Rare Earth Future
Back in January this year, investors were becoming dispirited with progress on LAMP completion. I wrote an article for this site called “Where Lynas is at”. My final summation was:
“Clearly, Lynas will no longer be the same company after POL approval. It should be one heavily in demand. At a time when investors are looking for a safe place to invest, yet one with outstanding returns, many will want to be a part of it.”
The article was premature and I strongly regret writing it. 10 months later, the LAMP has been completed less than 2 months, the Pre-Operating Licence has been approved, issued and then suspended. It remains suspended.
Along the way, I have seen countless strong supporters of the company lose most of their assets as the continued delays and uncertainties have allowed the big players to control the market and manipulate the share price as low as 56 cents.
The uncertainties have been greatly assisted by the poor flow of, at times misleading, information from the company. I will detail what the company has done, how it has poorly informed the market over a considerable period. It has been the light on the hill on a dark night, enticing us to stagger to the top only to see that light extinguished and another one to appear on the next hill. And so on.
The LAMP was originally scheduled to be in production by 30/06/11. Not only is it still not producing, there is not one iota of confidence that it will ever produce.
In my view, the situation has now become so bad that a Trading Halt should be imposed until the market is once again fully informed that the LAMP can either operate or it can’t.
Just follow this timeline of company announcements and see if you agree with me about how the market has been misled:
Sojitz Funding announcement 30/3/11
Budgeted Phase 1 construction costs are fully funded
•The Mount Weld Concentration Plant is completed and is ready for the first feed of ore. Lynas is working on satisfying the final requirements of the WA Department of Environment, which are taking longer than expected to satisfy. Lynas expects to satisfy those requirements within 3 to 4 weeks, and Lynas understands that start up of the Mount Weld Concentration Plant will occur upon satisfaction of those requirements
•The Lynas Advanced Materials Plant (LAMP) is due to be commissioned in 3Q 2011
•All approvals in Australia and Malaysia are in place to complete construction of processing plants
•All major equipment procured
•Lynas has signed six supply contracts and two letters of intent in relation to future production
(The market has now been informed that 30th June completion will not be achieved. Completion is now going to happen some time during the next 3 months. Deliberately not very precise? This advice is from experts in construction of such plants who not so long before were assuring us that completion would be by 30/6! A later announcement was more precise and used a September date for completion. Couldn’t be October because that was in the 4th quarter, wasn’t it, and the Company didn’t want to let on just yet that the 3rd quarter wasn’t going to be achieved.)
5 Million Hours LTI Free Achieved at Lynas Advanced Materials Plant 30 September 2011
Lynas Corporation Limited (“Lynas”) (ASX:LYC, OTC:LYSDY) is pleased to announce a major milestone in achieving 5 million hours Lost Time Injury (“LTI”) free in the development and continuing construction of the Lynas Advanced Materials Plant (LAMP) in the Gebeng Industrial Estate, near Kuantan, Malaysia.
The Concentration Plant in Western Australia commenced feed of ore on 14 May 2011 and is performing well. First feed of concentrate at the LAMP is scheduled to be achieved in the fourth quarter of 2011. Lynas has received all required approvals to construct the LAMP, and is in the process of applying for all pre-operation and operation approvals.
(Ah, the 30th of September has now come, so the Company has to announce a later completion date. Again, it is unhelpful to the market by advising an imprecise time of “fourth quarter of 2011”. Some investors were able to imagine a possible date of 31/10, some, no doubt were more careful and thought 30/11 more likely, and the rest had every right to believe 31/12/11 was as late as it could go. Weren’t we all sadly mistaken?!
Quarterly Report 31/10/11
Slight delays in final procurement packages and associated delays in construction and contractor resourcing means it is likely that first feed to kiln will not occur until early Q1 2012.
For once the company didn’t wait till 31/12 to announce they were wrong – they strung us out that little bit further with “early Q1 2012”. Now, you could think that might be early January or even early February but certainly not early March. In any case, whatever you thought that announcement meant, you would have been wrong.
The Chairman, Nick Curtis, gave his address at the AGM on 30/11/11 and said:
“This time next year I will not be reporting to you the sales we are about to achieve, but rather celebrating with you the reality of our production and sales, and speaking again of the huge potential of our business.”
He also said the LAMP was 78% complete as at 30/9/11. He didn’t say that with 22% still to go, there was no chance of the deadline of early first quarter 2012 being met. That was his opportunity to confess to the delays but he said nothing. Nothing other than that ridiculous statement above which is also clearly false.
