I found this good article discussing REE, several stocks including Lynas and good fundamental information relating the REE market to the global picture for the economy in general.
I am bullish REE, but looking for a good place to invest my $$$. My main concern here is 2 B shares outstanding. I have seen too many pennies use the first wave to fund development, then reverse split 10, 20 or even 50 to 1 once they get up and running so they can put up good per share numbers. Any reason Lynas is "the one"? Thanks!
You still have not addressed the shipping cost differential for Australia rare earths vs. those in China.
Also, where is the demand going to be?
China seems to have no problem in 2010 supplying 100% of the need for their various manufacturers that are using rare earth in China and Taiwan.
I think Australia rare earth is going to have a tough time making money against the Chinese mines in terms of the advantages in shipping or transportation to the refineries and the labor cost.
This is going to be a major factor and problem for an Australia miner for the next 3-4-5 years in my opinion and you have not addressed this.
What about the bigger issue: as China does more exploration for minerals on its continent and continues to find more gold, silver, copper, it will also encounter rare earth deposits. They will use cheap labor to develop those reserves as they are proven before buying supply in Australia and shipping it in.
You use your cheapest and easiest commodity resource first.
Another big problem is Australia's wanting to tax resources 50% that are shipped out of the country for non-domestic use. This is going to hurt investors as companies will have trouble selling their product-minerals to foreign buyers that have to pay a 50% tax. A Chinese manufacturer would rather buy from Canada, Greenland, Africa or China where there will be rare earth for sale in 5 years rather than pay the additional cost for Australia minerals.
Why not address these negatives instead of being a cheerleader for Lynas.
Tankers???. Lynas plans to ship ore concentrate to Malaysia in palletized 1000lb. bags. as standard bulk freight.
Lynas has also projected their total labor cost per Kg. of product as less than 10% of their total unit cost.Their rare earth product will be highly price competitive unless the Chinese flood the rare earth market with product, which I highly doubt they can do.
China looks out 5-10-15-20 years and is buying up reserves of every commodity.
I do not think investors in rare earth should wait around for China to exhaust its supplies of rare earth and cheap labor. That might take 5 years.
Remember everyone in China except the management and owners works for $200-2000 per year. The miners in Australia are paid very high wages.
The problem with rare earths in Australia is that Australia is so far away from the U.S. and China. That ore has to be shipped half way around the world. China will be able to sell all of its supplies to Chinese customers that use the earths in manufacturing. The Australia supply will be too expensive. Look at the salaries in Australia.
It is one thing to sell Australia gold and another to sell rare earth to the Chinese.
Yes someday Lynas will sell to the Chinese I just do not expect the prices to be competitive with the Chinese supplies. China does not have to ship its earth anywhere. Tankers are expensive. They rent for $10,000-20,000 per day and it is a long trip. Add that to the cost of competing with Chinese suppliers of rare earth.
Remember, China has just begun to tap its mineral resources only during the last 10 years. 90% of China's mineral potential is still undiscovered. The way our oil was 100 years ago, and now our shale gas which was was discovered over the last 5-10 years. Now we probably have more natural gas than any country in the world.
I looked at rare earth shares after the newsletters called attention to them.
The problem I am having is the number of shares required to fund a mine. They raise money for pennies a share and issue too many shares compared to other miners and other resource opportunities. I invest in oil, gas and gold because of demand for the product.
The rare earth demand is $1B per year in sales. To me that is a small industry. The demand is currently met by China and its low cost labor advantage.
Miners in Australia make $50,000-100,000 per year.
My other concern is how much demand for rare earth in the future. Suppose demand increases 100%, what does that do if that demand is split by producers in Canada, Greenland and Australia? When will the demand arrive? Five years from now? Maybe.
Take $1b in increased demand and divide it up to mines in South Africa, Canada, Australia and China. That is not much for Lynas, expecially when you allocate the revenue to 2 billion shares as you mentioned. Also, how much of the revenue number goes to the bottom line. Most miners have mining costs of 30-50%.
I think Lynas is overpriced. Most shares were purchased in the last year at 29 cents per share. There will be no revenue for 3 years and we do not know how much revenue per share. With 2 billion shares what if revenue is only 5-10 per share.
Price of the shares is up 30-40-50% over the offering this last year.
"My other concern is how much demand for rare earth in the future. Suppose demand increases 100%, what does that do if that demand is split by producers in Canada, Greenland and Australia? When will the demand arrive? Five years from now? "
- Lynas will be the first major producer of rare earths outside of China. It will be years before other significant mines produce anything. As we move into the "technology era," I believe that rare earths will rise in demand. I believe there will be a rare earth metal "crisis" or minor shortage for a year or so. Lynas will be there to benefit from that as other miners scramble to catch up. This will be the prime opportunity for Lynas investors. Then things will level out. But also keep in mind that Lynas has all ready established itself with its "RED" brand, and has multiple international contracts in place. Essentially, they will be a vertically integrated rare earth supplier. Some of these junior miners are laughable in comparison.
"There will be no revenue for 3 years" - I understood that they will start producing from Mt. Weld in mid/ late 2011. Thats basically a year from now.
Regarding the number of shares. I thought the latest stock offering was for .41 ( around that US.) The .29 was for the china deal which feel through. I'm not a finance person, so I can't address the large number of shares and its implications. Can someone post an analysis/article that addresses that?
long: Lyscf, Avl, GWM