As indicated by company announcements, LYC's production costs...

As indicated by company announcements, LYC's production costs are likely to fall to around $19/kg over the long term, and perhaps even a bit a lower. However, at present (and for the foreseeable future) they must be in the region of $25/kg (or perhaps a bit higher) or the company wouldn't be trying to negotiate these reported hedging strategies with customers.

Let's assume the company is able to negotiate long term contracts at a $10/kg premium to their cost of production (whatever the accurate COP number is). On phase I nameplate capacity of 11,000 tonnes, this equates to only around $110mill of EBITDA. On these numbers, the stock is fully valued at around 50c.

If they can negotiate a $20/kg premium to their per kg cost of production, the stock will eventually be worth closer to $1. If demand picks up, and phase II comes on line (which should allow COP to fall), then we can start seeing a $2 share price, etc.

Obviously, in negotiating long term fixed priced contracts, LYC is giving away exposure to spectacular upside should RE prices ever take off again.

The point of my earlier post is that, assuming these media reports are true (and it is worrying that LYC are briefing the media in this ad hoc way), whether or not LYC will be profitable in the foreseeable future hinges on these negotiations. If customers prefer to take a punt on the spot price, LYC have little choice but to start production at a loss (or break even at best) and prey that prices pick up soon. The company has significant debt repayments to make and does not have the luxury to wait another year in the hope that prices to pick up. Molycorp is in a much worse situation in this regard, but that's another story...