Press statement on 28th June 2014 by SMSL on impending renewal of Lynas’ operating license by AELB.
SMSL strongly urge the Government and the Ministry of Science, Technology and Innovation (MOSTI) NOT to extend or renew Lynas’ Temporary Operating License (TOL) which is due to expire on the 2nd September 2014!
Lynas has failed to disclose to the public the identification of the site for the Permanent Deposit Facility (PDF) for its radioactive Water Leach Purification (WLP) waste as required under the terms of its TOL!
The regulatory authority AELB, in granting the TOL to Lynas stated that Lynas needs to fulfill the above condition 10 months after it commenced operations.
On the eve of the dateline, it claimed to have submitted the proposal to the relevant ministry, but the Minister concerned refused to reveal the site proposed. The then Ketua Pengarah of AELB Dato’ Raja Abdul Aziz said on record that Lynas only submitted a ‘conceptual’ plan of the PDF and not the site! We would like to remind both Lynas and the government that the ‘wastes’ ARE REAL while the PDF plan submitted by Lynas remains a concept!
Lynas claimed that they are able to recycle all solid wastes into industrial products thus not requiring a PDF!
Till this day it has NOT revealed how they propose to do that; neither has it produced any research papers for the public to evaluate the validity of its claims!
To recycle the THOUSANDS of tons of its solid wastes annually, Lynas needs to set up a recycling plant the size of which will be the equivalent of if not bigger than its present processing facility!
This will involve a large input of funds to get it set up and make it operational! Given Lynas’ present state of financial status, it will not be able to walk its talk! This will render Lynas’ claim a bluff and the people of Balok, Kuantan and greater Kuantan will eventually be left holding the toxic legacy, courtesy of Lynas!
Lynas is required to deposit with the government a total sum of 50 millions USD in 5 years as security. It had asked and obtained an agreement from the MOSTI to stretch the payment to 7 years with a mere 6.05 millions being collected in the first year of its operations. This raised a grave concern on whether Lynas will be able to honour its pledge to the government to remove the waste including shipping them overseas if it failed to utilize it for recycling!
The radioactive waste left behind by Asian Rare Earth is still undergoing a cleanup operation costing no less than USD $100 millions. Should there be a foreclosure for LAMP, with the meager sum of USD $ 6.05 million collected from Lynas, the people of this country will be burdened with the costs of cleaning up the toxic waste left behind by Lynas!
Lynas had to resort to rights issue of its shares to its shareholders to pay for the second quarter’s operations. In the words of a financial analyst “It’s almost a stay of execution,” UBS AG analyst Jo Battershill said.The government should take cognizance of this fact and refuse to extend or renew Lynas operating license.
We reiterate here that Lynas had not fulfilled the various terms under the Temporary Operating License. The license was issued on the ground that it will enable the AELB to collect operational data on the wastes produced to validate Lynas’claims. We had on our part done some data gathering and compilations. We demand that AELB release all the data collected since day one of Lynas’ operations failing which it will only prove that the AELB is incapable of playing its regulatory role! Under the circumstances the government should not extend or renew Lynas’ operating license!
We had sent appeal letters to the AELB and the Mosti Minister in May 2014 urging them not to extend or renew Lynas’ operating license! In the letters we submit that we have found new evidences that will enable them to deny Lynas the renewal of the license. They had acknowledged receipt of our letters through AR letter acknowledgement cards. Till this date they had yet to reply!
We wish to remind the government and the MOSTI that they are elected by the people to safeguard the interest of the people and the nation. By not considering the facts laid before them as tabled above, they shall be held accountable to the future generations of this country and we shall do whatever that is necessary to ensure that our children and great-great grand children shall not be burdened with the tasks of a clean up like the Bukit Merah case.
We repeat: Until and unless all conditions are complied with under the TOL, the government should NOT extend or renew Lynas’ operating license!"
SMSL
Saturday, 28 June 2014
Tuesday, 24 June 2014
Press Statement by SMSL on the incident of Himpunan Hijau’s event on 22nd June 2014
SMSL strongly condemn the extra judicial way of handling the supporters of HH after their arrest. Witnesses testified that Ho Kim Huat was brutally manhandled resulting in head and bodily injuries and had to be sent to the General Hospital Kuantan for emergency treatment and remain warded for observations! This is by any standards of operations by the police should not have occurred. We hereby call upon the Pahang state Chief Police officer to initiate investigations into this incident to preserve the integrity of the force and make public his findings!
The demonstration yesterday was a peaceful assembly of Kuantan residents and supporters from all over the country. They had gathered in front of the police barricade and were waiting for the negotiation between the parties involved in this dispute to conclude. At the end of the negotiation , a commotion started resulting in three supporters being arrested, one of whom had earlier breached the barricade. He was floored and kicked and beaten with the wooden baton on his back and head resulting in bruises sustained on his lower abdomen and the head. The detainees claimed that the police used steel knuckles to punch them on various parts of the body while they were held in custody in the police van. The detainee who sustained bodily bruises and head concussions was carried into the Lynas plant compound and received emergency medical aids before he was rushed to the hospital for medical attention!
The entire happening was caught on tape.
This is a serious charge of violation of the basic human rights of the victims! We urge the victims and the organizer of yesterday’s event to launch an official complaint with Suhakam. Such violence on the part of the police in handling a civil protest should never be condone! It was a peaceful civil protest and there was no criminal offence being committed. The police are tasked to upkeep law and order and any offence committed should be dealt with accordingly to the legal provisions. There is no room for justification for the way the detainees who complained about being manhandled by the police.
Save Malaysia Stop Lynas
23th June 2014
SMSL strongly condemn the extra judicial way of handling the supporters of HH after their arrest. Witnesses testified that Ho Kim Huat was brutally manhandled resulting in head and bodily injuries and had to be sent to the General Hospital Kuantan for emergency treatment and remain warded for observations! This is by any standards of operations by the police should not have occurred. We hereby call upon the Pahang state Chief Police officer to initiate investigations into this incident to preserve the integrity of the force and make public his findings!
The demonstration yesterday was a peaceful assembly of Kuantan residents and supporters from all over the country. They had gathered in front of the police barricade and were waiting for the negotiation between the parties involved in this dispute to conclude. At the end of the negotiation , a commotion started resulting in three supporters being arrested, one of whom had earlier breached the barricade. He was floored and kicked and beaten with the wooden baton on his back and head resulting in bruises sustained on his lower abdomen and the head. The detainees claimed that the police used steel knuckles to punch them on various parts of the body while they were held in custody in the police van. The detainee who sustained bodily bruises and head concussions was carried into the Lynas plant compound and received emergency medical aids before he was rushed to the hospital for medical attention!
The entire happening was caught on tape.
