LYC 2.89% $5.69 lynas rare earths limited

70% chance of bankruptcy

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    Lynas shares slump on weak prices, poor cashflow


    Shares in troubled rare earths miner Lynas Corp dived on Tuesday after the company warned that the improvement in cashflow evident in the December quarter will not be sustained, amid renewed weakness in market prices and production glitches.
    As a result, the shares fell a heavy 11 per cent to 5.5¢, eroding much of its recent gains.
    Revenues in the December quarter totalled $45.1 million, which failed to cover the operational and administrative costs of $48.3 million booked in the quarter.
    Undermining the group's efforts to cover its costs was the continued decline in neodymium and praseodymium (NdPr) prices, which stood at $US38.4 a kilogram at the end of December, down from $US41.8 at the end of the September quarter. Used together, these two materials are key elements in producing high-powered magnets.
    Similarly, the price of SEG [samarium, europium and gadolinium] declined by $US5.8 a kilogram over the same period as its most valuable component, europium, slumped by 27 per cent due to the shift to LED lighting systems and away from rare earths lighting systems, it said.
    Despite the weak pricing environment, revenues were bolstered by the sale of sub-par material accumulated since the start of operations at its Malaysian processing plant, it said without giving details.
    Offsetting any gain here, however, was the need to direct some feedstock to the phase 2 production unit, which is yet to be brought on stream.
    Lynas said it "does not expect to sustain the positive operating cashflow achieved in December into the March quarter", blaming low product prices due to weak demand amid uncertainty over Chinese government policy and the costs of its restructuring program.
    As a result of the continued weakness in rare earth metal prices, Lynas said buyers have decided to run down existing stockpiles, which in turn forced Lynas to sell 60 tonnes of neodymium and praseodymium into the spot market in China, which also weighed on market prices.
    Additionally, Lynas's output of neodymium and praseodymium was affected for nearly three weeks over the end of the year due to problems encountered with its solvent extraction, it said.
    Lynas has closed much of its Australian administration, which has been shifted to Malaysia, where its processing plant is located. This entailed unspecified redundancy costs.
    Lynas raised a net $77.9 million during the December quarter, with loan repayments of $12.3 million booked in the quarter.
    In return for a halving to $40 million in the Sojitz loan repayment for fiscal 2015, the interest rate on its loan here has been raised to 7 per cent.

    Read more: http://www.smh.com.au/business/lyna...r-cashflow-20150127-12z6i7.html#ixzz3Q3wzwPx9
 
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$5.69
Change
0.160(2.89%)
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$5.51 $5.72 $5.51 $34.50M 6.126M

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1 169 $5.66
 

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Price($) Vol. No.
$5.70 11000 2
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Last trade - 16.10pm 29/03/2024 (20 minute delay) ?
Last
$5.70
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