Lynas Corp

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Lynas Corp

Post  jkucher on Mon Feb 14, 2011 8:28 pm


Check out Lynas Corp. LYSCF:OTC on the US market. It's a Australian rare earth metals mine. Apparently China controls 95% of the market and has started limited exports of these materials. China tried to buy them last year when they needed money for a new mine. But they ended up selling more shares. There mine isn't operational yet, so the stock price is low. But prices are rising and will be producing next year. I didn't look into their financials yet. But might be a good play. The alternative for rare earth materials is Molycorp and they are around $47 per share

Lynas LYC.AX
Market cap: $3.2 billion
Flagship project: Mount Weld, Australia
Current Stage: Construction
Planned production: 22,000 tonnes a year by 2012
Pros: Mount Weld is large resource and is very high grade at over 12 percent. Construction is well under way on the concentration and separation facilities. The company is drilling to expand its resource.
Cons: Much like Molycorp's project, Mount Weld will produce a mix of rare earths that is skewed toward lights, mainly cerium and lanthanum. It will also produce neodymium, dysprosium and europium.


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Re: Lynas Corp

Post  Max on Sun Feb 20, 2011 1:03 pm

This one is a tricky one, since it has an ADR on the OTC market, while the exchange for the underlying stock is in Australia. I am using the numbers from the Australian listing/financial statements (numbers from June 2010). All amounts are therefore in AUS dollars, but the current conversion rate for AUD/CAD is nearly 1:1. It looks like the conversion for share count is 10 ADX : 1 ADR.

There are 1.6B ADX shares outstanding (1,000,000,000 of those shares were recently issued at $0.45 per share). Current stock price is $1.93.

Cash is $0.22
Book Value is $0.35

They have very little liabilities and no debt. They are also losing money (very small loss due to very low expenses and no revenue). With the erosion of book value, the assumption must be that all the value of their resources are off of the balance sheet. If that is the case, I would consider the stock highly speculative, since currently they have taken all the investor's money and shown no tangible return on their financial statements.

It would be good to research resource recognition policies to determine how likely it is that they have significant off balance sheet resources that for some reason they are not able report. They can't report because they haven't proven the estimates sufficiently, but if they can't prove the estimates then you are taking the stock on faith.

Kuch, what is your overall strategy with these kind of plays? I am just trying to find out why Lynas compared to all the other stocks just like it. What do you look for, how do you find successful picks, etc....

1) Focus on industry where price is rising due to macro economic factors?
2) Gamble on estimated reserves becoming proven reserves and being included on the balance sheet increasing book value at a future date and justifying the currently overpriced stock? If so, how do you separate good prospects from bad ones?
3) Follow technicals to guage investor interest and possible high volume movements?

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