With stage one and two almost sold out and with production...

With stage one and two almost sold out and with production coming on stream late 2011 and mid to late 2012 respectively, together with stage three expansion now being brought forward, (could be in production in late 2012/13), we have an unusually condensed time frame before major cash flow which is very compelling for a predator when doing the sums on LYC.

The demand /supply equation for REE, together with LYC's huge deposit, and first to market advantage, are very compelling points for number crunchers.

At the current basket price LYC will generate in excess of $700m EPSBITD but after costs for stage one.

Include stage two and I come up with a minimum of $1.2b and when stage three is added $1.9b EPSBITD.

So in effect if a takeover was tabled (I believe it will be)
for say $3.50 today; based on stage three being in production the return on investment would be between 28 and 31% p.a. EPSBITD.
I know that would be dirt cheap but thats why an offer now would be the best why to go for a predator imo.

Even with stage one alone a sale price of $2.50 (won't happen) returns EPSBITD of 14c 16%.

Talk about a no brainier; its more likely than not that strong buyer interest will emerge imo. The share register is wide open, JPM and MS would sell and so would a lot of other instos who are on board.

My new valuations for LYC based on a PE of 10 are:
Stage (1) $4.01
Stage (2) $7.41
Stage (3) $11.12

If you want to be very conservative take take 30% of each price and you still have terrific numbers.

I don't see the basket price consolidating below current levels for several years at a minimum.