royal bank of scotland initiate coverage, page-23

Reading through old analyst reports tonight is driving me nuts. All of them either implicitly or explicitly calculate Moly to full production of 40k t/a on time and each discounts us for delays and project risks. This is generally done to be conservative which on the surface makes some sense.
But the times they are a changing friends. ARU just tacked another 9-12 months to their plans for 20k t/a. And while Moly is claiming they are funded (but seems to be counting promised, intended or anticipated funding together), their proven methods are being doubted by Simutomo and the business world. Lets face it, this ARU and MCP supply was the whole supply (besides Lynas) that GS thinks will result in oversupply of Ce and La in 2013.
So what happens if we reverse the RBS conservative logic and hold LYC to their current timeline and add nine months to a year to the Moly timeline. The answer is rather dramatic. Moly with their lofty 40k t/a would no longer be scheduled to dramatically shift Ce and La pricing in the non-Chinese market. If this does not happen do to Moly project issues (funding, new technologies, start-up delays, environmental issues, ect.) the prices Lynas will see will be very big (off the RBS charts in fact).
My own view is the RBS notion that Moly's timeline is reliable because they have produced is just wrong. A new plant is always a different game. A new processing method always adds some project risk. A new start-up and commissioning always increases risk of delay.
My point is not to rehash the Moly bashing. My point is now that we saw Moly go through a tough month and look weaker for it, it seems to get the most accurate NPV we have to consider the risks they face due to their potential impact on future pricing.
On this basis, my logic is to take the reverse scenario of the RBS conservative case and average it with the RBS case. This is easy to do theoretically, but not in a practical way. If we are the only meaningful non-Chinese source through 2013, all non-Chinese supply will be exhausted and the prices will skyrocket further. And on the opposite side demand destruction would also be a concern too.
We can strip out the RBS discounts and take a $80 LT price per kg and we get a $4.77 price for Lynas. But current LT prices are nearly twice this number and the $4.77 figure still assumes competitors drop prices. Eventually prices will drop. Many experts say 2015 is a better guess. If the base case put the price drop in 2015 a $10 NPV would be possible based on current prices and no demand destruction. I suppose it is anyone's guess. But in a two horse race through 2013, I think it is just too conservative for RBS to weigh down Lynas and assume smooth sailing for Moly. Mining just does not work that way.