This is a serious charge of violation of the basic human rights of the victims! We urge the victims and the organizer of yesterday’s event to launch an official complaint with Suhakam. Such violence on the part of the police in handling a civil protest should never be condone! It was a peaceful civil protest and there was no criminal offence being committed. The police are tasked to upkeep law and order and any offence committed should be dealt with accordingly to the legal provisions. There is no room for justification for the way the detainees who complained about being manhandled by the police.
Save Malaysia Stop Lynas
23th June 2014
Saturday, 10 May 2014
SMSL/PSHK Press statement on the 10th May 2014
SMSL hereby call upon the Malaysian regulatory authority AELB and the Minister of MOSTI NOT to consider the application by Lynas for the Permanent Operating license in view of the likelihood that it is forced to close because of financial reason.
The TOL (Temporary Operating License) for two years is due to expire on the 2nd September 2014. Under the terms of the issuance, as recommended by the IAEA report, Lynas is required to submit the plan for the PDF (Permanent Deposit Facility) for its radioactive waste WLP before TOL is granted.
Lynas not only failed to submit the plan before the issuance, AELB made a provision for them to comply within 10 months after it commenced operating. On the eve of the dateline, Lynas submitted a ‘conceptual’ plan of the PDF while the Deputy Minister of MOSTI, Dato Abu Bakar Mohd Diah replied in the Parliament that Lynas did identify the site and the plan for the PDF but he declined to reveal the site! (http://www.thenutgraph.com/lynas-an-unsolved-conundrum/)
This showed clearly that Lynas failed to comply with the requirements stated in the TOL.
The IAEA report also recommended that Lynas deposit USD50 million with the AELB in installments of USD10 million each year for 5 years. This is grossly inadequate as LAMP is 10 times the size of ARE which is currently undergoing a clean-up operation which cost the former ARE owner USD100 million! In the event of a foreclosure, the residents and the people of Malaysia will be left holding the toxic ‘unwanted baby’!
The risks of a foreclosure can be real as the following paragraphs taken from various reports in the public domain show:
In its first quarterly report 2014, (note 1) Lynas has a closing cash balance of AUD$23.4m as at 31 March 2014. Their next quarter will require AUD$48.172 m to operate as tabled in its quarterly cash flow report (note 2)
Lynas seeks to raise AUD$30 million through rights issue and another AUD$10 million through institutional placement to boost its working capital.
On this, the foreign analysts commented:
“It’s almost a stay of execution,” UBS AG analyst Jo Battershill said by phone. “If there’s any price weakness, a slowdown in the Chinese economy, or a slowdown in demand for rare earths, than how long does it buy them? It’s hard to know.” (Note 3)
"The market's just looked at it and gone, 'well, this is kind of what people thought and the operational side of things continues to disappoint," UBS Metals and mining analyst Jonathan Battershill said.
"Despite the company saying they think they can have the production level up at 11,000 tonnes by June ... we are not really seeing the numbers that provide confidence. Even under the assumption that it will be 11,000, they still need to raise money." (Note 4)
We are gravely concerned about the possible foreclosure of Lynas. The toxic legacy that will be left behind will burden all future generations for centuries to come!
This is definitely not an unfounded or baseless concern as our research showed the cash flow problem and the future rare earth market ahead for Lynas will be much more challenging than before! (See report attached).
We hereby also call upon the Lynas Monitoring Committee set up under the recommendation of Parliamentary Select Committee to equally exercise care and prudence and factor in the financial hardship Lynas is currently experiencing before they make their final recommendations to the Minister concerned. If they failed to exercise them in their deliberations they are answerable to all the future generations in Malaysia!
For further information please contact:
SMSL Hotline 012 982 3302
Note: (1)
https://www.lynascorp.com/Quarterly%20Reports/2014/Q1%202014%20Quarterly%20Report_final%201324839.pdf)
Note (2)
(http://www.asx.com.au/asxpdf/20140430/pdf/42pbgdm9s1vfj7.pdf)
Note (3)
http://www.bloomberg.com/news/2014-05-05/lynas-to-sell-shares-defer-debt-payments-after-rare-earth-slump.html
Note (4)
http://www.smh.com.au/business/mining-and-resources/lynas-shares-hit-5year-low-as-funding-crunch-looms-20140311-34k1z.html
SJH’s research report.
SMSL hereby call upon the Malaysian regulatory authority AELB and the Minister of MOSTI NOT to consider the application by Lynas for the Permanent Operating license in view of the likelihood that it is forced to close because of financial reason.
The TOL (Temporary Operating License) for two years is due to expire on the 2nd September 2014. Under the terms of the issuance, as recommended by the IAEA report, Lynas is required to submit the plan for the PDF (Permanent Deposit Facility) for its radioactive waste WLP before TOL is granted.
Lynas not only failed to submit the plan before the issuance, AELB made a provision for them to comply within 10 months after it commenced operating. On the eve of the dateline, Lynas submitted a ‘conceptual’ plan of the PDF while the Deputy Minister of MOSTI, Dato Abu Bakar Mohd Diah replied in the Parliament that Lynas did identify the site and the plan for the PDF but he declined to reveal the site! (http://www.thenutgraph.com/lynas-an-unsolved-conundrum/)
This showed clearly that Lynas failed to comply with the requirements stated in the TOL.
The IAEA report also recommended that Lynas deposit USD50 million with the AELB in installments of USD10 million each year for 5 years. This is grossly inadequate as LAMP is 10 times the size of ARE which is currently undergoing a clean-up operation which cost the former ARE owner USD100 million! In the event of a foreclosure, the residents and the people of Malaysia will be left holding the toxic ‘unwanted baby’!
The risks of a foreclosure can be real as the following paragraphs taken from various reports in the public domain show:
In its first quarterly report 2014, (note 1) Lynas has a closing cash balance of AUD$23.4m as at 31 March 2014. Their next quarter will require AUD$48.172 m to operate as tabled in its quarterly cash flow report (note 2)
Lynas seeks to raise AUD$30 million through rights issue and another AUD$10 million through institutional placement to boost its working capital.
On this, the foreign analysts commented:
“It’s almost a stay of execution,” UBS AG analyst Jo Battershill said by phone. “If there’s any price weakness, a slowdown in the Chinese economy, or a slowdown in demand for rare earths, than how long does it buy them? It’s hard to know.” (Note 3)
"The market's just looked at it and gone, 'well, this is kind of what people thought and the operational side of things continues to disappoint," UBS Metals and mining analyst Jonathan Battershill said.
"Despite the company saying they think they can have the production level up at 11,000 tonnes by June ... we are not really seeing the numbers that provide confidence. Even under the assumption that it will be 11,000, they still need to raise money." (Note 4)
We are gravely concerned about the possible foreclosure of Lynas. The toxic legacy that will be left behind will burden all future generations for centuries to come!
This is definitely not an unfounded or baseless concern as our research showed the cash flow problem and the future rare earth market ahead for Lynas will be much more challenging than before! (See report attached).
