Wednesday 23 April 2014


On 22/04/2014(Tuesday) 9am, SMSL attended a hearing at the Federal Court in Putrajaya for the following cases:-

1. Taufeq Teng & 6 Others: To apply for a motion of leave in the Federal court to review the dismissal of leave by the Appellate court on a point of law;

2. Ismail Haji Bakar: To move a motion of leave in the Federal Court to review the dismissal of leave by the Appellate Court on the recusal of Judge Datuk Seri Mariana Yahya

3. Tan Bun Teet: same as above.

The first case is an application for leave in the Federal Court on a point of law on the dismissal of leave by both the High Court and the Appellate Court. The leave application both at Kuantan High Court and the Appellate Court were unsuccessful. It was an application for leave to file a Judicial Review (JR) against the issuance of TOL by the Government on 3rd September 2013.

The second and third cases are similarly applications for leave in the Federal Court on a point of law which has yet to be interpreted. Earlier in the Kuantan High Court, SMSL has applied for leave to recuse Judge Datuk Seri Mariana Yahya. It was granted and the case was heard by the judge herself. She dismissed the case on the ground that she is capable of upholding justice though she is personally involved in the application. Therefore, SMSL proceeded to file for an appeal against Judge Mariana’s decision in the Appellate Court. It was subsequently dismissed.

All 3 cases were heard by a panel of 5 judges at the Putrajaya’s Palace of Justice at around 11am and the verdict was read out after lunch at 1.15pm where the judges were of the view that there was nothing that had not been interpreted in terms of the laws involved. They dismissed all the cases with cost of RM25,000.00 each to the AGC and Lynas.

The attempt by the 7 residents of Kuantan to ask for leave to file a JR on the issuance of TOL has finally reached the end of the road.

On the other hand the JR cases of both Haji Ismail and Tan Bun Teet will be heard at the Kuantan High on the 8th May 2014.

As this shall be the finale of the legal saga against the award of TOL, all are urged to be there to witness the hearing!

Wednesday 16 April 2014

Nick Curtis' Lynas Corp stake keeps shrinking

Nick Curtis is losing interest in rare-metals miner Lynas Corp, although it is not of his own volition. Curtis reported to the ASX on Thursday that he handed 10 million shares to Credit Suisse to settle a $4.319 million loan facility set up in April last year.

''The facility is not a margin loan and therefore there are no margin calls,'' Curtis reported at the time.

So presumably it is not to blame for his sale of 2.85 million Lynas shares just before Christmas. Since December, his stake in the company has shrunk from 16 million shares to about 3 million as of this week.

CBD suspects other funds may have changed hands to settle the facility given the shares were worth a tad under $2 million when Credit Suisse took hold of them.

It is not the only potential call on the family purse strings.

There is also the matter of the legal bills being run up by his son, ''celebrity investment banker'' Oliver Curtis - hubby to publicity queen Roxy Jacenko - who is fighting insider trading charges in the Supreme Court.

Just as well Nick's Queen Street, Woollahra home is still on the market.

He also has 18.5 million options over Lynas shares, compliments of the years he spent as its CEO.

The stock's plunge since its half-year results announcement a few weeks back finally bottomed after Lynas reported that production at its controversial Malaysian processing facility remains on track.

''I wish to assure shareholders that while LAMP has been slower to ramp up than we would have liked, recent production is beginning to demonstrate sustainable momentum,'' said Curtis, who also had to contend with a speeding ticket issued by the ASX on Wednesday when the stock bottomed at 17.5¢.
Charitable plan

Having rolled the board of Australian Infrastructure Fund last year, Wilson Asset Management chairman Geoff Wilson is seeking a higher purpose for the corporate shell he now controls.

The AIF board says it has received a proposal from his charitable entity, the Wilson Foundation to ''transform the company into a listed investment company with a charitable purpose''.

The Wilson Foundation plan is to invest $1 million in the company to buy out minority shareholders and then raise new capital under its new mission - if the proposal is approved by current investors including Wilson Asset Management, which has a 18.6 per cent stake.

The company is expected to generate a normal market return for its shareholders; the charitable donations will come from fees forgone by the fund managers it invests with, according to Wilson.
Murdoch moves

CBD could not help but notice that the return of heir apparent Lachlan Murdoch to the family firm was not worth a single tweet from bachelor dad Rupert Murdoch, as of Thursday afternoon.

Luckily his papers picked up the slack. News Corp rag The Daily Telegraph chose to splash with a pic of Rupert and the elevation of his sons, Lachlan and James, at the ''family-controlled business'' above an ad with the tag line ''family proof''. Here's hoping guys.

