Predictions are always fun. So many things can happen some part of them are always wrong. It is only through recording them down and seeing how you do that you learn from mistakes. Normally I would not share with this board but because this should be a dramatic Q with a major turn to better or worse. I would be very interested in others thoughts.
Gross Revenue. Would expect an increase from 49.5 M to at least 55M really doubt it will reach 60M
Recipes Cash. expect this will be first Q in last 3 or 4 Qs where Recipes will be below revenue. They have receiving early payments of over 15 M and it will catch up to them this Q. RC will grow but be below revenue. Probably
One big positive I just thought of The AU/ US $ is currently about 70%. This should be a quick gain of 30%. Another is that right now why they are in trouble fuel which is a major expense is low. this will help
Over invested has only a little to do with $. It is an emotional state. A state where dreams of a company going up replace cold logic. I know I have several of these in my past. You originally started rebuying when Amanda said they were cash flow positive. They were but only because of the way interest is accounted for. Since then they have gone negative. Did you change your opinion. I have shown you how they have collected early payments with sales in return for favorable terms. This Q price of material sold went down more than 5%. Q to Q, while market price went up 13%, in China, Go back and read I predicted this would happen as well as revenue received for product shipped. Revenue has not happened yet my original prediction on revenue was before Fy 16 Q4. I am now pretty certain this will happen next Q. but Q4 at latest. You Questions my $450M in debt. I showed you from company records it was over AU $600M Have you even thought about this? Are you worried? If you are not even concerned you are over invested in hope.
Glad you are in Utah. Do you want to put this on hold for a few days.
You said you were going to look for one of the three negatives that I did not mention Have you tried yet.
There are lots of positives I have never denied it.
Amanda has reduce staff significantly.
Plant is running predictably.
Management is on site working on the problems. Rember when I sold at $1.4x I said main reason was NC lack of attention to plant problems.
That the numbers to let us know what is going on are now much clearly stated,
Unfortunately The debt, NC's debt, is just to large to overcome.
I want to say something again because some times you don't seem to understand That when they take it over not one minute of productions. The facilities will reemerge much better than they are now.
First what new info is in Amanda’s talk? I see none but maybe I missed something. She says things that could mislead you like "Every morning I wake up thinking of bank account" does this make you think she is watching it, It makes me think she is scarred.
You keep saying 'hostile takeover', kill the golden goose, destroy everything. This seeing a takeover as destructive helps you think it will not happen. I see none of this. It will not be destructive. IT will be positive for all but stock holders. It makes far more sense for it to be friendly. Amanda team is doing a good job they may even run new company. Lynas management are in a no win situation they have every reason to keep it friendly. After some negotiation and a stock holders vote they push a button. The stock holders get maybe a penny for every 10 shares. The next day it is a private company running just the same as it is today. Nothing changes except no debt no public stock holders. REE prices will go up just like you say. A few years later the company is taken public Jare keep half of stock and controls company, sells half recovering a high percentage of their money. Corporate registration would stay in AU or maybe be moved to Malaysia I doubt it would be moved to Japan where a high corp. tax rate and some severe economic problems would hurt it.
Another possible scenario is in return for their Yes vote all the current stock holders are given a 10 or 20 % stake in the new company. There stock gets traded for a small percentage of new stock at a ratio that allows this reduction in ownership. I do not think this will happen because to do it the company would have to remain a public company. In a few years the company will be worth much more operating out of the public eye for a few years.
There is one other Posibility. Stock holders vote "NO" this will hurt them more. out of space let me know if you want to know how.
You are a little out of date. The Aug 2015 refinance was for Sojitz Jogmec and Mt Kellett all rolled into Jare.
From appendix 5B pg 3
“The Group has a US$225M fully drawn facility from a SPC established by Sojitz and JOGMEC
(the “Sojitz Facility”). Principal repayments of US$10M each were made on January 19, 2014 and
October 2, 2014 reducing the principal outstanding to US$205M.
In addition, the Group has a US$225M Convertible Bond facility on issue.
As announced on August 17, 2015, interest payments for both facilities are paid into a restricted
Lynas bank account, and are available, at the lenders’ discretion, for reuse in the Lynas business.”