We hereby also call upon the Lynas Monitoring Committee set up under the recommendation of Parliamentary Select Committee to equally exercise care and prudence and factor in the financial hardship Lynas is currently experiencing before they make their final recommendations to the Minister concerned. If they failed to exercise them in their deliberations they are answerable to all the future generations in Malaysia!
For further information please contact:
SMSL Hotline 012 982 3302
Note: (1)
https://www.lynascorp.com/Quarterly%20Reports/2014/Q1%202014%20Quarterly%20Report_final%201324839.pdf)
Note (2)
(http://www.asx.com.au/asxpdf/20140430/pdf/42pbgdm9s1vfj7.pdf)
Note (3)
http://www.bloomberg.com/news/2014-05-05/lynas-to-sell-shares-defer-debt-payments-after-rare-earth-slump.html
Note (4)
http://www.smh.com.au/business/mining-and-resources/lynas-shares-hit-5year-low-as-funding-crunch-looms-20140311-34k1z.html
SJH’s research report.
Wednesday, 23 April 2014
SMSL COURT CASE
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!
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
http://www.smh.com.au/business/nick-curtis-lynas-corp-stake-keeps-shrinking-20140327-35lnk.html
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 realestate.com.au. Speaking of which, given he is still looking for a CEO and CFO at realestate.com.au, we are glad that he doesn't have too much work on his plate at Ten.
Read more: http://www.smh.com.au/business/nick-curtis-lynas-corp-stake-keeps-shrinking-20140327-35lnk.html#ixzz2z2E8ia8A
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 realestate.com.au. Speaking of which, given he is still looking for a CEO and CFO at realestate.com.au, we are glad that he doesn't have too much work on his plate at Ten.
Read more: http://www.smh.com.au/business/nick-curtis-lynas-corp-stake-keeps-shrinking-20140327-35lnk.html#ixzz2z2E8ia8A
http://finance.ninemsn.com.au/newsbusiness/motley/8826878/is-lynas-corporation-limited-cheap-or-trouble
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.
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.
Thursday, 27 March 2014
No respite in sight as Lynas bleeds - Part 2 (By Soo Jin Hou)
Lynas has released its half year interim financial report for the period ending 31/12/13 on 11/3/14. On the cover page, Lynas warned investors of an imminent cash crunch and that it will need to raise fresh funds via additional equity, additional debt or some refinancing or restructure of the Group's debt facilities over the next 12 months. Subsequently, investors punished its shares through a 11% decline in price over the next 2 days, extending the 11% loss of the previous 2 days.
This paper is written to document various information that may not be immediately apparent to the lay investor which suggests that its predicament may be worse than it seems.
Average Selling Price (ASP)
The average selling price is USD 22.70/kg and USD 21.48/kg for quarters ending 30/9/13 and 31/12/13 respectively. What is certain now is that Lynas can only command prices closer to the China domestic price instead of the higher FOB (Freight on Board) China price (see Table 1). This may be a huge disappointment to many Lynas investors who continue to use FOB China price to justify a comfortable profit margin. The lower pricing is most likely due to its products being rare earths composites instead of the 99% pure rare earth elements from which the basket prices are derived from.
Quarter ended 31/9/13 Quarter ended 31/12/13
Lynas has released its half year interim financial report for the period ending 31/12/13 on 11/3/14. On the cover page, Lynas warned investors of an imminent cash crunch and that it will need to raise fresh funds via additional equity, additional debt or some refinancing or restructure of the Group's debt facilities over the next 12 months. Subsequently, investors punished its shares through a 11% decline in price over the next 2 days, extending the 11% loss of the previous 2 days.
This paper is written to document various information that may not be immediately apparent to the lay investor which suggests that its predicament may be worse than it seems.
Average Selling Price (ASP)
The average selling price is USD 22.70/kg and USD 21.48/kg for quarters ending 30/9/13 and 31/12/13 respectively. What is certain now is that Lynas can only command prices closer to the China domestic price instead of the higher FOB (Freight on Board) China price (see Table 1). This may be a huge disappointment to many Lynas investors who continue to use FOB China price to justify a comfortable profit margin. The lower pricing is most likely due to its products being rare earths composites instead of the 99% pure rare earth elements from which the basket prices are derived from.
Quarter ended 31/9/13 Quarter ended 31/12/13
Average selling price 22.70 USD/kg 21.48 USD/kg
Mt Weld basket price (China domestic) 21.80 USD/kg 22.62 USD/kg
Mt Weld basket price (FOB China) 29.80 USD/kg 29.30 USD/kg
Mt Weld basket price (China domestic) 21.80 USD/kg 22.62 USD/kg
Mt Weld basket price (FOB China) 29.80 USD/kg 29.30 USD/kg
Table 1: Comparison of average selling price vs Mt Weld basket prices
However, as low as the ASP may seem, it might be even lower if not because Lynas chose to stockpile its lanthanum instead of selling at a loss. As of 6/3/14, prices of lanthanum and cerium oxides remain below USD 6/kg [1], well below Lynas' optimal production cost of USD 15/kg [2]. To prop up the ASP, Lynas announced in January it will not accept new orders for lanthanum at prices below USD 15/kg [3]. It is unclear what is the actual ASP if the unsold lanthanum is included, but it will definitely be lower. After all, Lynas has admitted that the slight drop in ASP in the December quarter is due to a higher proportion of cerium than the prior quarter.
In the half year interim report, Lynas revealed that it had produced 994 tons but sold only 627 tons of rare earths oxides (REO). Similarly, inventory for finished goods also climbed from AUD 0.53 to AUD 4.42 million (m). These evidences are consistent with window dressing, although Lynas attributes the sales gap to timing.
Production Cost
Prices of lanthanum and cerium, which constitute 72% of Lynas' products, are much lower than Lynas' optimal production cost of $14-$15/kg if the plant is to run at the maximum capacity of 22,000 tons per annum (tpa) [2]. However, Lynas will only attempt to achieve half that by June quarter for fear of causing a collapse in rare earths price if it floods the market with excess supply. At half capacity, Lynas has claimed to be able to achieve production cost in the high teens [4].
In the comments section of the first part of this article [2], a Lynas investor has said that "Lynas has estimated (that) phase 1 capacity (11,000 tpa) cost of production will be US$19/kg". In view of the absence of any direct estimate from Lynas in any of its official documents, it is regrettable that the author has no choice but to adopt the data given by the investor.
Profit excluding Depreciation and Amortization
Assuming an ASP of USD 22/kg, gross profit margin is 13.6%. Assuming USD 19/kg is the all-in cost, encompassing even Nick Curtis' and Eric Noyrez' FY2013 remuneration of AUD 3.64m, at 11,000 tpa, annual gross profit is USD 33m (AUD 35.7m). Assuming the same net financial expense as FY2013's, profit before tax is AUD 23.1m. Assuming the profit split between Australia and Malaysia is 30:70 [5], Lynas will have to pay AUD 2.1m in taxes and net profit is AUD 21.0m. Table 2 summarizes the profit estimate.
