why lyc is $2 and not $4, page-53

Agree there is some risk in execution but totally disagree that it is not priced in.
The earnings projections I'm following are using an average forward basket price approx 50% of the current spot thru to 2016.

"LYC base case NPV of $3.79/share is based on the following
assumptions:
? First production from Phase 1 of the Project (11ktpa rare earths oxide (REO, 100% basis)) in 4QFY12E and reaching steady-state by 3QFY12E;
? Phase 2 expansion of production at the Project (additional 11ktpa) commencing in 3QFY13E and reaching steady-state by 1QFY14E;
? The Mt Weld REO basket price forecast profile shown below: Average $100kg thru 2016.
? Operating costs of between US$13-14/kg over the first five years of production. We then inflate our operating costs in-line with CPI from this point;
? We assume total capex of c.$600m on Phase 1 and c.$360m on
Phase 2 (excluding working capital requirements). On an ongoing basis, we assume sustaining capex of $22m p.a.;
? A 15% Group effective tax rate for the period of the Malaysian tax concession (through to FY24E) and 30% from FY25E onwards; and
? A 15% WACC, which we feel is appropriate given that LYC is yet to reach first production from Phase 1.

Price target:
Our Jun12 price target for LYC of $2.79/share is based on our NPV valuation (see Table 4). We previously did not apply any risk weighting to the value of the Group's Integrated Rare Earths Project; however, given the risks of further delays to the commencement of production at the
LAMP, we have now decided to apply a 75% risk weighting to our base case NPV for the Integrated Rare Earths Project. Upside risks to our price target include higher than expected rare earths basket prices, a weaker A$ and successful developments of other prospective rare earths
deposits (e.g. Malawi). Downside risks to our PT include significant project delays and cost overruns, weaker than expected rare earths basket prices, a stronger A$, further delays in receiving the required approvals to commence production at the LAMP and unexpected geotechnical issues at Mt Weld.

You might also want to have a good read of the TMR report that clearly demonstrates the "sweet spot" that LYC will enjoy from 2012 thru 2015 when further Western CREO comes online.

IMO the risk/reward in this stock is outstanding.