LYC - Lynas Rare Earths

[nioka]

There are a few interesting points raised in the presentation released today;

- CNMC "share the vision of Lynas, the business model will not change." I'd like to know what safeguards are/can be put in place to ensure that the business model will not change. Currently the business model revolves around focusing on meeting the demand of Japan, Europe, and the US. Does one of the safeguards include the board being expanded to 8, with the chairman having the 'casting vote?' Curtis will remain the chairman, so I would assume he would use his vote to ensure the business model won't change. I'm unsure as to what this means to be honest, any thoughts from others would be welcomed.

I can't see that there can be any guarantee that the business model will not change. Any vote is in the hands of one man and he is particularly friendly with the chinese side of any discussion on policy. What happens if he ;
1. Dies or becomes incapicated
2. Sells his holding in Lynas.
3. Retires
4. Gets voted off the board in the future.
5. Gets involved in other companies and loses interest in Lynas.
Any one or all of these things and many others are possible. No company should have their future tied up in one man.

 

[renim]

hey
if the chinese help this through a cash shortfall
and if the chinese are not taking this off the market
and it makes aussie jobs
and pays aussie taxes
then it sounds good to me.
ps follow the money, bet on the chinese

 

[vincent191]

LYC went around for months, hat in hand, looking for financial support. They saw their share price plummet to very low levels. No Australian Company or fund managers showed any interest.

At one time it looked like it will all collapse into one big heap. They had to look towards the Chinese for funding to get them going again. Now we hear people complain that it should never had been sold to Chinese interest.

Well, I say this much to the critics "where were you when the chips were down?"

 

[nioka]

Part2. (some paragraphs left out.report split into 2 pts to be accepted)

In surveying the iron ores of Bayan Obo for the purpose of setting up a contained, vertically integrated, and thus hidden from prying Western eyes, steel industry it seems that Soviet geologists familiar with deposits in the Kola peninsula of the Soviet Union noted and brought to the attention of the fraternal colleagues they were training in Soviet style exploration drivers that the Bayan Obo iron was a rich source of bastnaesite, the most common hard rock ore of the rare earth elements. The rest is a convoluted history of fraternal cooperation and is best left for a spy novel featuring Chinese students at Kola trying to fit Russian mining, extraction, and separation techniques from there to the operations at Bayan Obo, where rare earth production was primitive, labor intensive, and subject to the whims of the commissars overseeing the planning and operations of the Baotou Steel Works, a great showcase of the strength of the people and the party under Chairman Mao and not to be interfered with lightly.

By 1997 when Deng Xiaoping’s dictum that “the middle east has oil, we have rare earths” had filtered to the local level in Bayan Obo, a short lived cooperation allowed an American survey team from the USGS in concert with China’s Ministry of Metallurgical Industry, to go to Bayan Obo and issue for public consumption - "The Sedimentary Carbonate-Hosted Giant Bayan Obo REE-Fe-Nb Ore deposit of Inner Mongolia, China: A Cornerstone Example For Giant Polymetallic Ore Deposits of Hydrothermal Origin." I am certain that this title was first written in Chinese to emphasize that theirs was a lot bigger than any of ours; it is traditional in the orient to write like this.

That 1997 study concluded that:

on the basis of reported estimates of total reserve(s) of 48 million metric tons (average grade 6 wt. percent Re2O3 , Drew and others, 1990) to as much as 100 million metric tons of Re2O3 of unspecified average grade (unofficial estimate from Chinese colleagues, oral comm.., 1987), Bayan Obo is the world’s largest known REE deposit.

The report continues that “although the [total] size has not been disclosed in the Chinese literature… [it has been acknowledged based on unreported drilling data] that Bayan Obo is China’s largest niobium deposit.”

What don’t we know about Chinese resources and reserves of REOs? We’re on the way to finding out.

I will continue this discussion in the coming year. The point I am making is that western businessmen who base their long term supply requirements for rare earths not only on continued access to Chinese production of rare earths but on Chinese produced studies of resources and reserves as well as the idea that Chinese miners and refiners economically competitive with western operations are walking on thin ice.


Recent Chinese actions in the non-Chinese rare earth mining space make it even more likely that China itself needs rare earths from the outside. What does this mean for the future of technology based products in the west?