To put it simply Mt Kellett bound holders could have forced bankruptcy August 30 2016 by calling the debt when it was due, they would have received little. So instead they took the higher interest rate. The MK bounds with warrants were issued Feb, 28 2012 and matured in 4.5 years. I doubt Sojitz would have accepted deal without MK. They would have loss control (not seniority) with MK bounds coming due first. With this deal MK gained equal footing with SoJitz where they were secondary.
Prices went up 13 %. I am assuming you are referring to base 100 charts that shows Sept at 77 and Dec at 87. And you are correct that is 13%. What I am referring to is what Lynas sold their for product. My math is correct for the Q ending September they sold a KG for $17.168. for Q ending December $16.061 / KG. If you think China prices are more important than what Lynas receives when analyzing Lynas then you are correct. For me what they sell it for is more important than what happens in the government manipulated market in China. Both do have importance! What do you think tells more about Lynas? You are welcome to believe prices in China are more important if you want. You should be very curious if not concerned why if prices went up they sold for less.
Stockdude. I refused to answer your question for proof that only Interest was in Restricted Cash (RC). I knew I was correct but I was unwilling to go back 6 Qs and show only interest was deposited. There are many things that can be put in RC. I kept asking you to say what else you thought was in their but you did not answer just repeatedly said I did not know because I would not prove it. As you point out I pay much more attention to numbers than words which in this case was a mistake. While looking up something for someone else I happen to notice words not just number in this line in the Dec activities report pg 6.
“Funds for JARE & Mt Kellett interest (Restricted Cash) 33.5” AU$ 33.5 is the number I used.
So if you are still sure there are other things in restricted cash you better tell Amanda because reporting bad info can cause someone allot of problems. I am sure she would want to know.
Last Question if there were other things why is it important? The problem is the same regardless of what is in restricted cash. I doubt you will answer, you never do, but I would like to understand.
According to Lynas’s Dec. 5B MT Kellett and Jare are $ US 430M (5B line 3.1) = 614 M AU plus about $ AU 10 M payables not covered by restricted cash. The loans were written in US $ so it is appropriate to note them that way. With everything else in AU$ it does makes it look smaller. For me 500M is fine as would be $440M. It is so large that even with ridiculously high price increases they cannot raise this amount with 22KT PA in time for balloon payments.
You say demand will rise exponentially, the highest I have seen is 8% PA CAG till 2020 then 10 or 11% till 2025 (from memory). I thought this persons arguments were week and last year prices went down 10% when his forecast was up 7 or 8%. When you say exponentially it has to relate to some current growth rate. The exponential of 0 is 1 which is flat. I would like to see what goes into this statement with references. Better yet let’s keep it in CAG it is much clearer. If the exponential statement was just your opinion that’s fine just state it.
I think you are doing something that I did several times until I created rules to stop it. You are over invested in Lynas and have been for a long time. To say it is over just hurts. In this case you keep looking at the market potential and consider details about lynas just a nuisance. A rising tide does raise all ships. But if one is full of holes it is going to sink just as fast regardless of tide. I have been telling you for more than a year that Jare will take over Lynas by killing the owner (stock holders) Your recent reply of why would they kill the goose that lays the golden egg shows that you do not want to get that only the owners get killed.
Please stop looking at market. and take a long hard look at lynas.
I can prove that all of lynas's current restricted cash is interest. please look at reply of a few minutes ago. but before I go to the work please tell me what else you think is in Lynas's current restricted cash balance. Or did you just pull this out of thin air as well.
Your wrong again and I am done with your nonsense please look at restricted cash before refinance, it was zero. Before plant was complete (two years ago) it was large because it contained payments for plant. Please take 8 M divide by 7% x 4 and you will see that it comes to to the debt owed mt kellet and Jare within 100 basis points.
Please please please do so math before you rant and rave saying things are untrue The math is simple nothing more
As far as prices going up or down Q1 2691 Tons divided by 46.2 M = $17.17 / KG Q2 3082T / 49.5M = 16.06 now in my book that is a decrease of $1.09 /KG. If you accuse me again of false numbers or lying without you providing any facts to back it up I will not reply I am sick and tired of you pulling un- substantiated garbage out of your * and then I have to work to prove how full of it you are. You are welcome to show me where I am wrong but stop telling me that facts do not line up with your smoke dreams. I will reply only to numbers.
This is in addition to the post of a few minutes ago. You keep saying prices will go up, they will raise money both are possible and small amounts are probable. You need to at least guess about how much these numbers have to be to see if they are likely.