Gross profit AUD 35.7 million
Net financial expense AUD 12.6 million
Tax expense AUD 2.1 million
Tax expense AUD 2.1 million
Net profit AUD 21.0 million
Table 2: Projected profit
Free Cash Flow
Unfortunately, even if Lynas manages to eke out a slim profit, its free cash flow is negative after accounting for depreciation and amortization. After subtracting the annualized amount of AUD 24.5m (half year FY2014 is AUD 12.2m), free cash flow is negative AUD 3.5m. Free cash flow is a measure of a company's excess cash after spending to maintain its asset base. Having a negative free cash flow, even when the ideal conditions above are met, means that Lynas will not even be able to maintain its "state-of-the-art" plant. If Lynas scrimp on safety, more industrial mishaps may occur in the future.
The conditions assumed are ideal because it has not taken into account the following:
a) the potentially lower ASP if unsold stockpile is included
b) net financial expense is likely higher as interest income from cash deposit dwindles with depleting cash pile
c) potential cost from meeting its obligation to build a permanent disposal facility or sending the waste overseas
d) interest payment for the Sojitz loan facility is partly tied to LIBOR rate and will likely increase in a rising interest rate environment
e) higher production cost due to partial withdrawal of subsidy for petrol (since September '13) and electricity (since January '14) as well as the implementation of the Fuel Cost Past Through mechanism this year
f) allocation for R&D expense from 1% of revenue as recommended by the Parliamentary Select Committee [6]
g) execution risk in bringing down production and labor cash burn rate of AUD 51/kg in the December quarter
h) execution risk in meeting production target from 2,964 tpa in the December quarter to 11,000 tpa by June quarter.
Financial Obligations
With negative free cash flow, Lynas will have no money to maintain its plant let alone meet its financial obligations. Lynas has 2 major creditors. The Sojitz loan facility has a principal repayment schedule as shown in Table 3.
30 September 2014 USD 35 million
31 March 2015 USD 45 million
30 September 2015 USD 45 million
31 March 2016 USD 90 million
Total: USD 215 million
Table 3: Sojitz loan facility repayment schedule
In addition, the principal of Mt Kellet convertible bonds amounting to USD 225m is payable in full on 25 July 2016. In short, Lynas will need to fork out a total of USD 440m by 2016. Without a doubt, Lynas will default on its borrowings unless it is able to raise fresh funds.
Interestingly, the Mt Kellet convertible bonds come with conditions that restrict Lynas from issuing new shares until Lynas can achieve at least 70% nameplate capacity of Phase 1 over 6 consecutive months [7]. Therefore, unless Mt Kellet relents, debt financing or debt restructuring are Lynas' only options.
Balance Sheet
Lynas is significantly leveraged with gearing (borrowings/equity) of 0.87, which means, Lynas has almost as much borrowings as it has its own funds. While it is still possible to borrow, it is unlikely Lynas will get favorable terms in view of its poor profitability and prospect. To make the matter worse, the Sojitz loan facility comes with a condition that 50% of any new debt raised must be used for partial repayment [7]. Therefore, even if Lynas is able to swap new debt with old, it will probably service the new debt with even higher interest than that of the old.
To add to Lynas' woes, as of 31/12/13, it has 5 times more trade payables than it has receivables (AUD 38.2m vs AUD 7.6m). Therefore, Lynas may burn cash even faster in the subsequent quarter.
Lynas' net asset per share is AUD 0.28. At the closing price of AUD 0.225 on 27/3/14, it is still trading at a price to book ratio of 0.8. That is quite a lofty valuation even though it has already shed more than 90% of its peak value. The author expects more room for the price to fall should Lynas fail to turnaround its business.
In conclusion, Lynas will fail. It is not a matter of if, but a matter of when. Will the existing creditors throw in the towel? Or will they continue to throw good money after bad? The next few quarters will be crucial for Lynas' survival, and the concerned people of Malaysia wait with bated breath.
Soo Jin Hou
Stop Lynas Coalition
[1] http://www.arafuraresources.com.au/rare-earths/pricing.html
[2] Soo Jin Hou, 4/12/2013, No respite in sight as Lynas bleeds, http://www.themalaysianinsider.com/sideviews/article/no-respite-in-sight-as-lynas-bleeds-soo-jin-hou
[3] Quarterly Activities Report for period ending 31/12/2013.
[4] This information is hearsay from Lynas' investors who tuned in to the Investors Call held on 19/4/13. Unfortunately, the audio recording of that call does not include the Q&A section which is purportedly where the production cost for Phase 1 is revealed. These information are obtained from Topstocks forum under the thread "Lynas Quarter Report Investor relations Call" started on the same date.
[5] JP Morgan, 24/6/2010, Lynas Corporation Limited - A rare opportunity.
[6] Laporan Jawatankuasa Pilihan Khas Mengenai Projek Lynas Advanced Materials Plant (LAMP) "Parliamentary Select Committee Report on the Lynas Advanced Materials Plant (LAMP) Project", 2012, http://www.aelb.gov.my/aelb/malay/dokumen/lynas/LAMP/Laporan%20Jawatankuasa_red.pdf
[7] Annual financial report and Sojitz/JOGMEC loan facility deferral of completion of phase 2 test and related matters, 16/9/13.
Saturday, 14 December 2013
Government must shut down the LAMP to investigate the fatal accident
SMSL - SLC - Himpunan Hijau Joint Press statement
Government must shut down the LAMP to investigate the fatal accident
14 December 2013
 |
| From left, Indera Mahkota MP Fauzi Abdul Rahman, SLC spokesperson Ali Akbar Othman, SMSL spokesperson Tan Bun Teet, Himpunan Hijau(Green Rally)spokespersons Winson Ooi and Bang Seet Ping |
SMSL, Stop Lynas groups and local members of Parliament and State Assembly men are deeply concerned with the fatal accident yesterday at the Lynas rare earth refinery plant in Gebeng (LAMP). A worker died when he fell into a pond when he was performing a routine test in the morning. Before the news was reported in the media, SMSL was tipped off from a number of sources.
Mr Tan Bun Teet, the spokesperson for SMSL said, “This is very serious. We are demanding the government to shut down the LAMP immediately and cease ALL activities in the plant until a full and comprehensive independent investigation is completed by the relevant authorities like DOSH to establish the nature and the cause/s of the fatal accident. Safer work place and a healthy environment should be in place when highly corrosive and hazardous substances are handled to protect the life and the safety of workers at the plant.”
In May last year a 34 year-old Lynas subcontractor died after a couple of months suffering from complex respiratory problems. He worked at the LAMP for over twelve months before he fell ill. (http://www.chinapress.com.my/
Later, another death was officially reported by the police to have occurred during an interview session in the plant .