It means that you should be looking at Canada's Avalon Rare Metals and Great Western Minerals Group both of which are listed on the TSX. It also means that you should be looking to see if the private U.S. companies, Molycorp and Thorium Energy, Inc., have plans to go public.

 

[nioka]

China Will Push Increased Demand for Rare Earths
Jack Lifton

Laissez-faire capitalism is alive and well in the rare earth mining sector of the economies of the United States, Canada, Australia, and the Republic of South Africa. None of these top tier industrial economies issues or funds government mandates for the exploration for, production of, or production of end-use products of the rare earth elements and/or thorium. Thus the world’s most competent, experienced, and educationally qualified mining exploration and engineering groups, have only the “free” marketplace to look for funding for such endeavors. The governments of some other nations, particularly, China, but also now including Korea and Japan as well as, most recently, the central governmental regulatory bodies of the European Union take a more pro-active role in securing for themselves, for their domestic use, supplies of materials that they consider critical to their heavy and high tech industries and to their military-industrial complexes. The rare earth elements and thorium are at the top of everyone’s list in the pro-active countries. The same is true for the “reactive” countries, such as today’s USA, Canada, and Australia, but the strength of the reaction has not yet been effective in producing civilian or military sector funding for rare earths or thorium.

At this very moment Australia's parliament is grappling with reacting to a Chinese "private" company's offer to buy 51%, i.e., control, of Australia's largest and best rare earth mining development, ASX listed Lynas Corp (LYSCF.PK), the huge Mt. Weld ore body of which is said to be ready for production.

Apparently Australia's other major rare earth mining company, ASX listed Arafura, has already been approved to sell 25% to a Chinese corporate investor with additional equity for the Chinese investor in negotiation.

In October of 2007 the National Academies published a book entitled “Minerals, Critical Minerals, And The U.S. Economy,” which was an analysis of a two year long study by a group consisting mostly of academics but which also included some selected representatives of the U.S. mining and manufacturing industries. The study identified not only which minerals and metals were critical, i.e., which ones were the bases of technologies that could not be actualized as practical devices without them, but also set out criteria for assessing the impact of the interruption of their supply on U.S. industry, the general economy, and, in an additional volume, “Managing Materials for a Twenty First century Military,” on the capability of the U.S. military to be effective in the event of the interruption of the supply of critical materials. For today’s discussion I want to reproduce the Mission Statement designated as the “Statement of Task” for the first study:

Statement of Task

Understanding the likelihood of disruptive fluctuation in the supply of critical minerals and mineral products for domestic applications, and making decisions about policies to reduce such disruptions, requires thorough understanding of national and international mineral sources, mineral production technology, the key uses of minerals and mineral products in the United States economy, and potential impediments to the mineral supply.

This study will:

Identify the critical minerals and mineral products that are essential for industry and emerging technologies in the domestic economy (addressed in Chapters 1-3 and in culminating discussion in Chapter 4);

Assess the trends in sources and production status of these critical minerals and mineral products worldwide (addressed in Chapters 3 and 4);

Examine the actual or potential constraints, including but not limited to geologic, technological, economic, and political issues, on the availability of these minerals and mineral products for domestic applications (addressed in Chapters 3 and 4);

Identify the impacts of disruptions in supply of critical minerals and mineral products on the domestic workforce and economy (addressed in Chapter 2);

Describe and evaluate the current mineral and mineral product databases and other sources of mineral information available for decision making on mineral policy issues (addressed in Chapter 5); and

Identify types of information and possible research initiatives that will enhance understanding of critical minerals and mineral products in a global context (addressed in Chapter 5).

I want to address item 3 above, because when it is analyzed in further detail, it exposes a serious flaw in strategic planning, which is that prior to assessing the impact of geological, technological, economic, and political issues on the availability of critical minerals it is first necessary to assess the credibility of the numerical data, which is the basis of your analysis. In layman’s terms it comes done to:

Is the data accurate,
Is it complete,
Is the provider truthful, or
Is the provider truthful but incapable of being correct due to ignorance, lack of the appropriate scientific background, incompetence, or inability to assess or measure the credibility of either the data or its provider of that data, and
In any of the cases above is there any hidden agenda coloring the transparency of the data?

