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Lynas finally delivers rare earth products in Malaysia
02/27/2013 3:52 pm EST
The company received a temporary operating license from the Malaysian government in September after five years of legal challenges. Processing work begin in late November after opponents of the plant, worried about health effects from radiation that might be released in processing, exhausted their court challenges. The company projects an output of 11,000 metrics tons in the second quarter of 2013.
The issue, now that the plant has started production and is in the process of working through the typical early stage bugs, is when Lynas and the rest of the rare earth sector will see a recovery in prices. Rare earths are used in products from TVs and computer displays to hybrid car batteries to lasers to wind turbines. Some of these markets—wind turbines, for example—have been deeply depressed. Prices for the combination of rare earth elements (rate earth elements sell for radically different prices depending on how rare they are) Lynas mines at Mt. Weld in Australia have fallen to $37.45 per kilogram from a 2011 price of $147.96. Prices are still in decline—the Mt. Weld combination of rare earths sold for $42.92 per kilogram in the fourth quarter of 2012. But the rate of decline seems to be easing. At $37.45 per kilogram the Mt. Weld price is not that far above the $31.35 per kilogram price from 2010—before the big surge in rare earth prices.
I think internal progress at Lynas could well take the stock back to the 95 cents to $1 a share range that the shares saw in September and October of 2012. Getting much above that price, however, will depend on a recovery in key rare earth end markets such as wind turbines and consumer electronics. The top of the 52-week price range is $1.35.
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/ , I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund owned 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/