“We have heard of these cases at the community level. This is the first time Lynas has actually issued a media release. The Government must come clean to disclose these cases of mishaps in fairness to those who have suffered and to the grieving families of those who have sadly departed. “ Said Ali Akbar bin Othman from the Stop Lynas Coalition (SLC).
“Obviously the trust in Lynas and the authorities are lacking which is why a citizen group like SMSL has been called up with such information. Lynas and the Government owed to the family of the victim/s and the remaining workers at the LAMP a decent standard of occupational health and safety. ” Concluded Mr Tan
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Friday, 13 December 2013
Lynas engineer drowns in pond at plant
Lynas engineer drowns in pond at plant
KUANTAN: An engineer of the Lynas rare earth plant drowned Friday in a pond at the plant in the Gebeng industrial area here, police said.
Kuantan deputy OCPD Supt Abdul Aziz Ahmad said Mohamad Fadzli Mohamad Rafdzi, 33, is believed to have slipped and fallen into the pond at about 9am.
A colleague, Sharizal Samsudin, 40, lodged a police report at the Gebeng police station, he said.
Abdul Aziz said the police and firemen rushed to the plant and rescuers found Mohamad Fadzli's body in the pond at 2.40pm and sent it to the Tengku Ampuan Afzan Hospital in Kuantan.
Police did not suspect any foul play in the incident, he said. - Bernama
Wednesday, 4 December 2013
No respite in sight as Lynas bleeds - Soo Jin Hou
http://www.themalaysianinsider.com/sideviews/article/no-respite-in-sight-as-lynas-bleeds-soo-jin-hou
DECEMBER 04, 2013
I attended the Lynas annual shareholders' meeting (AGM) on 29/11/2013. During the meeting, I asked 2 questions.
The first: "In view of Molycorp's intention to ramp up their rare earths production by 130% from 10,000 tons to 23,000 tons per year, how does Lynas intend to do the same without a collapse in rare earth prices?"
The second: "The Malaysian government is under tremendous pressure after the Fitch rating downgrade to reduce or withdraw energy subsidy. How much will Lynas be affected if the energy subsidy is withdrawn?".
Neither question was satisfactorily answered and this suggests that it is likely that Lynas will continue to bleed red ink in the near to medium term.
Rare earths prices have collapsed spectacularly over the past 2 years (see Table at bottom of page). The 2 primary products from Lynas, i.e. lanthanum (LaO) and cerium oxides (CeO), which make up 72.2% [1], saw a 95% collapse in prices. Their current prices of less than AUD$6/kg (RM17/kg) are well below Lynas' current production cost, and more shockingly, below the optimal production cost of AUD$14-$15/kg (RM40.70-RM43.60/kg) Lynas needs to achieve by running at maximum capacity of 22,000 tons per annum (tpa) [3]. This is distressing because if Lynas cannot make money from these two products if conditions are ideal, Lynas will never make money from them.
Interestingly, the depressed prices come amid Molycorp running at only half its capacity [4] and Lynas at 19% of capacity [5]. So if both simultaneously ramp up production, REO prices will be crushed. Molycorp has expressed intent to increase production from 10,000 to 23,000 tpa by end of 2014 [6], while Lynas has expressed intent to increase from 4,200 to 11,000 tpa by next quarter. The combined increase is a whopping 239% from current production levels! The problem with Lynas and Molycorp is that their combined capacity of 42 tpa is 60% of the global demand outside China. They are so big they control prices. In the case of LaO and CeO, the spectacular collapse may be explained by them making up 72.2% and 83% [4] of Lynas and Molycorp's portfolio respectively.
Therefore, the more likely scenario is that both companies will ramp up production slowly to prevent REO prices from collapsing. By running below nameplate capacity, Lynas will not achieve economies of scale to turn profitable. It is easy to deduce that both companies will run each other to the ground.
It is quite obvious what Lynas' strategy is. Lynas hopes the profit made from the remaining products, chiefly neodymium (NdO) and praseudymium oxides (PrO) will be sufficient to overcome the losses incurred on LaO and CeO. Lynas is betting that NdO and PrO prices will go up. Unfortunately for Lynas, NdO and PrO also make up 14% of Molycorps' product [7], so premium market will also get competitive. With both players ready to ramp up production, prices are unlikely to grow much in the near term, in the best case; and in the worst case, will collapse just like LaO and CeO.
The most crucial question now is, what is Lynas' current real production cost? That data will enable us to forecast its profitability based on rare earths prices. In the absence of such data, an appropriate estimate may be production cash flow divided by November's production numbers of 350 tons (4200 tpa) [5], the highest output on record. For the period ending 30 Sep 2013, Lynas dispensed AUD$40 million (RM116.7 million) in operational, production and administration costs to produce only 253 tons (1012 tpa) of REO. Assuming the best case scenario that costs stay constant despite a fourfold increase in output, the current cost is AUD$38.1/kg (RM111/kg), an ocean divide from the targeted AUD$14-15/kg.
In essence, Lynas is caught in a catch-22 situation. If it ramps, it loses money with depressed selling prices. If it doesn't, it loses money from high costs. Damned if it ramps, damned if it doesn't.
Lynas may see an increase in production costs. During the AGM, I raised the inevitability of the government of Malaysia withdrawing the energy subsidy, to which Lynas replied that they are minimally impacted as they are not an energy intensive company. The 3rd day after the AGM, the government of Malaysia raised electricity tariff by 15%. Electricity may not be a significant part of Lynas' expenditure, but liquefied petroleum gas (LPG) might be.
Lynas uses LPG to heat its rotary kiln, where the ore concentrate is dissolved by sulphuric acid at 650°C. According to the PEIA, Lynas consumes 12,820,000 Nm3/year [6]. That is equivalent to approximately 25.6 million kg/year or about RM 47.4 million/year. The subsidy is approximately half [7], therefore Lynas may need to fork out another AUD$16.2 million (RM47.1 million)/year if this subsidy is pulled from under Lynas' feet. Since Lynas burns approximately AUD$100 million (RM291 million)/year, I find it hard to accept AUD$16.2 million as negligible.
In addition to production woes, Lynas lost badly in the court of public opinion, despite winning all litigation cases. Pakatan Rakyat, who ran on an anti-Lynas platform, won the popular vote in the general election. More significantly, 6 out of the 7 representatives around Kuantan won on the anti-Lynas platform, proving that the local community rejected the project. Shortly after, Himpunan Hijau collected 1.3 million physical signatures (not online ones) in a petition against Lynas. Lynas provoked further anger by behaving like an ostrich, refusing to answer any allegations raised in the Oeko Report commissioned by Save Malaysia, Stop Lynas. Therefore, Lynas will be on the agenda in the next election, if it is still alive by then. It will be another stressful period for Lynas investors, who then have to dabble in political science to bet on a regime that is experiencing eroding electoral support.
