of the basket price and the basket price is $20 (for example). $20*20% = $4.00 per kg. With 2.549 Billion kilograms in the mine the value becomes $10,196,000,000. Add the $600,000,000 for the LAMP and the total value becomes $10,796,000,000. AT 3.49 billion shares, Lynas per share value become worth $2.92 (approximately). Add a P/E value and the shares become really valuable.
I’m not certain Lynas is being understated value wise because of the tax laws. Once declared it appears that taxes are owed. However Amanda can give guidance without facing taxes; certainly BHP isn’t paying taxes on the declared resources of $32 Billion plus coal, natural gas and petroleum it has declared in its 2015 Annual Report. At the present time Lynas carries the Mt Weld facility at a value of $0.05 per kilogram. To go from $0.05 to a basket price of $18.50 (or whatever the most recent value is) is to indicate that either a huge profit is being made (obviously not), production costs are huge (we have the latest numbers) or the value $0.05 is too low from the start have not had the value restated to reflect the market). Lynas assumes if not used, the REOs are of little value which I believe is a wrong assumption as it downplays per share value in the company.
Two houses are built the same and side by side, both valued at $1,000,000. One home has been upgraded with a home movie room and an in-home gym. Both combined added another seventy -five thousand dollars to the value. Both homes are for sale. Should they be priced the same based on the exterior view of the homes? Obviously not, but then why do most people see Lynas and assume its worth only the value of the LAMP?
As Amanda knows, as does the board of directors, the true value of Lynas is underground. As long as she/they do not have to mention the true value of Lynas’s in-ground assets Lynas will never appreciate to its true value. It isn’t difficult to conclude that the Lynas Board of Directors is one reason for low share prices because the true value of ALL of Lynas assets are not carried at current value. As the market sees Lynas it is a $600 Million dollar business. What the market doesn’t see is the $10.8 billion dollars in assets Lynas owns. In my opinion, Lynas will not rise until both its production and (visible and hidden) assets are understood by the market.
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