They are waiting to have the Malaysian elections before they issue the TOL.
LYC - Lynas Rare Earths
- Thread starter nioka
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They are waiting to have the Malaysian elections before they issue the TOL.
Why do you say that?
Lynas Corporation Limited (LYC.ASX, $0.71/sh, Mkt Cap $1.13b) – Management of residue offshore increases execution risk and costs – TRADING SELL PT $0.50/sh.
•We previously issued a sell recommendation on LYC, predicated on the TOL not being issued until post election given it remains a highly politicised issue.
•We remain of the view that the TOL will be issued post election and reiterate our sell recommendation on growing concerns regarding dilution should the convertible bonds price be reset, project execution risk, and funding implications.
•The only major change in yesterday’s market announcement was LYC announcing it is willing to ensure all material causing concern to the Malaysian public being removed through conversion into co-products and exported elsewhere in a form acceptable to international markets.
•We don’t expect the Australian or WA government will be a willing recipient and anticipate higher execution risk and costs as a result of exporting waste material offshore.
•Latest expectations are that a Malaysian election will be held in late Q4CY12. It’s widely expected that Prime Minister Najib Razak will table the Budget on Sept 28, dissolve Parliament shortly after and then hold an election within two months.
•The expected delays will also have funding implications and cause balance sheet difficulties in the interim.
•While the plant is now completed in Malaysia, there still remains a long lead time until cash flow generation that will need to be funded by sufficient working capital. We estimate a minimum 6-month lead-time from when the TOL is granted, which in itself could be generous given the complexity of the processing circuit, to account for ore being shipped from Mt Weld, plant commissioning, customer product qualification, and receipts from first sales.
•Total cash balance as of June 30 was $205m. $81m of that is restricted for phase 2 expansion, leaving an unrestricted cash balance of $124m. We estimate a minimum $50m was required for completion of phase 1, an additional $15m for sustaining capital, and $16m working capital spend since July. We therefore estimate LYC currently has just $43m in working capital.
•We estimate $8m a month in working capital requirements in a ‘stand still’ scenario. Therefore should the TOL be delayed until next year we would expect additional funding would be required to ensure sufficient working capital is in place to successfully ramp up the plant to full production.
•We would also like to seek clarification regarding a further dilution event if LYC fails to have the TOL issued by the convertible bond reset date on the 15th of October. This is the date at which the $225m convertible bond can be re-set based on a LAMP non - approval event.
•To us, LAMP Non-Approval Event means “the Malaysia Pre-Operating Permit not being obtained by the Group on or before 15 October 2012.” If LYC has not received a TOL by 15 October 2012, we expect the conversion price is reset to 120% of the VWAP 30 trading days post 15.10.12, vs. a current conversion price of $1.25/sh.
•We recommend clients that have a position in LYC to SELL given the licence uncertainty, funding implications and additional risk of managing waste.
skc
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Can you please provide a source or a link to this? It would be nice to acknowledge the writer of this analysis - assuming it is not your own
I can confirm it is someone from fosters.
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I feel like it's about to be sold off pretty hard.
Sitting on long term support line. (broke it earlier today but pushed back over).
Sitting on long term support line. (broke it earlier today but pushed back over).
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Where do you get this support line from Gringott? A daily chart back to 2007 shows it jumped down through the support today, but never made it back up.
I am happy to concur that LYC is in for some stormy waters. Well according to my decaf green chamile tea it is.
I am happy to concur that LYC is in for some stormy waters. Well according to my decaf green chamile tea it is.
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skc
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That lower support lines looks rather random.
The key feature is horizontal support at 50c and that's where it's headed by the looks.
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Oh come on. Try this then. Weekly chart this time.
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Hmm, all very interesting. Depending on which chart (timeframe) and how you define and draw your support lines, this alters the outcome. I guess this proves I have much more to learn when analysing charts.
The big one we agree on is that LYC is in trouble. I agree with SKC, a solid support line around 46-47c is the next stop.
The big one we agree on is that LYC is in trouble. I agree with SKC, a solid support line around 46-47c is the next stop.
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Fosters' report is based upon the opinion that the TOL will only be granted after the election. It is a possibility I guess, the whole situation is quite amazing. To think that a handful of people can hold up a license for months on end even when various local and international agencies have declared it safe.
Other broker reports believe the license to be given before the election, but they had HOLD/BUY ratings with targets way above the current share price. I don't think anyone knows the outcome apart from the AELB and even they might not know yet. Huge capital decimation for a lot of shareholders though.
Other broker reports believe the license to be given before the election, but they had HOLD/BUY ratings with targets way above the current share price. I don't think anyone knows the outcome apart from the AELB and even they might not know yet. Huge capital decimation for a lot of shareholders though.
A stock for Malaysia experts only
Hi!
We are on the way to the second target I introduced a year ago.
roughly 45-50 Cents (see charts above)
My analysis of Lynas being trapped in a political situation turned out to be right.
Nick Curtis was too greedy and very short minded when he picked Malaysia.
Looks like he could lose it all now if things continue to go wrong, beeing "all in".
In any case Lynas has already lost very valuable time falling behind its main competitor, MCP. A company that surprised the market wit a additional funding this summer, something Lynas still has to come up with as cash runs out. I'm sure the honorable Mr. Curtis will find a proper way to issue a whole bunch of new shares, but will that be possible before the sovereign risk can be ruled out?
The political situation is the main factor here.
Two things have to be considered.
1. Chinese influence
2. Elections
A scenario that people refuse to discuss is btw. the opposition party winning.
If the TOL is held up for political reasons as it seems, BN is seriously challenged.
People want reforms and are tired of the corruption as Umno losing ground. People fear the elections being manipulated and since Lynas stands for corruption anxieties too, the plunge is likely to continue.
0.565 atm, we are almost at that resistance levels already
Lynas has a cash-machine all set up and ready to run. It's simply located in the wrong place. :bad:
Regards
Julia
(currently no position)
Hi!
We are on the way to the second target I introduced a year ago.
roughly 45-50 Cents (see charts above)
My analysis of Lynas being trapped in a political situation turned out to be right.
Nick Curtis was too greedy and very short minded when he picked Malaysia.
Looks like he could lose it all now if things continue to go wrong, beeing "all in".
In any case Lynas has already lost very valuable time falling behind its main competitor, MCP. A company that surprised the market wit a additional funding this summer, something Lynas still has to come up with as cash runs out. I'm sure the honorable Mr. Curtis will find a proper way to issue a whole bunch of new shares, but will that be possible before the sovereign risk can be ruled out?
The political situation is the main factor here.
Two things have to be considered.
1. Chinese influence
2. Elections
A scenario that people refuse to discuss is btw. the opposition party winning.
If the TOL is held up for political reasons as it seems, BN is seriously challenged.
People want reforms and are tired of the corruption as Umno losing ground. People fear the elections being manipulated and since Lynas stands for corruption anxieties too, the plunge is likely to continue.
0.565 atm, we are almost at that resistance levels already
Lynas has a cash-machine all set up and ready to run. It's simply located in the wrong place. :bad:
Regards
Julia
(currently no position)
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After market announcement: LYNAS RECEIVES TEMPORARY OPERATING LICENCE
Talk about darkest before the dawn, eh...
Talk about darkest before the dawn, eh...
After market announcement: LYNAS RECEIVES TEMPORARY OPERATING LICENCE
Talk about darkest before the dawn, eh...
How high do you think it will go tomorrow? $1?
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This thing will be like a rocket tomorrow morning.
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