We had a hint yesterday of what Wesfarmers saw in rare earths miner, Lynas Corp when it launched its now aborted $1.5 billion bid earlier this year.
Lynas revealed on Thursday that net profit jumped 50% in 2018-19 thanks to record production of major rare earth elements.
Lynas is the largest rare earths producer in the world outside of China and made it clear in yesterday’s release and briefing that it seems most of its future growth coming from outside China.
“Demand continues to grow in outside China markets and the vast majority of Rare Earths that we produce through to 31st December will be sold to customers outside China.
“We are continuing to progress with our Lynas 2025 growth plans to meet forecast demand growth and we will provide further updates as details are finalised,” CEO Amanda Lacaze said in yesterday’s release.
It is at the start of plans to build a major processing plant in the US and its major funders and shareholders are two Japanese groups who will take much of its production of rare earths.
Lynas said profit after tax was $80 million for the year ended June 30, up from $53.1 million a year ago. The higher profit was struck on a small fall in annual revenue to $363.5 million from $374.1 million in 2017-18.
The market liked the news, saw it as a positive and marked the shares up 1.7% to $2.36 where it was valued at $1.68 billion, well above the Wesfarmers offer.
Wesfarmers bid $2.25 a share but Lynas managed to convince major shareholders and supports, and the Malaysian government that its strategy was right. The Malaysians have in fact allowed the company four more years to come up with a method of stripping out radioactive material from the ore it ships from Western Australia to Malaysia.
The Malaysian government has also renewed Lynas’ licence meaning the single biggest threat to the company’s future (and a potential weak point that Wesfarmers tried to exploit) has been shut down.
Ms. Lacaze said yesterday the improvements were achieved in a year that presented some extremely challenging regulatory and market conditions.
“We are very pleased that the Malaysian government has renewed the operating licence for the Lynas Malaysia plant and followed the recommendations of its own scientific review committee,” she said yesterday.
“Subject to meeting specified conditions over the next six months, this renewal provides a clear pathway for our continued operation.
“However, market volatility continues and in the second half of FY19, we took the step of reserving NdPr production for the current and future needs of our strategic customers. This led to a small inventory build by year-end.
Lynas said it produced 5,898 tonnes of NdPr over the year, up from 5,444 tonnes. Rare Earth Oxide production came in as 19,737 tonnes, a jump from 17,753 tonnes.