Signs of life in the shares of rare earth hopeful, Lynas Corporation (LYC), which closed up more than 6% yesterday after it revealed some mildly encouraging news.
The shares ended up 2.5c at 43c after rising 10% to 44.5c at one stage after it revealed it had renegotiated the terms of a big loan involved in the financing of its controversial rare earths plant in Malaysia.
The loan facility with Sojitz Corp and Japan Oil, Gas and Metals National Corp was deferred to March 31, 2015 from January 19, 2014 the date by which Lynas is required to meet targets for production volumes and cash operating margins.
Lynas said the extension reflects ‘‘subdued global rare earths demand and previous delays to the start up of the Lynas Advanced Materials Plant’’ in Malaysia.
The delay will give the company time to get the plant up to full production and for the current bout of international prices weakness to hopefully pass as demand picks up.
Shipments of rare earths began in the June quarter from the company’s 11,000 metric tonne-capacity refinery in Malaysia’s Pahang state after it started production in February following protests and legal challenges over radiation concerns. The company said it earned $900,000 for a shipment, its first paycheque.
The company also announced yesterday that its full year loss grew to $107.4 million for the 12 months to June 30, from $102.6 million.
LYC YTD – Loss widens, new debt deal struck
According to mining industry reports, the low prices have been troubling Lynas for a while The Metal Miner website reported on September 3 that:
"Apparently low rare earth prices are impacting Lynas Corporation, which began refining rare earths in Malaysia shipped from its Mount Weld mine in Australia. REIN (Rare earths Industry news, another website) reported that Lynas has “set a minimum price schedule” to come into effect July 1.
The article states that current prices of US$16 to $20 per kilogram are 25% below the minimum level for producers and are not sustainable.
"Lynas Corp. said the company will try to persuade its mostly Chinese customers that they should lock into long-term contracts to guarantee supply, even though that would mean paying above-market prices."
The extension would indicate that Lynas has had trouble getting Chinese buyers to sign up to high priced long term contracts. Lynas said in the statement that the because of the lower prices and delays to the Malaysian plant, "the production and financial profile of Lynas will be different to that envisaged at the time of the loan facility’s establishment. Consequently, the parties have executed a deed of amendment under which the terms and conditions of the facility are restructured to better suit the new profile.
During the negotiation of the deed of amendment, Sojitz and JOGMEC emphasised their continuing support for Lynas.