The conclusion is, Lynas will fail. It is not a matterof if, it is a matter of when. It will happen when creditors stop throwing good money after bad and just let Lynas die. At the current cash burn rate at AUD$ 100 million a year, Lynas' cash pile amounting to AUD$101 million [3] can last only about a year. Is there any more creditors foolhardy enough to throw money at it?
In the face of certain failure, the residents around Balok and Kuantan should get concerned about the permanent waste disposal solution, particularly, the sufficiency of funds. If Lynas have not left sufficient deposit with the incompetent government, the taxpayers might once again, be made to bear BN's blunder.
[1] www.lynascorp.com, "Average Mt Weld Composition Price". Earlier reports have distribution data.
[2] Lynas stopped updating the composition price regularly and provided no FOB China price in the latest quarterly report. 21 Nov numbers taken from Arafura's website http://www.arafuraresources.com.au/rare-earths/pricing.
[3] Lynas quarterly report for the period ending 30 Sep 2013.
[4] http://www.molycorp.com/investors/, "Presentations, Q3 2013 Molycorp Inc Earnings Conference Call Presentation".
[5] Novermber estimated output found in CEO's Address to AGM, download here: http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=LYC#headlines.
[6] Preliminary Environmental Impact Assessment and Quantitative Risk Assessment,
Proposed Advanced Materials Plant, Gebeng Industrial Estate, Kuantan, Pahang
Malaysia. Volume 1: Main Report. Environ Consulting Services (M) Sdn. Bhd. January
2008.
[7] A Citizen's Guide To Energy Subsidies in Malaysia, The International Institute for Sustainable Development, 2013. Download here: http://www.iisd.org/gsi/sites/default/files/ffs_malaysia_czguide.pdf
http://www.themalaysianinsider.com/sideviews/article/no-respite-in-sight-as-lynas-bleeds-soo-jin-hou
DECEMBER 04, 2013
I attended the Lynas annual shareholders' meeting (AGM) on 29/11/2013. During the meeting, I asked 2 questions.
The first: "In view of Molycorp's intention to ramp up their rare earths production by 130% from 10,000 tons to 23,000 tons per year, how does Lynas intend to do the same without a collapse in rare earth prices?"
The second: "The Malaysian government is under tremendous pressure after the Fitch rating downgrade to reduce or withdraw energy subsidy. How much will Lynas be affected if the energy subsidy is withdrawn?".
Neither question was satisfactorily answered and this suggests that it is likely that Lynas will continue to bleed red ink in the near to medium term.
Rare earths prices have collapsed spectacularly over the past 2 years (see Table at bottom of page). The 2 primary products from Lynas, i.e. lanthanum (LaO) and cerium oxides (CeO), which make up 72.2% [1], saw a 95% collapse in prices. Their current prices of less than AUD$6/kg (RM17/kg) are well below Lynas' current production cost, and more shockingly, below the optimal production cost of AUD$14-$15/kg (RM40.70-RM43.60/kg) Lynas needs to achieve by running at maximum capacity of 22,000 tons per annum (tpa) [3]. This is distressing because if Lynas cannot make money from these two products if conditions are ideal, Lynas will never make money from them.
Interestingly, the depressed prices come amid Molycorp running at only half its capacity [4] and Lynas at 19% of capacity [5]. So if both simultaneously ramp up production, REO prices will be crushed. Molycorp has expressed intent to increase production from 10,000 to 23,000 tpa by end of 2014 [6], while Lynas has expressed intent to increase from 4,200 to 11,000 tpa by next quarter. The combined increase is a whopping 239% from current production levels! The problem with Lynas and Molycorp is that their combined capacity of 42 tpa is 60% of the global demand outside China. They are so big they control prices. In the case of LaO and CeO, the spectacular collapse may be explained by them making up 72.2% and 83% [4] of Lynas and Molycorp's portfolio respectively.
Therefore, the more likely scenario is that both companies will ramp up production slowly to prevent REO prices from collapsing. By running below nameplate capacity, Lynas will not achieve economies of scale to turn profitable. It is easy to deduce that both companies will run each other to the ground.
It is quite obvious what Lynas' strategy is. Lynas hopes the profit made from the remaining products, chiefly neodymium (NdO) and praseudymium oxides (PrO) will be sufficient to overcome the losses incurred on LaO and CeO. Lynas is betting that NdO and PrO prices will go up. Unfortunately for Lynas, NdO and PrO also make up 14% of Molycorps' product [7], so premium market will also get competitive. With both players ready to ramp up production, prices are unlikely to grow much in the near term, in the best case; and in the worst case, will collapse just like LaO and CeO.
The most crucial question now is, what is Lynas' current real production cost? That data will enable us to forecast its profitability based on rare earths prices. In the absence of such data, an appropriate estimate may be production cash flow divided by November's production numbers of 350 tons (4200 tpa) [5], the highest output on record. For the period ending 30 Sep 2013, Lynas dispensed AUD$40 million (RM116.7 million) in operational, production and administration costs to produce only 253 tons (1012 tpa) of REO. Assuming the best case scenario that costs stay constant despite a fourfold increase in output, the current cost is AUD$38.1/kg (RM111/kg), an ocean divide from the targeted AUD$14-15/kg.
In essence, Lynas is caught in a catch-22 situation. If it ramps, it loses money with depressed selling prices. If it doesn't, it loses money from high costs. Damned if it ramps, damned if it doesn't.
Lynas may see an increase in production costs. During the AGM, I raised the inevitability of the government of Malaysia withdrawing the energy subsidy, to which Lynas replied that they are minimally impacted as they are not an energy intensive company. The 3rd day after the AGM, the government of Malaysia raised electricity tariff by 15%. Electricity may not be a significant part of Lynas' expenditure, but liquefied petroleum gas (LPG) might be.
Lynas uses LPG to heat its rotary kiln, where the ore concentrate is dissolved by sulphuric acid at 650°C. According to the PEIA, Lynas consumes 12,820,000 Nm3/year [6]. That is equivalent to approximately 25.6 million kg/year or about RM 47.4 million/year. The subsidy is approximately half [7], therefore Lynas may need to fork out another AUD$16.2 million (RM47.1 million)/year if this subsidy is pulled from under Lynas' feet. Since Lynas burns approximately AUD$100 million (RM291 million)/year, I find it hard to accept AUD$16.2 million as negligible.
In addition to production woes, Lynas lost badly in the court of public opinion, despite winning all litigation cases. Pakatan Rakyat, who ran on an anti-Lynas platform, won the popular vote in the general election. More significantly, 6 out of the 7 representatives around Kuantan won on the anti-Lynas platform, proving that the local community rejected the project. Shortly after, Himpunan Hijau collected 1.3 million physical signatures (not online ones) in a petition against Lynas. Lynas provoked further anger by behaving like an ostrich, refusing to answer any allegations raised in the Oeko Report commissioned by Save Malaysia, Stop Lynas. Therefore, Lynas will be on the agenda in the next election, if it is still alive by then. It will be another stressful period for Lynas investors, who then have to dabble in political science to bet on a regime that is experiencing eroding electoral support.
