http://www.hotcopper.com.au/...fid=1&tid=874596&msgid=4852693
COMPANY BELIEVES RARE EARTHS MT WELD PROJECT WILL SUCCEED
Sydney - Wednesday - April 15: (RWE Aust Business News)
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OVERVIEW
********
Lynas Corporation Ltd (LYC) owns the richest deposit of rare
earths outside of China, at Mount Weld in Western Australia.
It has great potential as rare earths, which are a group of
fifteen metallic elements that have unique properties, are indispensable
for many technological applications.
Rare earths already play a critical role in the electronics,
automotive, environmental protection and petrochemical sectors.
As these industries grow, and as research around the world
continues to develop applications for rare earths, demand for these
materials is expected to continually increase.
The rare earths are not actually rare, but very few can be
actually mined with safety due to the radiation factor.
The more abundant cerium and lanthanum are as common as copper
whereas others, such as terbium, are not particularly abundant.
Progress at the Mount Weld project was suspended in February but
the company still expects the mine and plant construction will be in a
position to fill the void by the end of 2010, about 11 months later than
originally predicted.
The tragedy for Lynas has been that some of the major investors
wanted to retrieve much of their invested funds in the company to save
their own and other operations.
In the light of these developments, Lynas has done well to
survive.
The long time experience of executive chairman Nicholas Curtis in
running mining companies has stood the company in good stead.
In Lynas Corp's February statement to the ASX, the company agreed
to terms with all of its bond holders for settlement of all claims
concerning the $US95 million convertible bond facility.
The total amount in the escrow account will be disbursed as
follows:
Bond holders: $US91m and Lynas: $US4,886,763.49.
Settlement involves a release of all claims.
Some settlements were completed on Friday evening and it is
expected that the remaining settlements will occur early this week.
The total potential claims against Lynas included the following
approximate amounts:
Bond Principal: $US95m; Accrued Interest: $US6m; costs:
$US500,000 = $US101.5m.
Lynas asserted that the conditions to release of the $US95m
escrowed funds to Lynas were satisfied prior to 31st January 2009.
However, it became clear that the bond holders were not willing
to agree to release the escrowed funds to Lynas.
The Supreme Court of New South Wales proceedings initiated by one
bond holder, whose bonds had a face amount of $US15m, will be dismissed.
Those proceedings were referred to in the Lynas announcement
dated March 3, 2009.
In addition, all of the convertible bonds will be cancelled.
Lynas decided that it was in the best interests of the company to
settle all claims concerning the convertible bonds, rather than becoming
involved in lengthy and costly litigation.
Importantly, settlement will also lead to a release of the
securities held over the project assets of the Lynas group, enabling
Lynas to move forward with discussions concerning potential replacement
financing.
The total cash at bank of Lynas as at March 17, 2009 (excluding
the amount of $US4,886,763.49 referred to above) was about $36.8m.
A significant portion of this amount is committed to suspension
costs in respect of the project.
Directors recently told shareholders: "You will have seen from
recent announcements that as a result of the uncertainty concerning the
financing structure for the company's rare earths project, the company is
suspending work on the project.
"We now provide the following additional updates.
"The company continues to be confident about the future of the
Mount Weld rare earths project.
"Lynas continues to hold the view that the project is sound, even
in the current financial environment, and that with appropriate funding
structures in place, the company will have an exciting future."
Both rare earths demand and prices remain robust and the project
economics remain solid.
The suspension of the project is a result of the current global
constraints on the availability of capital.
SHARE PRICE MOVEMENTS
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Shares of Lynas yesterday rose 1.5c to 21.5c. Rolling high for
the six months was 52.5c and low 10c. The company has 654.7 million
shares on issue with a market cap of $140.7 million.
The company continues to assess all of its options concerning the
convertible bond facility and the company expects to be in a position to
update the market further in coming days.
The company's cash balance at 31st January 2009 was approximately
$55m.
The company is currently implementing a suspension of the project
in a manner that will allow a rapid restart as soon as a satisfactory
funding base is secured.
Given financial market uncertainty the company estimates that
this refinancing could take between 6-12 months.
In the meantime, procurement and construction activities will be
halted at the logical point of suspension.
Contractual obligations are being examined on a case by case
basis and all vendors and contractors are being contacted.
The vast majority are showing significant support for Lynas'
position and terms are being negotiated to minimise cash outlay pending a
restart.
The company's current estimate of the expenditure over the next
few months to suspend the project is difficult to assess precisely until
all negotiations are complete, although it is estimated at about $45m.
Whilst significant rationalisation of ongoing expenses has
occurred the company takes the position that it must retain core skills
to enable a restart in as rapid and efficient a manner as possible.
The company is in active dialogue concerning various additional
short term funding arrangements as well as longer term project financing.
Significant development work has been undertaken on the project,
including detailed engineering and project planning, significant
procurement of essential equipment, preparation of the site in Malaysia
and the mining of a large stockpile of high grade ore at Mount Weld.
All of this work will be used in restarting the project.
Once the suspension is completed, the company will evaluate the
cost to restart the project through to completion.
BACKGROUND
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Lynas Corporation was listed on the ASX on September 11, 1986.
It owns the richest deposit of rare earths, also known as lanthanides, in the world at Mount Weld, near Laverton in Western Australia.
This deposit underpins its strategy to create a reliable, fully integrated source of rare earths supply from the mine through to customers in the global rare earths industry.
Lynas suspended work on the Lynas rare earths project in February 2009 but it should now be completed in 2010.
Lynas has received all environmental approvals to build a concentration plant at Mount Weld and an advanced materials plant to process the Mount Weld concentrate through to final rare earths oxides in the Gebeng industrial estate, Kuantan, Pahang, Malaysia.
The company plans to become the benchmark for security of supply and a world leader in quality and environmental responsibility to an international customer base.
Rare Earths play a key role in green environmental products, from energy efficient compact fluorescent light bulbs (CFLs) to hybrid cars, automotive catalytic converters and wind turbine generators.
They are also essential in the development and manufacturing of products from hard disc drives to flat panel displays, iPods and magnetic resonance imaging (MRI) scans.
ENDS |
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