Meanwhile, questions remain unanswered about the split at Ten between Lachlan and James Packer. Does the fact that Murdoch broke his deal to ''act in concert'' with Packer on their combined 17.6 per cent stake in Ten signal a divergence of interests as he rejoins Ten's alleged predator News Corp?

That news popped up just 10 minutes before Murdoch announced he was stepping down as Ten chairman.

And what would Ten's new executive chairman, Hamish McLennan, do if a bid does lob from his previous employer News Corp?

After all, he was appointed on behalf of News as chairman of Speaking of which, given he is still looking for a CEO and CFO at, we are glad that he doesn't have too much work on his plate at Ten.

Read more:

Is Lynas Corporation Limited cheap or trouble?

Lynas Corporation Limited (ASX: LYC) shares have gone for a cliff dive recently as investors worry over a perfect storm of cost blowouts, delays, regulatory risks, excess debt, and dramatic falls in the market prices of the key rare-earth commodities it produces.

All this means analysts expect another capital raising may soon be required to keep the company in business and fix a balance sheet weighed down by borrowings of around $477 million.

Once considered Australia’s most promising next-generation mining company, Lynas has blown around $1 billion developing its Malaysian Lynas Advanced Material Plant (LAMP) facility to process rare earth minerals mined at its Mount Weld plant in Western Australia.

The group has burnt through the cash in an attempt to get the LAMP operationally cash flow neutral. The quarterly report for the period ending December 2013 showed cash-in-hand remaining of $74.7 million with negative operating cashflow of $17.19 million partly a result of sales coming to only around one-fifth of operating production and administration costs for the quarter.

In the six-month period to December 2013 Lynas spent $67.1 million with cash receipts from sales at just $10.2 million.

In April 2011 shares traded at $2.55 and today trade for less than 20 cents, which leaves the question has the group reached the bottom?

Lynas' announcements to the market last week included proclamations that at current prices for the rare-earths sold it will be operationally cash flow neutral at a monthly rare-earth sales rate of 750 tonnes.

In March 575 tonnes were produced (not sold) and the company says come June 2014 it will be producing the equivalent of 11,000 tonnes per annum (tpa) as part of its Phase I project. That's equivalent to 917 tonnes per month and well above the operationally cash flow neutral level if sold at expected prices. Even if the plant is operationally cash flow positive, Lynas has its debt pile to service and other required investments and expenses to meet.

This means the 11,000 tonnes per year figure is a minimum and given that only 575 tonnes were produced in March that's going to require a rapid, problem free, production ramp-up over the next quarter to end of June 2014.

Lynas also received approval in November for the Phase II part of its LAMP project which if successful would allow it to bring an additional 11,000 tpa of capacity online, making a total of 22,000 tpa at which it estimates a 14$-15$ cash cost per kilo produced. This versus a reported selling price of $22.63 per kilo in the quarter to March 2014.

Lynas’ Achilles’ Heel though is the massive decline in prices of two of its key rare-earth resources over the last two years. Lanthanum Oxide and Cerium Oxide have more than halved in market price at exactly the wrong time, leaving the business unable to produce some of its key rare earth resources at a profit for now.

Lynas believes its time will come, as rare-earth production requires significant capital and operational expenditure to safely manage residual wastes. This means as demand rises new supply is likely to come from existing producers raising capacity, rather than newcomers entering a capital intensive and evidently tricky market.

It estimates that demand for its rare-earth materials used for renewable energy, electronics, lighting and oil refining sectors could grow at 5-6% per annum. Almost all other production comes from Chinese controlled producers and their varying levels of production have tended to dictate market prices received per kilogram of rare earths produced.

It’s also notable that while the company has been talking up its prospects over the last week, its own chairman and major shareholder, Nick Curtis, has been offloading his own shareholding on a substantial basis over the past year, including dumping 10 million shares to Credit Suisse in March 2014 alone.

Foolish takeaway

If the group's stars align and it meets production guidance alongside a recovery in the rare-earths price it may be in a position to manage its debt and shares trading around the 20 cent level today will look a screaming bargain soon enough.

However, the prospects of a price rise in its key commodities looks thin and bargain-hunting investors will be placing their faith in a company and management team that has been long-on-promise and short-on-delivery so far. Given the debt and cost blowouts this is a very high-risk investment, however, if the company is able to execute a turnaround in union with an eventual rare earth price rise, now would be the time to snare a bargain.