Toly I have been thinking about how to answer. Re read your post several times. I have finally decided the key to my answer is in your opening statement. “Why would I focus on major and minor problems when I can look at the overall picture and come up with what I consider a more balanced analysis.” It appears to me you have lost focus of Lynas current conditions. Yes you are correct about market. But you fail to comprehend how deep a hole NC put this company in and the most optimistic future predictions will not rescue them from this. They have about 500M in debt all do in a couple of years. they make it a profit after all that then divide that profit by nearly 4 Billion Shares ( current shares plus unexercised options) it takes 40 M in profit to make a penny per share. If demand and price go up there is nearly 150 Ktons in completed (MCP) or nearly completed (GWM, Stans, GGG, AVL, UURF,TSM, QST,) capacity world wide. Will all this come on line absolutely not, Stains is still actively being built, slowly, MCP, Stans 50 KTPA This puts a big damper on the prices rising too much.
The highest CAG that I have seen for demand is about 8% per year through 2020. If only MCP is restarted to half its 40KTPA capacity it can absorbed most of this, Ignoring mix. TSM is nearly completed in Sweden, if it is completed it brings large amounts of the CREE on line.
Now let’s create a scenario that is highly unlikely and see how Lynas does. Lets assume NdPr $/KG goes up 50% each of the next two calendar years. Compounded Price Growth of 196%. Let’s assume La goes up 20% CPG 144%. Ce is in over supply so no price increase. After covering interest how much profit do they make? How does this compare to balloon payments that are due. To dig out of this hole they would need at least half the debt, about $250M, more than they have ever raised in a single issue even when REE prices were high and stock was over $1.00
I think you are jerking me around. I know you are smarter than you are pretending. But just in case I will answer your question so you don’t turn around and say I could not answer.
Q1 Free cash $31.2M Restricted cash 25.3M. Do you remember I slipped last Q and said Free cash was just over $20M and you accurately corrected me to $31.2M. I acknowledged your correction. Q2 Free cash $20.1 M Restricted cash $33.5 M. $31.2 M minus 20.1M = 11.1 M reduction in free cash. Now restricted went up because they must make the interest payments into restricted cash. 33.5 M – 25.3M = 8.2 M. now just to close loop 8.2 M that went into restricted cash plus 2.9 M they actually lost = 11.1 M which is the reduction in free cash. If you could not work this out and understand it easily you should not be investing in individual stocks without guidance.
One last point when I did the first post I had not looked at Appendix 5B and did not realize they had to pay for new MW Tailings plant in Q3. I have another post where I now feel that Q3 burn rate will be higher than 11 Million. How much is hard to tell, with slow start to SX5 and improvements to La there are just too many variables to know how much bigger, we will know in 3 months.
New line is good news. Its impact will be small compared to debt accumulated. I also mentioned restricted cash. Instead of physically sending interest to Jare, Sojitz and others it is put in a restricted account. “As announced on August 17, 2015, interest payments for both facilities are paid into a restricted Lynas bank account, and are available, at the lenders’ discretion, for reuse in the Lynas business.” Lynas has no access to this at this time they cannot use it. In the future (see August 17 agreement for details) if they meet certain goals and Jare approves Lynas may borrow at 6.5% from this restricted cash to finance certain improvements. Free cash which is the only cash they have access to went down the $11 M just like I claimed. If they were making interest payment it would have gone down this much. In the past you seem to understand the difference between Free and restricted cash clearly. Why are you suddenly trying to confuse matters with these statements. Are you trying to get out while confusing others?
I have changed my mind on what is happening that has caused NdPr to be consistently higher than 25% than the mount Weld content. This Q it was just under 30%
Originally I thought there were 3 possibilities.
1. They were enriching the concentrate input to the plant with old out of spec NdPr.
2. They found a small pocket of ore that was much richer at Mount Weld
3. They were not reporting all Ce because they could not sell it ( legally you cannot carry inventory that you know you cannot sell)
Going back 8 Qs as of this Q there has been more NdPr than 25% of production could account for. So I was wrong on assuming number one. Still feel 2 and 3 are very unlikely. But statements in the last 2 activities report indicate they are now making improvements to the final processing of La. This creates a forth options
4. A portion of La (and probably Ce) could not pass testing and therefore could not be counted.
This is the most likely explanation.
