Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lynas Rare Earths Ltd (LYSCF, Financial) delivered an EBITDA of $132.1 million despite a depressed market.
- The company maintained a strong balance sheet and reduced costs by 17%.
- Significant progress was made in the Mount Weld expansion program, with a 63% increase in ore reserves.
- The company successfully completed and commissioned the Kalgoorlie plant and the first shipment of mixed rare earth carbonate was processed successfully.
- Lynas Rare Earths Ltd (LYSCF) improved operational efficiencies, particularly in recoveries, leading to better cost performance.
Negative Points
- The market for rare earths was depressed with lower sustained prices and slower demand growth.
- NdPr production reduced by 8% due to an extended shutdown at the Lynas Malaysia facility.
- The company faced increased total recordable injury frequency rates, prompting a review of health and safety programs.
- There was a significant increase in the cost to construct the Kalgoorlie facility.
- A permitting issue related to wastewater management in the US has delayed the construction of the heavy rare earths plant.
Q & A Highlights
Highlights of Lynas Rare Earths Ltd (LYSCF) Earnings Call
Q: Can you provide more color on operating cost performance and the factors affecting it?
A: Amanda Lacaze (CEO): We saw unit cost reductions this year due to improved operational efficiencies and better recoveries. We also selectively rejected some lanthanum and cerium early in the process to optimize costs. Pol Roux (VP - Downstream) added that despite higher prices for chemicals and energy, they improved cost positions through better recoveries and reduced chemical and energy usage.
Q: What is the production outlook given the recent market rebound and any major maintenance work that might impact production?
A: Amanda Lacaze (CEO): We aim to demonstrate our ability to produce 10,500 tonnes per annum of separated NdPr by the end of the year. However, we will not rush to this number immediately to avoid supply-side pressure. We plan to do some maintenance work towards the end of the year, but it should not significantly impact finished goods production.
Q: What are the steps needed to resolve the permitting issue in Texas, and how does this affect the timeline for the US project?
A: Amanda Lacaze (CEO): The wastewater permitting issue in Texas is complex and tied to a larger issue with Dow Chemical. We are working closely with them and the US government. This delay does not significantly affect our ability to meet customer needs due to our increased separation capacity in Malaysia.
Q: Can you provide a split on the remaining capitalized costs for various projects?
A: Amanda Lacaze (CEO): The majority of the remaining capitalized costs will be for completing the Mount Weld expansion. We also have some mop-up costs at Kalgoorlie and tens of millions of dollars to be spent in Malaysia over this year and next.
Q: How are you promoting fixed pricing and long-term contracts, and are you seeing pressure from European customers to diversify supply chains?
A: Amanda Lacaze (CEO): We have a variety of pricing formulas, including fixed prices, floor-ceiling prices, and premiums above market prices. We do not sell into the spot market. European customers are indeed under pressure to diversify their supply chains, and we are actively working with them to meet regulatory requirements.
Q: Can you provide any quantitative guidance on operating costs, especially in comparison to 2019?
A: Amanda Lacaze (CEO): We aim to achieve cost levels similar to 2019, but we are not committing to a specific date. The introduction of Kalgoorlie will bring different cost pressures, and we are focused on being one of the lowest-cost producers in the market.
Q: What is the impact of the Chinese production quotas on Lynas's production outlook?
A: Amanda Lacaze (CEO): The modest increase in Chinese quotas and reduced imports from Myanmar are positive signs. We expect our second-half production to be a step-up from the first half, aligned with market demand.
Q: Can you explain the broad range in CapEx guidance for FY25?
A: Amanda Lacaze (CEO): The broad range allows us to manage our capital program based on market conditions. We have identified projects that can be moderated or delayed if necessary. The transition from capital to operating accounts will also impact the CapEx line.
Q: Are you confident that the market will recover sufficiently by the beginning of calendar year 2025?
A: Amanda Lacaze (CEO): We are optimistic due to recent price firming and new Chinese quotas. We will manage our assets efficiently and align production with market demand, expecting a step-up in production in the second half of the year.
Q: How does the new resource and reserve statement impact your long-term production plans?
A: Amanda Lacaze (CEO): The new statement validates our view that continued investment in exploration at Mount Weld offers the most economic pathway to supply rare earth elements. We aim to demonstrate our ability to produce 10,500 tonnes per annum of NdPr this financial year and plan to expand to 12,000 tonnes in the future.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
