Saturday 21 November 2015

Press Statement by SMSL on 20th November 2015

On the 16th November 2015, The Star newspaper reported that Lynas Corp Ltd’s Chief Executive Officer (CEO)Amanda Lacaze said;

“It’s hard to run a scare campaign in the face of hard evidence, referring to protests against the plant’s location in Kuantan.”

The ‘hard evidence’ referred to was the claim that the data on “low background radiation and harmful emissions collected by third parties over the last four years…”

It is understandable why she made such a claim at this time of the year. The Annual General Meeting (AGM) of Lynas’ shareholders is to be held on the 23rd November 2015(Monday) in Sydney. We wonder why the regulating authorities, the AELB, had remained absolute silence over the matter and allow an interested party to make such a claim. Isn’t AELB the rightful authorities entrusted to adjudicate on the matter?

The paper further reported that “Lynas Corp’s radiological safety adviser Prof Dr. Ismail Bahari said the company had invested RM50millions into equipment to neutralize any acidity, metals or contaminants from its residue.’’

‘’He further added that another RM75millions was spent on a system to treat its gas emissions and scrub harmful sulfuric acid in the gas”

Should the Kuantan residents feel grateful for the ‘extra mile’ Lynas Malaysia has taken to ensure the emissions are controlled within the permissible limits? If the monies concerned had not been spent how would the stakeholders ever know if LAMP is operating with safe limits of all the harmful substances and gases it produced?

When LAMP was granted the TOL, the DG of AELB Datuk Raja Abdul Aziz Raja Adnan, in reply to questions, said that the TOL was issued with the aim of collecting various DATA to ascertain that LAMP’s gaseous and liquid emissions and solid wastes produced are in accordance to that advanced by Lynas in their documents submitted in support of the application for the operating license. And here we have instead the interested party making all the statements concerning the various data which fall under the duties and role of the regulating authorities to collect and verify.

We hereby urge the Atomic Energy Licensing Board to come forward to state and verify if Lynas Corp’s claims on emissions and wastes are authentically accurate.

Thursday 9 July 2015

SMSL/PSHK Media Statement

8th July 2015

We finally received the report of the International Post-review Mission of International Atomic Energy Agency (IAEA) on 26 Jun 2015. It has been almost 8 months since the delegation visited Malaysia on 13-17 October 2014. Malaysian public deserves an explanation on why the report took such a long time to be published. The public should be made known of the executive summary of the report which would then reflect the transparency as well as public engagement by the government and Lynas

The report titled “The International Post-Review Mission on the Radiation Safety Aspects of the Operation of a Rare Earth Processing Facility and Assessment of the Implementation of the 2011 Mission Recommendations” mainly focused on the public and operational safety, radiation protection, safety assessment, waste management, decommissioning and environmental remediation.

It is disappointing that the imminent need for Permanent Disposal Facility (PDF) is still absent. To recap, finding a location for the PDF for the WLP waste and the decommissioning is one of the requirements for Temporarily Operating License (TOL) to be granted to Lynas. Instead of keeping true to their recommendations concerning this issue, the IAEA team suggested “A scenario in which the Residue Storage F 9as presently executed on-site) becomes the Permanent Disposal Facility for the WLP solids should be addressed by Lynas and included in an update to the Safety case and reflected in other supporting documents as appropriate”

Though submissions have been made by residents’ groups on this subject where Lynas has repeatedly claimed that they are currently doing research on the recycling of the WLP waste and the government of Malaysia has Issued statements to the effect that even if those experiments were to be successful, the industrial by-products from the recycling have to be shipped abroad!

The Review Mission team was fully aware of Lynas’ plan to use the RSF as PDF for WLP solids and yet chose to hide their support by mentioning that should Lynas elects to do so, all it has to fulfill is to “merely update their Safety Case report and in other supporting documents”! If it is not because of restriction on land use requirements by AELB, the proposal would have been treated as the acceptable solution to Lynas’ waste disposal of WLP solids.