The conclusion is, Lynas will fail. It is not a matterof if, it is a matter of when. It will happen when creditors stop throwing good money after bad and just let Lynas die. At the current cash burn rate at AUD$ 100 million a year, Lynas' cash pile amounting to AUD$101 million [3] can last only about a year. Is there any more creditors foolhardy enough to throw money at it?
In the face of certain failure, the residents around Balok and Kuantan should get concerned about the permanent waste disposal solution, particularly, the sufficiency of funds. If Lynas have not left sufficient deposit with the incompetent government, the taxpayers might once again, be made to bear BN's blunder.
[1] www.lynascorp.com, "Average Mt Weld Composition Price". Earlier reports have distribution data.
[2] Lynas stopped updating the composition price regularly and provided no FOB China price in the latest quarterly report. 21 Nov numbers taken from Arafura's website http://www.arafuraresources.com.au/rare-earths/pricing.
[3] Lynas quarterly report for the period ending 30 Sep 2013.
[4] http://www.molycorp.com/investors/, "Presentations, Q3 2013 Molycorp Inc Earnings Conference Call Presentation".
[5] Novermber estimated output found in CEO's Address to AGM, download here: http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=LYC#headlines.
[6] Preliminary Environmental Impact Assessment and Quantitative Risk Assessment,
Proposed Advanced Materials Plant, Gebeng Industrial Estate, Kuantan, Pahang
Malaysia. Volume 1: Main Report. Environ Consulting Services (M) Sdn. Bhd. January
2008.
[7] A Citizen's Guide To Energy Subsidies in Malaysia, The International Institute for Sustainable Development, 2013. Download here: http://www.iisd.org/gsi/sites/default/files/ffs_malaysia_czguide.pdf
Friday, 29 November 2013
Lynas thwarts critics’ attempts to alert shareholders to risks in Gebeng plant
See more photos at http://t.co/LlgVizvo2w
Lynas thwarts critics’ attempts to alert shareholders to risks in Gebeng plant
BY TRINNA LEONG from the malaysian insider
NOVEMBER 29, 2013
Australian mining firm Lynas today thwarted efforts by environmental group Save Malaysia Stop Lynas (SMSL) to alert shareholders to the risks posed by its refinery plant in Gebeng, Pahang.
“One shareholder urged the board to allow us to share with the others what’s happening in Malaysia but it was denied,” SMSL chairman Tan Bun Teet told The Malaysian Insider after the company’s annual general meeting at its headquarters in Sydney.
“When questions were raised asking for more information, the chair conveniently forgot about it,” he said.
Tan said questions related to the refinery in Malaysia were brushed aside, with former Lynas chairman Nicholas Curtis limiting the topics that could be discussed during the meeting.
“Our questions to the board were either partly answered or totally ignored,” he said.
“The entire meeting was orchestrated to keep shareholders under-informed.”
The RM2.5 billion plant near Kuantan has been mired in controversies over concerns that the processing of rare earth ores from Australia would have a disastrous impact on the health of some 700,000 people within a less than 30km radius of the facility.
A report published by German think-thank Oeko Institute earlier this year highlighted the plant’s failure to prepare a safe disposal facility. The plant’s poor waste management system also remains a cause for concern as residents fear that radioactive leakages may occur.
SMSL, together with another NGO, Himpunan Hijau, sent several representatives to Sydney this week to attend the firm’s meeting. The groups had wanted to pressure the company’s board of directors to close its Pahang plant by encouraging its shareholders to stop backing the company.
“We told the shareholders that the road ahead for Lynas will not be smooth sailing with millions to be paid in litigation costs from anti-Lynas campaigns,” Tan said.
Tan said it was clear shareholders were not happy with Lynas’s performance after doing poorly on the Australian bourse the past year.
Lynas’s shares have been on the decline since January, sliding from $0.72 (RM2.11) to $0.30 (RM0.88) today, according to data from Bloomberg.
The company has been suffering financially after prices of rare earth fell over the past few months while operational delays at the Gebeng plant also placed a strain on its budget.
Tan also said Lynas was tight-lipped on its strategies to bounce back next year and the firm could not even promise to meet its target production of 11,000 tonnes in 2014.
“Instead of answering questions on how Lynas could meet its target production of 11,000 tonnes in the first quarter next year, Nick only informed shareholders that the plant will produce according to market needs. There was no elaboration on how the company is going to turn around financially in 2014,” he said.
“Most shareholders left even before the meeting was over,” he added.
Outside Lynas’s headquarters, several NGOs had gathered, including Australian anti-Lynas groups, SMSL and Himpunan Hijau, to urge shareholders to stop backing firms with bad practices abroad.
“Many people don’t realise how serious the activities of Australian mining companies overseas are, and their ability to get away with a flagrant disregard for people, the environment and the law,” said Thulsi Narayanasamy, director of independent watchdog Aidwatch. - November 29, 2013.
Tan said questions related to the refinery in Malaysia were brushed aside, with former Lynas chairman Nicholas Curtis limiting the topics that could be discussed during the meeting.
Thursday, 28 November 2013
Australian NGOs join Malaysian anti-Lynas camp-out in Sydney
Australian NGOs join Malaysian anti-Lynas camp-out in Sydney
by themalaymailonline.com
 |
| An anti-Lynas rally in Kuantan on June 24, 2012. — File pic |
StopLynas.org, an affiliate campaign of Friends of the Earth Australia, along with Beyond Nuclear Initiative, and AidWatch joined the call for Lynas to shut down its Lynas Advanced Materials Plant (LAMP) in Kuantan and leave Malaysia.
The NGOs claimed the rare earth refinery was a bad investment for the country and had no social licence to operate.
Beyond Nuclear Initiative (BNI) coordinator Natalie Wasley said the Australian initiative supported and commended the mass movement in Malaysia against Lynas.
“The LAMP proposal will leave a radioactive legacy for Malaysia’s future generations and fails environmental and social justice tests.
“Tens of thousands of mothers in Malaysia like myself share the same commitment in shutting Lynas down. We ask Lynas shareholders to reconsider whether Lynas is really a good investment and to divest,” Wasley said in a statement here.
Although Australia is a signatory to the Basel Convention Control, which is aimed at reducing the international movement of hazardous waste, an August report said Lynas would keep its temporary operating licence (TOL) until plans for a permanent waste disposal facility were approved. The plan was submitted in early July.
The protest comes on the heels of a three-day occupation outside the Lynas headquarters. Himpunan Hijau has been ramping up its protest efforts after the signature drive it launched in August where they were said to have met their target of one million signatures in 36 days.
