Your analysis has huge holes in where you think prices are going. You don't post anything about China's recent econ data. You don't post about central banks printing enormous about of stimulus. Most recent, the BOJ. You don't post about how much China is going to export REEs which could be much less than what you think. My point is, your research doesn't look at all the angles that affect commodity prices, just what LYC and MCP are up to, which I believe will NOT control future REE prices. You don't seem to understand the speculative nature of commodity markets, where prices can rise dramatically and quickly, long before there is proven demand for REEs.
I am sorry I thought I addressed them quite well. Here goes my Last try. At a 40 K ton a year RR from Lynas and MCP combined They will produce nearly twice the Ce & La That China shipped last year to the ROW in a year. I thought it was clear from this that even if CHINNA CUTS TO ZERO that there will be an oversupply. That during 2011 many good replacements for La and Ce were found. Current demand is down lower than 2010 and if you look at Charts of 2009 & 2010 when prices were at these levels demand was already falling. These two products make up 72% of Lynas's REE With them selling for much less than the COGS Lynas cannot be profitable.
Oversupply Many like to say that the current low prices are just over supply being worked off. China only shipped A little more than 2 x of what they shipped in 2010 in 2011 and 2012 combined. IF these prices are from hording during the period of high prices where did the product come from? Note I can only research what China shipped officially. Product leaked out and was not recorded by the government in 2011. A small amount in 2012. You can make your own guess how much. Based on how fast prices climbed I doubt it was as much as some think.
I do not think QE will help La or Ce at all in the near future. For the next two years demand will stay low. Manly because of demand destruction from high prices but also because demand was declining in 2009 and 2010 I am not saying it will not come back, it will. And Lynas has an excellent chance of making it. What I am saying is the next year and probably the next two will be very rough for Lynas. It will continue lower till this all gets worked out.
You should Join TMR and look at some of the charts on Price & Chinas shipments back to 2005. If you still think that prices are going to recover in the near future then buy like crazy.
Contraryj, a speculative investor will love to be buying at .50c. There is signifcant value to this company and the REE space. I think the pps can go much higher on the back of a positive election result in the near term. The oversupply issue is already known, this isn't new to investors, therfore already priced in. Even in the face of oversupply and slow ruturn to demand, the pps can rise anyway due to specutation of a recovery on the way.
Cerium and Lanthanum are sale-able impurities. They may not sell for much but they can be sold. The ore for Kennecott copper mine is over 99% trash ... I think about half percent copper. Yet it is an economical mine, selling many tons of copper, at the current $3-ish per pound, lower than cerium and lanthanum prices.
Mt Weld (from TMR) is 6.95% cerium + lanthanum. And 2.78% everything else. That is a decent grade for the other stuff. Yes, 71.42% of output is at unfavorable economics, but the other 28.58% is at favorable economics. For Mt Pass ore, the ratios are a bit worse, with 82.3% of output as cerium and lanthanum. and 17.7% of the other-rare earths.
Both depend on rare earth prices. But Mt Pass was once a europium mine. The europium content is 0.05%. Yet that was an economical proposition. As an analogy, Apple just introduced a new iPhone 5, which has an irritatingly different charging dongle. Mostt people buy more dongles than phones ... Do you know how low the profit margin on dongles is? Major fail by Apple.
It is certainly true that the cerium and lanthanum markets will see supply-demand swings with the increases in supply. As will of course all of the individual rare-earth-elements. But cerium and lanthanum are just a part of the business and you are ignoring the more important part.
For absolute convenience say the REO's sold are 14284 tons Cerium/Lanthanum and 5716 tons other. Say they sell the Ce/La at $10, and the Other at $100 ... that works out to a market basket price of $35.72, close to the Lynas current, $33.6. Revenues are $143 million on the Ce/La and $572 million on the Other. Any analysis that only talks about the Ce/La side and ignores the rest seems to be somewhat distorted.
Aside: I favor MCP. Even with slightly inferior ore, I expect the move out the value chain to metals, alloys, and magnets to be larger value than the increased "other" content of Mt Weld. JMO. That doesn't mean Lynas must fail, just I have a preference.