Early first quarter 2012 was almost past before he announced as part of the Mt Kellet funding announcement:
“Additional engineering completion requirements and consequential delays in procurement, as well as the recent monsoon season, are the primary causes of the delay for LAMP Phase 1. Based on the latest information from the construction manager, Lynas anticipates first feed to kiln and first production during the second quarter of 2012, subject to regulatory compliance and issuance of the pre-operating licence for the LAMP.”
2 months had gone by during which it must have been clear to all in the Company that the previous deadline of early quarter 1 2012 would not be met. Why did he wait so long before informing the market?
Another month passed before the next announcement. It was the Investor Presentation 14/02/12
“LAMP construction: 91% complete
Ready-for-Start-Up program (operational preparedness): 91% complete
Malaysia headcount: 236 (now at 85% of total expected workforce)
Pre-commissioning test packs: 33% complete
Temporary Operating Licence for the LAMP approved
Lynas is on track for first feed to kiln and first production in Q2 2012.“
This was fantastic news. All the market could think of was that TOL had been approved. In the euphoria and with the lack of Company explanation, the market believed “TOL approved” meant production could start as soon as the LAMP was ready. Not so, not so.
“On 1 February, Malaysia’s Atomic Energy Licensing Board (AELB) announced its approval of the Temporary Operating Licence (TOL) for the LAMP in Gebeng, Malaysia. The AELB’s approval decision came after a thorough and extensive review of the project by the Malaysian Government regulatory authorities. An appeal in respect of the AELB’s decision has been lodged with the Minister of Science, Technology and Innovation. The Minister’s decision is expected shortly.
As at the end of the period, construction of Phase 1 of the LAMP was 98% complete and pre-commissioning test-packs were more than 85% complete. Lynas is on track for first feed to kiln in Q2, subject to the issuance of the TOL. “
3 months after approval, we were informed that TOL still had to be ISSUED. “Approved” didn’t mean approved at all. Production couldn’t start till TOL was ISSUED. Oh, shit. In the midst of that disappointment, the Company lifted our spirits by claiming it was on track “for first feed to kiln in Q2”. Clearly, the LAMP at “98% complete” was going to ready to go by 30th June.
“PARLIAMENTARY SELECT COMMITTEE IN MALAYSIA UPDATE 20 June 2012
Lynas Corporation (ASX:LYC, OTC:LYSDY) advises that the report of the Parliamentary Select Committee (PSC) established in relation to the Lynas Advanced Materials Plant (LAMP) was debated in the Malaysian Parliament on 19 June 2012.
As previously announced on 19 March 2012, the Malaysian Government established the PSC with the purpose of helping to raise public awareness concerning the LAMP.
In tabling its report, the PSC makes clear that it has taken into consideration a broad range of issues raised by concerned citizens, special interest groups and NGOs relating to public health and environmental safety, and subjected the LAMP to intense independent, expert scrutiny.
The report recommends that the Temporary Operating Licence (TOL) be issued for the LAMP. In addition, the report notes that Lynas has complied with the standards and laws in Malaysia, which are in line with international standards.”
This again showed that the government believed the TOL should be ISSUED. Why then, did the AELB not issue it right there and then? Of equal importance, why did Lynas not use the opportunity to tell the market its 30th June deadline for completion in only 10 days time was not going to be met?!
Quarterly Activities Report 31/7/12
“The Lynas Advanced Materials Plant (LAMP) Phase 1 construction project in Malaysia was completed Lost Time Injury (LTI) free. The project involved a total of 8,690,000 hours worked without an LTI. Subsequent to the end of the reporting period Lynas Malaysia remains LTI free.
• On 18 June 2012, Lynas announced that the Ministry of Science, Technology and Innovation (MOSTI) Minister, Datuk Seri Panglima Dr. Maximus Johnity Ongkili dismissed the appeal that was lodged under Section 32 of the Atomic Energy Licensing Act in relation to the decision of the Malaysian Atomic Energy Licensing Board (AELB) to approve the issuance of a Temporary Operating Licence (TOL) for the LAMP.
• Lynas also welcomes the findings of the Malaysian Parliamentary Select Committee (PSC) report on the LAMP which recommended that the TOL be issued for the LAMP. The report noted that Lynas has complied with the standards and laws of Malaysia, which are in line with international standards.
