Lynas has been criticized for being overvalued by some camps and...

Lynas has been criticized for being overvalued by some camps and given the recent rise in share price it may seem by using conventional metrics that Lynas may be overbought.  Conventional metrics are great for an objective analysis of any company and Lynas measures up well against the fundamentals I personally use when I evaluate companies...

In addition to the objective analysis is the subjective end of things which includes evaluation of management, consideration of intellectual property, political implications and a whole host of other “intangibles” that make up the universe of influential factors for Lynas going forward.  Anyway, any comprehensive analysis of Lynas as a company needs to include both the objective and subjective factors that will influence both the company and the industry going forward...

First of all, I like to consider earnings. Both current and annual earnings are accelerating and it appears Lynas is selling everything it makes while the prices of rare earths have been increasing.  Cash flow is significantly positive as is the balance sheet which is currently financing Kalgoorlie, however as a backstop there is plenty of financing available through the JARE facility should it be needed...

As far as market performance, Lynas is trading at new highs and over time volume has been increasing indicating a ramp up in investor interest. With regards to shares outstanding, I think it is pretty clear to those of us who went through the somewhat unpopular decision to consolidate the shares outstanding from 9 Billion shares to ~ 900m shares that the reverse split was highly successful. I think Amanda was looking to this very time where ~900m outstanding is a pretty good number in terms of comparison to other companies in similar industries…

In terms of industry, it would be hard to find a group of stocks that are in more demand today than the rare-earth sector, virtually every news cast discusses critical materials with rare earths at the top of that list.  There are few publicly traded (major) rare earth stocks so it is difficult for the average investor to do research and compare companies.  Once again Lynas is defining the playing field and fundamentally investors are confused as there are few strong players in the game.  Lynas is clearly in the lead in the rare earth industry and that lead can only be appreciated by those with an understanding of the many moving parts that make up Lynas as a company...

The level knowledge maintained by many on this board makes it is easy for us to see the vision that is unfolding before our eyes.  Most investors don’t know the difference between mining rare earths and separating rare earths whereas many long term HC readers understand that Kalgoorlie was massively overbuilt to allow for future expansion or that SEG will be highly valued in the Blue Line JV in Hondo, Texas.  My point is that to some us, Lynas is still significantly undervalued because we understand most of the forces the driving the current share price appreciation and I know many of us not surprised...

Subjectively there are a few factors and intangibles that must be considered and this is where Lynas stands out.  I have said many times that the true value of Lynas lies in the experience and prowess of their engineers and the IP (intellectual property) that has been gathered over they years in the continual evolution of the LAMP.  I visited the LAMP five or six years ago and the proprietary equipment Lynas had to develop and was using back then is now being implemented in new separation technologies in the Kalgoorlie project.  It is impressive...

Bottom line, Lynas has figured out how to separate rare earths at scale something the pie in the sky juniors have yet to figure out.  It is one thing to develop an innovative separation process that works on a few grams of rare earth concentrate but the bottom line is that all of the ore Lynas sifts through must go through this process to obtain the significant of separated rare earths required globally.  In other words there is no substitution for hard work and the barriers of entry are tremendous...

The most important thing I consider when evaluating the investment potential of a company is the management.  The senior staff at Lynas is superb, I have met most on various occasions and they are team minded individuals who share Amanda’s vision and are challenged enough by their own domain to corroborate as opposed to compete with each other to accomplish Amanda’s ambitious goals.  It is also important to note that Amanda’s commitment to a diverse workplace and to community involvement is genuine and something critical during the dark ages when opposition forces tried to incite the local Malaysians to banish Lynas from Kuantan permanently...

The final point, and while most investors don’t realize this, Lynas is a green company on many different levels.  We are all aware of the contributions our products provide for a changing society, however it is not as well know that Lynas belongs to a couple of world initiatives that are committed to managing climate change and promoting social equality globally.  In the case of EcoVadis there are 80,000 companies committed to this initiative where companies are encouraged to work with other sustainable companies in an effort to affect change in several key areas.  Their mission is to provide the world’s most-trusted sustainability ratings, enabling all businesses to reduce risk, drive performance, and improve environmental and social outcomes…

In addition to EcoVadis, Lynas became a signatory to the United Nations Global Compact (UNGC) in 2019, and the sustainability report represents the Company’s ongoing commitment to reporting progress towards the principles of the UNGC...

It is hard to determine the monetary value of these intangibles but one thing is certain, Lynas as a $10b company is no longer a speculative startup but a dominate and solid company defining the rare earth industry.  While the intrinsic value of Lynas lies in the mine, LAMP and Kalgoorlie, the “informed value” lies in IP, experience and the way management is executing the excellent business plan all the while maintaining a high level of integrity.  That said it is satisfying to own part of a company that is committed to leading environmental change in both its product line and in the much bigger picture, a company that is also committed to leading meaningful global change…. JMHO…