Lynas Corporation Limited

Malaysian PM Acknowledges Lynas Operations in Malaysia: Lynas Corporation Limited (ASX: LYC) has an engagement in integrated extraction and processing of Rare Earth minerals, primarily in Australia and Malaysia; and development of Rare Earth deposits. The Company recently announced that the bondholders have converted a further portion of their convertible bonds from debt into equity. Each reduction of debt would be an important step in improving the balance sheet as the Company continues to position itself for its next phase of growth. In another update, LYC welcomed the Malaysian Prime Minister’s comments acknowledging the importance of the continuation of the Lynas operations in Malaysia.

In its quarterly report (ended on March 31, 2019), invoiced sales revenue increased by 26.8% to $101.3 Mn as compared to the prior quarter.Its closing cash balance was reported at $67.1 Mn. LYC posted new record production for the period despite slower start-up in January and ramp up of separated neodymium (Nd) and praseodymium (Pr) train. In total, 1,591 tonnes of NdPr produced, which included over 600 tonnes NdPr in March. Total rare earth oxide (REO) production was reported at 5,444 tonnes.

H1FY19 Financial Performance: Revenue from ordinary activities decreased by 10.5% pcp to$179.8 Mn. Its EBITDA decreased by 38.8% pcp to $50.8 Mn. As at 31 December 2018, cash and cash equivalent of the company stood at $53.7 Mn.
 

Balance Sheet as at 31 December 2018 (Source: Company Reports)

What To Expect: Despite the various challenges in the first half, the production run rate was excellent and reflected the improvements delivered by the Lynas NEXT project. It provides a strong foundation for continued improvements in the second half of the year.

Stock Recommendation: Lynas Corporation’s share generated positive YTD return of 70.68%. It is trading towards its 52 weeks higher levels. Its current ratio for H1FY19 stands at 3.26x which is better than the industry median of 1.87x, which indicates the company is in a better position to address its short-term obligations. Since the stock is trading slightly towards the higher level, we advise the market players to wait for the correction to make an entry.

Hence, considering the aforesaid facts and current trading level, we put our “Expensive” recommendation on the stock at the current market price of $2.730 per share (up 4.198% on June 5, 2019).
 

Greenland Minerals Limited

GGG Reported Increase In Rare Earth Recoveries By 8%:Greenland Minerals Limited (ASX: GGG) has an engagement in mineral exploration and project evaluation specifically of Kvanefjeld project, located in Southern Greenland. The Company recently announced Kvanefjeld optimised feasibility update where it highlighted an 8% increase in rare earth recoveries to 94% within the refinery circuit.It also reported US$31 Mn per annum increase in revenue at current rare earth prices. It also reported reduction in annual operating costs by 40%.

In March’19 quarterly report, as per optimised civil engineering studies completed by multi-disciplinary team, civil construction costs reduced by 44% to US$175 Mn, and the Company is on track to reduce overall capital costs significantly.Its net cash used in operating activities was $0.945 million for March’19 quarter.


FY18 P&L Statement (Source: Company Reports)

What To Expect: Rare earth elements are used in a wide variety of applications, which includes the world’s strongest permanent magnets. The magnet industry continues to be a major growth area, owing to the essential requirement of high-powered magnets in many electrical applications. In recent years, growth in rare earth demand has been limited by the end-user concerns over pricing instability and surety of supply. However, demand has returned, and the outlook continues to strengthen.

Kvanefjeld provides an excellent opportunity to introduce a large, stable supplier at prices that are readily sustainable to end?users. In addition, rare earths from Kvanefjeld will be produced in an environmentally sustainable manner which further differentiating it as a preferred supplier of rare earth products to end?users globally. These factors serve to enhance demand growth.Uranium forms an important part of the global base?load energy supply, with demand set to grow in coming years as developing nations expand their energy capacity.

Stock Recommendation: Greenland Minerals’ share generated positive YTD return of 69.12%. Its current ratio for FY18 stands at 6.52x, which is better than the industry median of 1.67x, indicating a better liquidity position to address its short-term obligations. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $0.115 per share.

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