When we accept data on resources and reserves from the PRC not only are we facing an unknown degree of data filtration for reasons of commercial competitive advantage, with which we are all, or at least should be, familiar, but also we are facing the filtering imposed by a government that mandates that if a resource level has been declared to be present by a mining operation then that operation will be required to either produce a certain minimum amount or be faced with losing its access to markets and finance through a reduction in its next production allocation. The simple fact of life that failure to meet government imposed production allocations may lead to loss of position without any hope of redeeming one’s economic (job) status or social status is far more important to a Chinese manager than accuracy in reporting the reserves upon which that allocation was based.

In China if you set your goals lower by fudging what you think you have, or can actually produce, and then meet your goal, set for you by and in the five year plan, you have been successful.

As recently as 1993 today’s situation, China as a the ultimate monopolist in rare earths, was far from obvious, and was not even considered likely by western observers.

In a joint survey of the rare earth’s industry published in 1993 as “International Strategic Minerals Inventory Summary Report- Rare-Earth Oxides, U.S. G.S. Survey Circular 930-N it was stated after a detailed analysis of the then known data on rare earth resources and reserves that:

The country having the greatest potential for REO (rare earth oxides-the commonly used identifier for this category) production is South Africa, which could produce 41,280 metric tons per year as compared to an actual production (1993) of 700 metric tons per year; this would be an increase of approximately 59 times the present production. The United States has the capacity to produce about 32,764 metric tons per year, which is a 50% rise over the 1989 actual production of 21,875 metric tons per year. China could undoubtedly produce more REO than is reported, especially if Bayan Obo steel slag could be successfully treated. Australia could produce 11,462 metric tons per year, about half again the present rate, if Olympic Dam and some of the placer operations introduced REO mineral recovery plants. REO output in Brazil could be raised by a factor of five with little trouble.

The difference in the quality and credibility of the data apparently was enough to cause the authors of this study, financed by the UN and the most credible commodity mineral data reporting agencies in the USA, Canada, Australia, The UK, and Germany to not state or estimate, quantitatively, their conclusions about future Chinese production in 1993.

But even before that it was clear to western educated and trained geologists familiar with mining in the Soviet Union that China was far too unsophisticated to provide reliable data on its potential mineral resources. A geologist colleague of mine told me that as he traveled across that part of the Soviet Union’s mining landscape which it was permitted for a foreign, Canadian visitor to see, he was struck even thirty years ago by the quality of the data being obtained as deposits were mapped meticulously while, in stark contrast, his conversations with Russian and other Soviet mining exploration personnel revealed that plate tectonics was not “officially” taught in Soviet universities that were training geologists. Soviet era geologists were thus not very good at the theoretical bases for exploration, he said, and to advance in the political hierarchy one did not disagree with official geological “doctrine.” Those who advanced the use of new or foreign ideas rarely got the resources to test those ideas. No one could benefit officially for example from discovering or developing a gold mine, so those mining cooperatives that did find easily fungible resources were engaged in a constant battle with bureaucrats and corrupt officials for scarce equipment, supplies, and skilled labor for all of which they traded with other similarly situated enterprises outside of the official economy. It goes without saying that “official” data on Soviet mineral resources and reserves were a total fabrication produced in Moscow to showcase Soviet “progressâ frequently with scant regard to the data even for proven resources.

 

[The Muffin Man]

LYC up 12.62% on the back of some strong volumes. There seems to be movement at the station, which is odd because I thought it would have traded around it's 50c range until any news re the FIRB decision.

So, what made the price jump on Friday? A counter offer? In any case, surely the Chinese offer has to be increased from 36c considering it is now trading at 58c and touched 60c during trading on Friday.

 

[johannlo]

Lets assume the FIRB approves the transaction. Are LYC obligated to accept the 36c price or is there room to maneuver on that one? What if a different offer comes in?

I have no hard evidence but you would think that the govt would be highly sensitive to any appearance of anti China bias after the Rio stuff. Also whilst I'm on speculation, here's hoping CMNC saw the Minmetals knockout last minute price hike and the effect that had on the Oz deal, and does something similar. Though of course in this case there's no competing offer to motivate that

 

[george46]

any viws on this one sems to move up solit now even when the market moves down no news from the gov yet must be alots off pl there on siteline

 

[george46]

its a worry iff this approval dont came thay olny have cash to last them thl mid octo
i hoppe thay get the approval

 

[vincent191]

Something is in the air, the sp is climbing against a falling market. Maybe the chinese cash is coming soon.

