At time of writing, the share price of Lynas Corporation Ltd [ASX:LYC] is down 2.13%, trading at $2.07 per share.
It has been a tough year for the Lynas share price, aside from a recent spike attributable to an acquisition proposal by Wesfarmers Ltd [ASX:WES]:
In a busy news day for Lynas, it responded to comments by the Malaysian Prime Minister and it was revealed that it is considering the the possibility of moving its ‘cracking and leaching’ operations closer to its resource in Western Australia.
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Lynas share price may be under pressure until Malaysian regulatory problems resolved
This is the key passage from the Malaysian Prime Minister’s press conference on Friday, as he is quoted by Lynas:
‘With regard to Lynas, we have imposed an extra condition, that is they must take away the waste. But they want to take away the waste to where? They want to take it to Australia, but Australia doesn’t want to accept it, so they can’t do it anyway.
‘So what we have done is we have opened up the business to other people, and there are other companies willing to buy up or somehow or other acquire Lynas, they have given us a promise that in future before sending the raw material to Malaysia they will clean it up first, they will crack it and decontaminate it in some way with regard to radioactivity, so that when the raw material comes here, the volume is less and the waste from that raw material is not dangerous to anybody.
‘So, they, this company or even Lynas they can continue if they promise that the raw material from Australia would be brought here only after, what they call, cracking and cleaning it up.’
There is a surprising revelation here.
It is the suggestion by the Malaysian PM that they have been in discussion with ‘other companies’ about the processing plant.
Whether this is Wesfarmers or not, we will see.
Wesfarmers previously came in with a bid for Lynas and it would be somewhat cheeky of them to be in discussion with the Malaysian government about a processing plant they still do not own.
Governance called into question
Matthew Ryland, a portfolio manager with Greencape Capital (which is a substantial shareholder of Lynas) is quoted by The Sydney Morning Herald as saying:
‘We question the governance of companies that make undertakings to foreign governments about assets that they don’t own. We see that as a bit of a governance issue presenting itself.’
Will Wesfarmers up the offer? Who knows?
Meanwhile, it has been reported that Lynas is seeking a way around the impasse with the Malaysian government by examining the value of operating ‘cracking and leaching’ operations near its Mt Weld mine.
Previously, we flagged a potential short-term pullback in the Lynas share price.
This may well continue, unless Wesfarmers ups the offer. So far there has been no specific mention of another suitor waiting in the wings.
I would caution against trying to bet on the news here. Unless you are an expert in the Malaysian regulatory environment. Even then, it seems as if there are simply too many variables.
For Money Morning