I quote from Q2 activities report “improving rejection of impurities (Zn, Al, P2O5, Na) in pre-treatment,
precipitation and washing stages,” These contaminates probably left a portion of La and Ce out of spec.
Going forward this and the last SX5 unit coming on line will have an impact on Price / KG they receive. SX5 will raise the price. More Ce and La will lower it. Since long term they do not plan to start any more of the Ce and La finishing it should raise the price received / KG It should also raise the percentage of NdPr to well over 30%. All of this will bring in more revenue at higher profit margin. Unfortunately it is just a drop in the bucket to what they need.
The chemical properties used in processing of La and Ce are quite similar usually all foreign material is removed from both then they are separated.
Couple of points Jare will not kill the goose they absolutely see the value. They kill the current owners ( stockholders and other debtors with warrants ect.) take the goose and nurture it. so it produces more than it ever could otherwise. Why would AU be unhappy Mt weld stays open. there will be money finally to open Duncan. Not one job will be lost in AU.
I always thought Amana does a good job with plant. One of key jobs is to keep stock up,. on this she is excellent. She tells the good news right up front in bullets. Then clearly tells bad side latter but it is in tables of numbers which few seem to take a close look at. She lays out the good and bad quite well no one seems to see the bad. At first I did not like her. Now I am in awe of her. She does her job both on technical side and political side very well. Still would not trust her, still would not want to work with her but she has my respect.
How she can fool so many without ever lying or breaking accounting principles is Quite amazing.
Sir I would prefer consistency rather than Amanda's double talk. If it is not ready for sale it is not ready. Period end of subject. Also it still went down even with all this double talk and smoke you are blowing. Go back and read your post to me does 12 tons really change much. If in all I said this is all you can find then I feel really good.
Item 2. “In Product Finishing (PF), the focus has been on improving product quality including eliminating sources of potential contamination, improving rejection of impurities (Zn, Al, P2O5, Na) in pre-treatment, precipitation and washing stages, improved tunnel furnace combustion and temperature control and improved calcination of La.” By itself this this sounds good. But
Item 2A. From Q 1 report “The success of the program to stabilise the operation of the SX6 circuits,
which separate La and Ce, resulted in a step change increase in the product quality of La and Ce products.” When Nd Pr was being Improved we heard for many Qs (Four I think ) about improvements But never about existing problems. Now two Qs in a row we hear about improvements, No indication that things are to spec. No indication of what is left to do. What is clear this product has not been anywhere near spec. The only good news here is when these product are better we should see an increase in sales price. Does Lynas have the time and cash to do it?
There is still one major item in the text and several minor ones that could indicate problems. I wonder if some of the big supporters like Stock Dude and Toly could find them?
Many pieces of news in the latest report. Per usual Amanda makes it sound good. Also looking back and doing a little math reveals some real problems.
Nd Pr production actually went down Q to Q. Q1 968 ton Q2 937 ton I point this out because I was labeled as XXX when I suggested this.
Next sales price for all product Q4 $ 22.05 /kg Q1 $17.16 / KG Q2 $16.01 / KG IT does not look like Lynas is getting more for their product.
Amanda made Cash flow look pretty good and change the way she described it. Lets compare Q1 to Q2. At end of Q1 they had $31.2 M cash on hand and at call, End of Q2 $20.1M burn of 11.1 M At this burn rate they have just under two Qs of free cash. Does this scare any buyers of the stock? Yes restricted cash went up from 25.3 M to 33.5 M
They are still bringing in more cash than sales. Again I say the only way this can happen is prepayments for favorable terms. Now last Q it was $ 9.7 M this Q $0.8 M. I have said as sales grow less this is impossible to sustain. They are now carrying $17.1 M in prepayments which is most of their 20.1 M in free cash.
I would like to end on a positive note for Lynas investors. Cost / KG made, continues down Q4 $17.00 / KG, Q1 $15.86 / Kg and Q2 14.62 / KG. Is $1.38 /KG going to carry this company?
Take 22 K tons / Yr. Assume the following price increases over 2 years. For Nd & Pr 25 % of output doubles in price. La 25 % of output a 25% price increase. Ce 48% of output which most people cannot sell goes up just a little. How much cash are they generating / yr after 2 years? How much cash have they raised? For the record the most aggressive Nd Pr numbers I have seen is 50% increase by 2020 but even with these more aggressive numbers they do not make it. Do the math