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Mining
The short term is cloudy as a craft ale for Lynas Rare Earths (ASX:LYC) as they await an appeal to extend the import of low level radioactive materials to their Malaysian processing plant.
But its executives continue to see the rare earths market maturing like a fine wine in the long-term as demand for permanent magnets that use Lynas’ NdPr accelerating over the course of the decade.
Pricing in China has been volatile and has trended down over the last month, failing to catch a bump from the end of Lunar New Year celebrations.
Lynas bosses, who say they punt a bottle of red wine on rare earth price predictions while cautioning they don’t have a crystal ball for them, say at over US$85/kg minus VAT prices remain historically strong.
“Two years back if NdPr is at US$85 you’d have to sign up. Two years ago, we would never imagined it’s 85. And terbium is US$1200 … So first point is that the prices are pretty high compared to the last (few) years with the exception of probably six months in 22,” Lynas COO Pol Le Roux said.
“Second, it is true that it went a bit down after the Lunar New Year because the demand did not increase as expected in China, right after the Lunar New Year, but the door is still open, you know that the production quotas will be announced sometime, no one knows and uncertainty is never very good.
“But for me prices are not of concern. They are pretty high, expectations are that we will stay stable over the next quarters. And in an environment again where the economy generally speaking and the demand in China specifically is not very high having this kind of price for the current situation in China is a very positive news.
“And I hope that we drink wine again next quarter.”
The big short-term headwind facing Lynas, which pulled in over $150m in profit in the first half of FY23, slightly down on the same period in 2022, is an impending deadline on imports of lanthanide concentrates into Malaysia on July 1.
Its Kuantan processing plant is the largest facility producing NdPr oxide outside China, but has faced local opposition from some quarters since before its opening in 2013 due to the storage of low level radioactive waste from cracking and leaching of concentrates from its Mt Weld mine.
A plant is being built in WA in Kalgoorlie-Boulder to handle that step, but Lynas, which is investing $500m to expand its Mt Weld mine to produce 12,000tpa of NdPr equivalent from 2024, faces a potential production gap given the uncertainty of the ramp up time of the Kalgoorlie facility.
The budget for the Kal project was already increased from $500m to $575m last year. Lynas MD Amanda Lacaze said the company, which produced 4,457t of rare earth oxides and 1508t of NdPr in the December quarter, is building up inventory to ensure it can supply customers.
It has appealed a decision from the Atomic Energy Licencing Board that it would not be able to change the condition in its last operating licence imposing the July 1 cut-off. But how long that will take is anyone’s guess and Lacaze is not prepared to say.
She continues to tell analysts the science is on Lynas’ side.
“It was such a big issue in 2013 but as our local communities will tell you, that was when they didn’t know what it was going to be like, they didn’t know how we were going to run the business. They didn’t know whether we were going to be safe or not safe,” she said.
“There was all of the angst about is this gonna make our fish glow in the dark, all of that sort of stuff, because you had silly politicians making YouTube videos sort of talking about those sorts of things.
“So I think 10 years on our community see us to be a serious business that takes our duties and responsibilities to our local community and to the environment seriously. And inside the company, as I always say to our people, we need to always do the right thing, we need to always comply with the regulations.
“And if we do that, ultimately decisions do have to be made fairly, equitably, and based on evidence, and the evidence is on our side.
“So how long will it take? Well, I wouldn’t want to predict how long Australian regulators take to do anything much less … not in my own country, but I think it has the attention of government and it has the attention of the regulators.”
Miners were trounced today, sliding 3.15% in no small part thanks to Fortescue Metals Group’s (ASX:FMG) going ex-dividend while broader sentiment across the materials sector was dirt poor.
BHP fell more than 3% and is now down 1.72% YTD, with much of the China reopening bull run now erased, while lithium players were poleaxed with Pilbara Minerals (ASX:PLS) down more than 7% despite announcing a debt facility for its downstream conversion JV with South Korea’s POSCO.
Also down was Fenix Resources (ASX:FEX), which elected not to pay an interim dividend, saying it was maintaining prior guidance that dividends would wait for the full year results in August.
The small scale iron ore producer announced a $10.9 million half year profit after tax after shipping 659,351 wet metric tonnes of iron ore in the December half at an average realied price of $112/dmt FOB.
That drove revenues of $85m, with a 10% fall in C1 costs to $81.25/wmt maintaining a decent margin.
Fenix continues to have 50,000t a month hedged out to June at a fixed price of $173.85/dmt.
“Fenix has reduced our operating costs in the face of challenging market conditions,” chairman John Welborn said.
“The Company’s disciplined approach to hedging has supported a strong profit result despite lower prevailing iron ore prices last year.
“The acquisition of Fenix-Newhaul is proving to be a game changer, both in terms of reducing costs and providing Fenix a unique advantage in the Mid-West as a fully integrated mining, haulage and logistics company.
“With iron ore prices strengthening, Fenix is well-positioned to outperform in the second half as we focus on advancing our growth aspirations and delivering exceptional value for shareholders.”
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