IAEA report also pointed out the fee adequacy of USD50 million for covering the cost of the long term management of waste including decommissioning and remediation is undetermined by the report. The review team suggested the fund’s financial basis and adequacy be assessed again against an appropriate estimate of potential future liability. This is extremely urgent and important as Lynas is currently under financial distress, and the USD50 million deposits can only be paid in full over a period of 7 years instead of the original 5.

Besides the waste management activities in the Decommissioning Plan are only vaguely described, the aquatic pathway of the waste water discharge is not radiologically monitored and this must be viewed seriously. Immediate remedial actions must be taken accordingly.

In its follow-up suggestions the IAEA Post Review team requires Lynas to define clearly the quantification of the management options for the waste generated and the disposal routes for these wastes be more consistently defined.

This indicated that Lynas has yet to have a comprehensive and accepted way to manage the thousands of tons of wastes generated so far.

Both the Malaysian Government and Lynas have failed to comply with all the recommendations by IAEA in its first Review Mission! To conclude otherwise which the IAEA Post Review Mission team has done is tantamount to committing grave injustice to the people living within the 30 km radius of the rare earth plant!

IAEA Report:

Thursday 29 January 2015

An interview with SMSL Chairperson, Mr. Tan Bun Teet with Mr. Fabian Biasio from Luzern on the issue of Lynas
Will Lynas survive its financial crisis?

Lynas’ financial status prior to 30th September 2014

In late September 2014, Lynas was due to repay Sojitz USD$35 millions. Besides that it has to set aside funds to cover the operating losses in the current quarter of no less than USD$ 10 millions. Given the cash in hand it has no way of meeting the obligations. The threat of a loan repayment default and a possible foreclosure loomed high in the horizon! Should their senior creditor Sojitz refuse to agree to a DEBT REPAYMENT RESTRUCTURING, they would have to consider stopping the operations in LAMP! Though Lynas had engaged the service of Nomura bank of Japan to negotiate with Sojitz, they failed to broker a deal with Sojitz. Sojitz later agreed to a new schedule of repayments at the last minute but extracted an additional 7% interest on the amounts payable.

Desperate moves to raise funds

Meanwhile Lynas commissioned Patterson Securities of Australia to underwrite the following new issues as a way out of their financial straits:

1. Underwrite 150 million new shares at AUD $ 0.080 to pay the USD$ 10 millions due to Sojitz.

2. Issue renounceable rights shares at the ratio of 15:4 to all existing shareholders at AUD$0.080 per share to raise another AUD$71 millions as operating expenses. This exercise is again underwritten by Patterson Securities. The total number of shares added came to 887,500,000 shares. Only a third of the total shares issued were taken up by the shareholders.

3. Lynas was keenly aware that it might not be able to borrow or raise funds through issuance of new shares in the coming months thus an underwriters’ rights option was included in the September 2014 offer at the ratio of 2:1 at AUD$0.090 per share exercisable before the 15th September 2015. This is expected to bring in another AUD $66 millions by adding another 740,226,191 shares to the total. The current total shares in trading stands at 3,370,955,034(3.3billion). Should the underwriters’ rights options be fully subscribed, it will eventually expand the total shares to 4,111,181,225! The practice of unrestricted issuance of shares to raise funds by corporate companies like Lynas has drastically diluted the worth of the current shareholders. It has also affected the interest and confidence of potential investors! This perhaps, helps to explain why the current share price of Lynas remained low. This week’s share price closed at 5.5 cents.

Current status at the end of 3rd quarter 2014

At the end of the 3rd quarter 2014, Lynas managed to raise AUD$83 millions to defray expenses on repayment of loan and maintain adequate funds for operating expenditures in subsequent quarters.

The 3rd quarter’s financial report by the management saw a reduction in operating losses narrowed down to AUD$ 10 millions compared to the preceding quarter of 30 millions. Whether the report was skewed in any way to paint a good picture for the company as well as shoring up shareholders’ confidence on the new CEO, the investment community will be the better judge of it and let’s wait for their 4th quarterly report before we make any further comments.

