Earlier today, the share price of Lynas Corporation Limited [ASX:LYC] increased by 4.2%, trading at $1.66 per share. Current trading price is $1.65.
This is still relatively close to its 52-week low of $1.48:
The latest news out of the company is its quarterly activities report, which provides further insight into its operations and the review of its plant in Kuantan, Malaysia.
Lynas’ sales down for the quarter despite building stock
As the company points out:
‘Sales performance in the December quarter was affected by the temporary halt to production in December. Whilst total tonnes sold was a new record, the product mix skewed towards La and Ce compared to previous quarters thus delivering a lower average selling price. As we had anticipated the temporary halt to production, we built stock prior to December with our partner in Japan (Sojitz). Accordingly, we avoided any negative impact to our Japanese customers, who appreciated this proactive support. Our Kuantan plant restarted on schedule at the start of January.’
The total sales revenue for Q2 FY19 was $79.9 million, down from $105.6 million.
Source: Lynas Corporation
Other highlights from the report include, record rare earth oxide (REO) sales volume of 5522 tonnes, over 600 tonnes of NdPr produced in October for the second consecutive month and an early January debt repayment of $3.1 million.
It now has a cash balance of $53.7 million.
What are the prospects for the Lynas Corporation’s share price?
Despite a tough year for the stock, Lynas Corporation is betting big on future growth in the rare earth oxide market, with many of these REOs, such as NdPr, being used in future technologies.
These include electric vehicles and clean energy solutions.
As Peak Resources Limited [ASX:PEK] discusses in a white paper:
‘NdPr, will face a significant supply shortage around 2025 and will be heavily under supplied. Estimates by leading industry observers expect this shortage to be in the range of ~20,000 – 30,000 tpa which is equivalent to current legal production levels. This will be further exacerbated by the restricted Chinese production quotas which are to take full effect by 2020, limiting their annual legal NdPr production to a maximum of ~27,000 tpa. It is also forecast that China will become a net importer of NdPr by 2020.’
So the long-term picture for REOs may be better than its short-term picture.
Lithium is experiencing a similar problem as well, with oversupply driving prices down with many major new projects coming on line.
Going forward, Lynas will be looking for more clarity from the Malaysian government regarding their operation in Kuantan.
Commenting on their talks with the government the company reported that:
‘As announced on 3 January 2019, Lynas has appealed one of the new condititions(syc) which requires the export of Lynas Malaysia’s Water Leach Purification (WLP) residue out of Malaysia before 2 September 2019. Key issues for the appeal include the availability of regulatory approvals, the proposed timetable for export of WLP residue and the significant cost. Lynas is continuing its discussions with the Malaysian government to seek to resolve these issues.’
With so much still riding on its relationship with the Malaysian government, shareholders will be looking for positive news regarding the Kuantan plant over the coming months.
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