Lynas jumps another legal hurdle to rare-earth processing in Malaysia

01/31/2013 8:30 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Australian rare-earth producer Lynas (LYC.AU in Sydney or LYSDY in New York) jumped one more legal hurdle on Tuesday, January 29. The Kuantan High Court in Malaysia rejected an appeal from Save Malaysia Stop Lynas to review the temporary operating license ranted by the country’s Atomic Energy Licensing Board.

This leaves only one last legal challenge to the company’s rare-earth processing plant in Malaysia. The last case had been scheduled to be heard on Tuesday, February 5, but has been postponed by the court. No new date has yet been set.

Lynas has said that it expects that the Malaysian plant will produce its first sample products for customer review in February. The company projects that production at the plant will gradually move to full capacity during the year.

The legal challenges now winding to a close have certainly been a big issue for Lynas, but I’d argue that they aren’t the biggest questions facing the company. Those remain When will the prices of rare earth minerals start to recover? and the related question, “Will the company need to raise more capital? Low prices for rare earths have forced companies such as California’s Molycorp (MCP) to raise more capital than expected, diluting existing shareholders more than expected. No rare earth company has done well in this period of low prices—Lynas shares are down 52% over the last 12 months—but shares of companies that have had to raise less cash have done better. (Molycorp is down 76% in the last 12 months.) Getting the Malaysian processing plant running and at capacity this year will remove some of that worry from Lynas stock.  (Lynas is a member of my long-term Jubak Picks 50 portfolio http://jubakpicks.com// )

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , may or may not now own positions in any stock mentioned in this post. The fund did own shares of Lynas as of the end of September. For a full list of the stocks in the fund as of the end of September see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

Related Articles on STOCKS

Keyword Image
11 Reasons to Buy Microsoft
12/11/2017 5:00 am EST

For our latest recommendation, we revisit one of the world's most prominent technology companies, Mi...