At time of writing, the share price of Lynas Corporation Ltd [ASX:LYC] is up 10.38%, trading at $2.18 per share.
In the last three months, Lynas’ share price has seen a significant spike following a takeover bid from Wesfarmers Ltd [ASX:WES], and following that has been in a bearish trend with a recent subdued revival:
Lynas has just released an investor update which outlines an ambitious plan to keep up with demand for rare earths.
Lynas’ share price reacts to plan
The Lynas share price took off at commencement of trading, as investors appeared to like what came out of the company.
There were significant highlights to be drawn from the presentation.
Perhaps the most important bit of data to emerge from today’s announcement was the projected future demand for NdPr, which underpins the Lynas’ bottom line:
With significant growth to be found in electrified vehicles, the company noted that demand for NdPr will accelerate from 2021.
Among other highlights in the presentation:
- Continuously improving production costs
- Full Operating Stage License (FOSL) in Malaysia due for renewal on 2 September 2019
- Upstream processing close to Mt Weld resource
- Downstream processing in Malaysia and US
Reuters also reported this morning that Lynas would be investing $500 million in the WA processing facility by 2025.
There was also an update on their relationship with Japan Australia Rare Earths (JARE).
This includes requested amendments to repayment obligations to extend the term of the JARE facility, and loan term extension to be ‘well beyond 2025’.
Verdict on Lynas
Today’s investor presentation provides a bit more certainty for investors about the company’s long-term plans.
As suggested in earlier coverage, going long on Lynas is all about your risk appetite.
With regulatory risks in Malaysia around the 2 September license renewal, it might be best to wait to see if this issue is resolved.
Alternatively, with moves underway for processing in the US and near Mt Weld in WA, you could get in early — assuming you are fine with risk in the immediate future.
Who knows, another take-over bid may even emerge from the woodwork?
Lynas strikes me as similar to a variety of lithium plays at the moment.
Lots of interest, difficult short-term fundamentals, but at the same time, a pretty rosy long-term picture.
For Money Morning
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