Pay of US$100M in a year??? Remember all debt is in US$. Have you even tried to figure out what Kind of Nd PR price that would take?. Hint they are still losing money on the P&L. all profits come from NdPr. Q3 they sold 1373 Ktons of ND PR. Even if Ce and La jumped more than 100% to $4./ KG there contribution would be small. page 12 of H1 report Recievables were 11M payable 49M. In a well run profitable company these are usually in balance. and about 60 days of revenue. Do you think any money should be used to reduce payable before paying money where it is not due? I am not saying this is bad management, it is good management when cash is a major problem. As things change it has to be taken care of.
Please read the bound agreements and amendments. There is no option for Lynas to pay down the bounds unless Mt K approves it. Everyone talks like Lynas can pay $1.00 to cancel one bond they can not. The whole profit incentive for the bond holders is the stock going up. Also any cash over 40 M has to go to JARE till they are FULLY PAID including deferred interest. (it is in the amendment) I am sure if the stock is at 10C + X and Lynas offers Mt K 10C + 90% X Mt K will take it to avoid the problems with buying and selling of this many shares, Maybe even 80% of X. Any idea of paying off MT K before JARE is fully paid is not going to happen. Remember that these loans and deferred interest due in 2020 are all in US $ with a fix exchange rate of AU$/US$ of .75. All this was explained quite well in the material sent to you with the proxy for the 2016 AGM. If you were not a stock holder it is in the announcement section of Lynas's web site or on the ASX web site.
With conversion factor the combined debt and deferred interest is over AU$ 600m. Most of the profit is from NdPr. Lets assume 6000 Kton of Nd PR. Lets assume a break even price of US$ 38.00 / KG Could you tell me what NdPr has to be selling for to pay off Mt K $100 M in a year? pay in full by 2020? Pay off all debt by 2020?
Note Current NdPr production is 1400K ton a Q 5600K ton a year. Break even is probably closer to $40 than $38. also things ramp not jump so even if you can show this scenario it is very generous to Lynas.
You think the 20% ownership rule will block stock sales, nonsense to even think it will be a consideration. Again in the proxy material there is a list of bound holders REPRESENTED by Mt K and how much they hold. Even if the biggest few hold all their stock only one or two would make it over 5% , Most will have MtK buy and sell and take the cash. The amendment and the proxy make it very clear that all the options are distributed to the bound holders in proportion to there holdings. That's why bound holders had to be listed in the proxy.
I am buying Lynas stock I think it is a solid chance (still high risk) to make 30 or 50% in a fairly short period of time. I am negative on your post because it is not supported by even a casual consideration of published data. I do not think you have any idea what prices have to be to generate a 100M of profit. How much vendors have to be paid before anything is paid to Jare.
People need to understand pluses and minuses not pie in the sky 5 or 10 X gains. Major dilution is coming from current amendments. They will probably not be debt free by 2020 meaning another deal and more dilution. That does not mean stock is not worth buying I think it is. Understanding facts lets you know when to sell or buy more. Summer of 2020 is 3 years away Debt payoff of large amounts like AU $600M takes time this is over 200M a year!!! Lynas has never had a profit on P&L though that should change H1 2018. Maybe H2 2017. Not saying it should be in the top 3 of major problems facing lynas But any stock holder not thinking there will be yet another refinance with more dilution in 2020 should do some math to see what that would take. Right now for me it is something to monitor but not worry about. 3 years is a long time. Things could change for better I will watch closely.
Right now (July 1) they have 13 Qs to pay off the debt . September 12 Qs. September 2018 8 Qs. Keep doing this simple division every Q against the remaining debt. I think you will see the amount owed per Q growing slowly at first then very rapidly. For example right now 600 / 13 = 46M / Q
next year if they pay 100 M to Jare (very unlikely) 500M / 9 = 55M/ Q. That's the problem with a fixed end date and no principle payments.
LYC Price at posting:
10.5¢ Sentiment: Hold Disclosure: Held
(20min delay)