An Overview of the latest Lynas News

In the wake of troubles seen by Molycorp (OTCMKTS:MCPIQ) in the US, rare earths investors are no doubt keeping track of the latest Lynas news, or updates from Australia’s Lynas Corporation (ASX:LYC).
In the latest Lynas news, the company reported that things are not actually going so bad. It’s managed to cut its annual losses with cost reductions and higher sales.
However, Lynas’s stock is still down 48 percent year-to-date, and not everyone believes that Lynas is out of the woods yet.

A quick summary of Lynas news in recent years

The share prices of Molycorp and Lynas were doing quite well a few years ago, when rare earths prices skyrocketed as China cut exports in 2010. At the time, China produced over 95 percent of the world’s rare earths supply, so a supply cut created a big problem for end users outside of the country.
However, China continued to export rare earths, while illegal miners circumvented export quotas. Meanwhile, demand fell in the face of high-prices as companies sought out alternative technologies. In 2014, the World Trade Organization (WTO) ruled against Chinese export quotas for rare earths. In other words, while the country may have other methods of controlling its exports, the most obvious one has ostensibly been axed.
Molycorp and Lynas, pressured by the drastic fall in rare earths prices, have struggled. In 2014, Lynas started to ramp up production at its controversial Lynas Advanced Materials Plant (LAMP) in Malaysia, while Molycorp started to expand its Mountain Pass operations in California. However, Molycorp filed for bankruptcy protection in the summer of 2015, and put Mountain Pass on care and maintenance shortly afterward.
Since April 2011, shares of Lynas have dropped 98 percent, from a high of $2.55 to about $0.038.

Lynas continues on

In March, Lynas reported positive free cash flow for the first time since it started mining rare earths in 2011. The company cut costs significantly for the March quarter, leading to AU$35 million in annualized savings.
Furthermore, the company announced in July that it had amended its contracts with suppliers of two major chemical reagents used at its plant, reducing take-or-pay volumes to more appropriate levels for an expected savings of approximately AU$42.3 million.
Meanwhile, a report from the International Atomic Energy Agency (IAEA) has found that Lynas’s LAMP facility is low risk. That’s a key concern considering there’s been a fair amount of vocal opposition to the plant.

Then, on August 17, Lynas announced a restructuring of its long term debt agreements, which CEO Amanda Lacaze called “unreservedly good news for all stakeholders.”
“This announcement marks the end of speculation and uncertainty for all stakeholders,” she said in a statement. “Lynas now has a strong, sustainable financial platform which complements its significantly improved and continuously improving business performance.”

A tough market

Certainly, it would appear that things are going a bit better for Lynas lately. Looking at the financial year ended June 30, the company decreased its losses from AU$345.4 million in 2014 to AU$118.6 million in 2015. Revenues rose fro AU$64.6 million to $144.6 million, year-on-year, while general and administration expenses were cut by roughly two thirds.
What’s more, in the past three months, Lynas’s share price has gained about 12 percent.
However, as alluded to above, that’s still a long way off from where the company’s stock was sitting in 2011, or even at the start of 2015, when it was closer to $0.07.
The rare earths space has not been exempt from the broader rout for metals prices and the mining sector. Indeed, as ABC reported, rare earth mining companies have had a hard time attracting investor interest, especially given past failures.
Still, Gavin Lockyer of Arafura Resources (ASX:ARU) told the publication that Lynas’s relative success has made things easier for junior rare earth mining companies in Australia.
“Luckily for Australia we have seen the likes of Lynas Corporation actually coming online and commissioning last year, which is great for the industry,” he said. “One of the hardest things for small companies is raising capital, and these are very capital intensive projects.”
It’s hard to say when the tide will truly turn for Lynas any time soon, but interested investors will certainly be keeping a close watch.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.