The group said that 1.2 million Malaysians had to date signed its petition of protest in their bid to get the Lynas plant to close down its operations in Kuantan.
On November 20 last year, activists from the Save Malaysia Stop Lynas (SMSL) group had similarly protested outside Lynas Corporation’s headquarters during the company’s AGM.
On September 3 last year, the Malaysian regulator Atomic Energy Licensing Board granted Lynas (Malaysia) Sdn Bhd its TOL, which came with several conditions. AELB director-general Raja Datuk Abdul Aziz Raja Adnan had then said the TOL would be for a two-year period that would end on September 2, 2014.
Environmental activists have raised health and safety concerns over the RM2.5 billion plant in Gebeng, Kuantan.
“Here is yet another example of an Australian mining company operating abroad despite ongoing and widespread opposition from locals in addition to well-founded environmental concerns,” Aidwatch director Thulsi Narayanasamy said in a statement.
“Many people don’t realise how serious the activities of Australian mining companies overseas are, and their ability to get away with a flagrant disregard for people, the environment and the law.”
Himpunan Hijau is today also joined by members of SMSL, who are expected to ask questions of Lynas directors at the shareholders meeting.
SMSL spokesman Tan Bun Teet said the shareholders had the right to know the truth, stressing that the organisation would continue with its campaign until the plant was shut down.
“We cannot accept another toxic legacy when the Malaysian Government has such a bad track record in dealing with toxic radioactive waste which continues to pose great risk and hazards to the tax-paying citizens when Lynas gets away paying no tax,” he said.
For the past two years the biggest environmental movement in Malaysia has formed in response to the Australian rare earth miner’s controversial effort to build the world’s largest industrial rare earth refinery, the LAMP.
Himpunan Hijau chairman Wong Tack, who had led a 14-day 300-km walk, the Green Walk, from Kuantan to Kuala Lumpur last year in protest against the Lynas project, threatened that more Malaysians would come out to protest if the plant was not shut down by next year.
“We are giving Lynas a deadline to pull out by June 29, 2014,” Wong said in a statement today. “If they don’t, that will be the date when millions of Malaysians will come to the streets to shut down this toxic plant. This is the message we give to Lynas and its shareholders.”
Wednesday, 27 November 2013
Tuesday, 26 November 2013
Experts Opinions of the Lynas Rare Earth Refinery Project in Malaysia
Press statement of Save Malaysia Stop
Lynas (SMSL)
Experts
Opinions of the Lynas Rare Earth Refinery Project in Malaysia
24
November 2013
 |
| From left, Tan Bun Teet (chairperson of SMSL), Wong Tack (chairperson of Himpunan Hijau), Theivanai (Enviromental lawyer, Friends of the Earth, Malaysia), Gerhard Schmidt (Senior scientist in Oeko Institute, German), Dr. Yoshihiko Wada (PhD in Ecological Economics, Doshisha University, Japan), Dr. Peter Karamoskos (Nuclear Radiologist, Public representative in ARPANSA, Australia), Prof. Wang Guo Zheng (Senior scientist in China rare earth industry), Prof. Chan Chee Khoon (Epidemiology, Universiti Malaya) |
This morning, about 150
concerned Malaysians attended a seminar to gain an in-depth understanding of
the Lynas rare earth refinery project in Malaysia from imminent international
and local experts at the Mandarin Court Hotel. The experts have shared their knowledge of the
issue and expressed concerns for Malaysia.
Expensive Toxic Legacy in the Making
Gerhard Schmidt, a Senior Scientist
and a toxic and radioactive waste expert from the Oeko Institute in Germany has
done a thorough analysis and evaluation of Lynas’ waste and pollution blue
print. He said.
“In Europe, past mistakes have costed
the public a lot of money to clean up decades later till today, not counting
the health care costs that might have resulted from the hazards. The Malaysian
Government should take the scientific advice to require Lynas to manage its
waste and pollution to international best practice standards and not to leave
another expensive toxic legacy.”
SMSL has requested for meetings
with the two regulators – the Atomic Energy Licensing Board (AELB) and the
Department of Environment (DoE) as well as for a plant visit at the Lynas plant
whilst our experts are around. The
government did not respond and Lynas wanted the visit to happen in December,
by which time the experts are gone.
Dr Peter Karamoskos, a
nuclear medicine physician and radiologist and the public representative on the
Radiation
Health
Committee of the Australian Radiation Protection and Nuclear Safety Agency
(ARPANSA) explained to the audience how international radiation safety standards
are set and promoted. He commented,
“The International Atomic Energy
Agency (IAEA) acknowledges that radioactive waste poses a threat to human
health and therefore must be managed properly in a scientifically sound manner. We cannot determine if a project is safe until there is
transparency both at the company and the governmental levels. In the case of Lynas, the lack of
transparency is a major problem. Malaysia really has to make sure its regulation is
implemented to prevent any runaway risk to the public for many generations to
come.”
Financing of a Toxic Project
The Lynas project was made
possible through finance provided by the Japanese Government through the Japan
Oil, Gas and Metal Corporation (JOGMEC). Professor Yoshihiko Wada from the Doshisha
University in Kyoto said,
“We have to work together to
fight the tyranny of economic supremacy that put profit above people and the
environment. We need to make the
Japanese Government more accountable for their financing. We have to make sure
that their investment is done in accordance with their own established ‘Environmental
and Social Guidelines.’[1].
“I
urge concerned Malaysians to use this leverage to exert political pressure on
the Japanese government. We can request
for formal inquiries that can be submitted through Members of the Diet (Parliamentarians),
as well as educating the mainstream media.”
He added.
Is a safe rare earth plant possible?
If Lynas is serious about its
corporate social responsibility and to live up to its ‘green’ image, the
findings and recommendations of the Oeko evaluation report should have prompted
the Australian company to change or at least initiate the following:
•
a completely new waste management concept to comply with international
best practice,
•
build new interim storages for their wastes with a really
thick liner underneath to prevent leaks,
•
a site for a Permanent Disposal Facility (PDF) with
excellent isolation conditions and nominated in consent with the then-affected
communities,
•
an additional cleaning stage for acids in their off-gas
treatment stage added.
Mr Schmidt remarked, “To my disappointment Lynas has
not done that and the Malaysian Government has not acted in its duty of care to
make Lynas do that in the interest of its citizens and the environment and for
the country’s long-term well beings.”
Mr Tan Bun
Teet from SMSL concluded
“Our
government kept claiming that the Lynas plant is scientifically safe. This is
why we have sought scientific input from credible and independent scientists
and professionals who can provide us with their opinion and views without
prejudice, fear or favour. We will
continue to campaign on the Lynas issue to build a safer Malaysia. This is just another step we have taken.”
For further comments or contact of
any of the experts, please contact SMSL hotline number 012 982 3302.
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