The crucial factor that will determine Lynas’ survival rests on the REO market price. Lynas has admitted that the current market price does not favour a full capacity production. Under the current market conditions, Lynas is only able to make a thin profit through sale of NdPr (Neodymium and Praseodymium) while sustaining losses in other types of RE they processed. Given an annual production of 22,500 tons, NdPr only account for a total of 2,800 tons. This works out to only 12.7% of the total volume of REO Lynas produced each year. The profits from the sale of this 12.7% will be used to subsidize the losses incurred through the sale of the other REOs.

What this means is the funds they have in hand will be depleted much more quickly following each month they are in operation. Their promise to supply an annual volume of 8,500 tonnes of REO to Sojitz seems plausible judging from the production volume of the September quarter. However this will also mean they would have to set aside a larger sum of funds to cover their enlarged losses. How much is this quantum is yet to be revealed. We will only be able to catch a glimpse of it when they publish their fourth quarterly report for 2014.

How long can the funds in hand last?

With the renewal of the 2-year TOL, Lynas has to pay AELB USD$ 7.79 millions. This is approximately equivalent to AUD$ 8 millions. This will reduce the total funds remaining to AUD$63 millions.

Lynas has hinted obliquely in their past reports to ASX and shareholders that they have to set aside funds to repair the cracking and leaching as well as the finishing areas of LAMP. The fact that they have to sell off 190 tonnes of semi-finished NdPr in Chloride form and suffered a revenue reduction of USD$2 millions to the total demonstrated the urgency to get the units up and running in the ensuing quarter. The December report will reveal how much has been spent to get the units up and running. The statement that they are able to produce their final products close to 99.9% of the specifications their client demanded is ambiguous. Even Molycorp has to send its products (the heavy REE) to China for final finishing!

The operating losses (if any) for the December quarter is still unknown. Only a close scrutiny of their report will reveal how the remaining funds in their hands will be used in the coming months, not forgetting that they have senior debt obligations to fulfill every three months starting March 2015. One conclusion seems to be obvious is that they expect the current funds will last till or before the underwriters’ rights option expires on 15th September 2015.

Circumstances under which LAMP will be forced to close

We have to be realisitic in our evaluation on the circumstances under which LAMP will probably stop its operations. Let us take a sober look at all the possible scenarios:

1. Lynas’ cash in hand runs out and they have no choice but to default on their loan repayments to Sojitz.

Sojitz took out a court order to liquidate Lynas’ current assets. LAMP will be included in the list and it has to stop operating while waiting for the court to appoint a liquidator.

2. Lynas is ordered by the Malaysian Government to fulfill the condition of locating a PDF.

Lynas would then have to allocate a certain sum to locate a suitable PDF and no one can be sure how much this will be. It will eat into the cash reserves they have in hand. Plus the interests on both their loans ,whatever is left may not see them last till end of June 2015 perhaps.

(This is not likely to happen for Lynas has proposed to recycle the WLP into road base aggregates (RB4) and the proposal was accepted by AELB in mid June last year. ( This can be found in their June 2014 quarterly report) Currently it has received proposals from third parties to recycle the other two streams of solid wastes. By agreeing to Lynas’ proposal for the WLP usage, it will exempt Lynas from finding a PDF.

Should our Government close both eyes to the timeline when it will be put into practice, Lynas will not need to spend any money on dealing with its WLP wastes. All its remaining cash can then be used fully to keep the loss making operations running.)

3. Our Judicial Review's (JR’s) prayers were answered.

This will mean the TOL will be revoked and LAMP has to stop operating. However Lynas will appeal and before the case is heard in appellate court it can continue its operations.

4. Should Lynas be forced to stop operating due to cash shortage, some lender(s) of last resort may lend them the money to carry on while hoping that the REE market will turn round.

This is a highly risky adventure for any private financial organization. Only a foreign government like Japan might be interested in injecting the necessary funds into Lynas to keep it running just to break China’s stranglehold on the RE market.

Confronting the reality we have a serious problem of how to get Lynas and our government to act on the safe disposal of the radioactive waste.

This is something all have to think about. By waiting for the market to ‘kill’ Lynas, we still have to come up with a proposal that will ensure the waste left behind will not pollute our environment permanently.