• Construction of Phase 1 of the LAMP was completed during the quarter and further progress was made on various pre-commissioning activities. Overall commissioning progress was 64% complete as at the end of the quarter. Construction of the Phase 2 expansion of the LAMP continued during the period and is on track for construction completion in early 2013.”
It waited a full month past the deadline before informing the market that in fact, the LAMP had been completed during June. Right…so what was this next announcement about?
“LYNAS Phase One LAMP complete 28 August 2012
Lynas Corporation Limited (Lynas) (ASX:LYC, OTC:LYSDY) has completed Phase One construction of the Lynas Advanced Materials Plant in Malaysia.”
Clearly REAL completion did not occur till 28/8. Or is it still not complete? Who knows? Not I.
“LYNAS RECEIVES TEMPORARY OPERATING LICENCE 5 September 2012
Lynas Corporation Limited (“Lynas”) (ASX:LYC, OTC:LYSDY) confirms that the Malaysian Atomic Energy Licensing Board (AELB) has today issued the Temporary Operating Licence (TOL) for the Lynas Advanced Materials Plant (LAMP).”
So on 5/9/12, the TOL (already approved in February!) was finally issued. The LAMP was ready to go, concentrate could be imported and production could start. No, no, not quite. Somehow, the TOL issue was able to be suspended. So it is now an approved, issued but suspended licence. I could ask in wonder, “Who is in charge of Malaysia?” We all must wonder.
Meanwhile, Lynas has suddenly started informing the market of important developments. Oh well, it did wait 5 hours before passing on the information about TOL issue being suspended but that didn’t surprise me one bit. If these court decisions aren’t price sensitive then I know nothing. Lynas should be in a Trading Halt while these cases run. I don’t just mean the day of the court appearance, I mean until a decision is handed down. A FINAL decision. That is the only way to stop the manipulation of the share price by people who already know the outcome of the legal proceedings.
“UPDATE ON MALAYSIAN LEGAL PROCEEDINGS 25 September 2012
Further to Lynas Corporation Limited’s (ASX:LYC, OTC:LYSDY) announcement dated 10 September 2012, the Kuantan High Court has decided to hear on 4 October 2012 an application by parties associated with the Save Malaysia Stop Lynas group for an injunction in respect of Lynas’ Temporary Operating Licence (TOL). The injunction application is part of an application seeking judicial review in respect of the June 2012 decision of the Minister of Innovation, Science and Technology to affirm the approval of the TOL.”
MALAYSIAN COURT UPDATE 4 October 2012
Lynas Corporation (ASX:LYC, OTC:LYSDY) provides the following update to its ASX announcement dated September 25, 2012, relating to a judicial review of the company’s Temporary Operating Licence (TOL) in Malaysia. The Kuantan High Court has adjourned until 10 October 2012 an application by parties associated with the Save Malaysia Stop Lynas (SMSL) group who are seeking an injunction against the TOL.
The deferral of the matter arose from additional affidavits submitted by Lynas. The applicants requested a brief adjournment to respond to those affidavits.”
Lynas waited till the night before the hearing before supplying the affidavits. It would have known that would cause a deferral. You may ask why Lynas did that. I do.
“MALAYSIAN COURT UPDATE 10 October 2012
Lynas Corporation (ASX:LYC, OTC:LYSDY) provides the following update to its ASX announcement dated October 4, 2012. The Kuantan High Court has reserved its decision on an application by parties associated with the Save Malaysia Stop Lynas (SMSL) group who are seeking an injunction against Lynas’ Temporary Operating Licence (TOL).
The injunction relates to an application by SMSL for judicial review of the Minister of Innovation, Science and Technology’s decision in June to dismiss an appeal against the decision of the Atomic Energy Licensing Board (AELB) to award the TOL.
The High Court is scheduled to deliver its decision on 8 November 2012. Until the decision is delivered, the interim order that was issued by the High Court on September 25, 2012 maintaining the status quo in respect of the TOL will remain in place.”
We are now in limbo till the 8th of November when some decision will be handed down by the court. Perhaps the TOL suspension will be lifted. Perhaps not.
The situation is abysmal. Lynas is trading in a vacuum. Trading needs to be halted until a clear picture of the Company’s future is available.
The Company itself needs to drastically change its attitude to the way it informs the market. It should give accurate deadlines which are met. Failure to meet them without sufficient reason should come at a cost to those concerned.
Right now, Nick Curtis bears ultimate responsibility for what has happened. He needs to be told to change his ways or “it’s the highway”.