 

[enigmatic]

China Released there 'Rare Earths Industry Development Plan 2009-2015'

Think it stirred a few people realizing that there is huge growth in Rare Earth .
This has seemed to had some impact on LYC GGG ARU..

 

[johannlo]

I am confused at recent massive spikes in ARU and LYC until I saw the general spikes across all REE stocks. But is it due to that single report?

Annoyed, got stopped out of ARU trying to do a quick trade (betting on 50 support, failed but only just) and BANG this happens literally 2 days after, DOH

Cmon FIRB yes or no just give us an answer so there is some direction moving forwards!!!!!!!!!!!!

 

[enigmatic]

I would assume it is just on this one report.. Rare Earth seems to lose interest quiet quickly mainly i think as there arent to many players and well alot of these projects are well in the future..

I was lucky enough to pick up some more ARU at sub 50c but forgot to look at LYC..

 

[bandicoot76]

after looking at all the rare earth players i still think ALK's dubbo ziconia project is still the most under-rated & best value... plus it isnt a puppet with china pulling its strings! one to watch IMO

N.B...i hold both LYC & ALK

 

[ColB]

LYC opened at .80 cents today and closed at .695 a fairly savage drop even considering its recent run.

After market activity (post 4 pm) highlights several trades at .795 which I think are what they refer to as cross trades between brokers or similar.

Could one of the seasoned investor/traders on this forum please offer me their perspective on the significance of this activity and how it may affect tomorrows trade.

Of note also, is an after market release (5.33pm) of a 39 page September investor presentation relating to the activities of the company.

Any response appreciated

 

[vincent191]

Trading halt today pending an announcement about the China deal. Judging by the way the sp had been climbing I think it is good new.

 

[johannlo]

well well well, a nice big 'talk to the hand' from the FIRB. Makes you wonder why they took so long to go about it.

There will be another route to raising cash (SPP looking v likely now, probably loans and / or JV thrown into mix). Just wondering how the market is going to see it in the ST?

On the plus side any capital raising will be done at much less dilution than the pitiful 36c price of the CMNC deal and we don't surrender majority control. Could be one of those contrarian moments where the SP does the exact opposite of what you'd commonly expect, at least if some of the baying crowd sentiment seen on some of the other forums is true.

 

[vincent191]

THE CHINESE DEAL IS OFF!!!!! Now lets us see what the local institutions and shareholders will do. Plenty of people didn't like the Chinese deal, now is the time to stand up and be counted. Are we ready to support this Company or is it all talk and sour grapes?

I am sure LYC has got a plan B in case the FIRB knocks back the deal, we will find out tomorrow and lets see what the sp will do. Often those that complain the most will dump the stock like a ton of hot bricks.

I have supported LYC when it was down and out, I will do the same again. I am holding on.

Reports that LYC is dead is grossly exagerated.

 

[Kieran]

I held LYC in from Apr-07 to Mar-08 and I'm very optimistic on the future of the company in the long term. Depending on what the SP does in the next few days I'd be looking to buy in as an opportunity to take part in any capital raising that takes place. However, IIRC, LYC has previously gone overseas to seek capital (at a very discounted rate) instead of offering the same opportunity to existing shareholders. This is most disappointing and I hope it doesn't happen again.

 

[vincent191]

I held LYC in from Apr-07 to Mar-08 and I'm very optimistic on the future of the company in the long term. Depending on what the SP does in the next few days I'd be looking to buy in as an opportunity to take part in any capital raising that takes place. However, IIRC, LYC has previously gone overseas to seek capital (at a very discounted rate) instead of offering the same opportunity to existing shareholders. This is most disappointing and I hope it doesn't happen again.

They had little choice at the time. The locals especially the institutions and banks dump LYC until the sp was at ridiculously low price (less than 20 cents from memory). At such a low level a rights issue to raise money from existing shareholders was out of the question.

Now that the sp is a more healthy 90 cents a rights issue is a viable option. Lets hope supporters outnumber the speculators in the next few weeks and give lyc a fair go.

There is also rumours that the Chinese may make a second bid. This is one time that rumours may work in our favour. It will help to keep the short sellers in check.

Short sell the sp down and the Chinese come back with a much higher bid and the short sellers will all be dead meat!!!