Release Date: February 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant progress on growth projects, including the Mount Weld expansion and the US Heavy Rare Earths plant.
- Updated Malaysian operating license allows continued import and processing of Lanthanide concentrate, ensuring operational stability.
- Strong demand growth for rare earths, with 2023 demand 45% higher than pre-COVID levels.
- Successful completion of a major works program in Malaysia, increasing NdPr production capacity to 10,500 tonnes per annum.
- Continued strong balance sheet with positive EBITDA of $62.6 million, despite lower market pricing.
Negative Points
- Financial results for the first half were weaker compared to the past couple of years due to lower market pricing.
- Challenges in ramping up the new Kalgoorlie facility, including power outages and ensuring operational safety.
- Dependence on the Chinese market, which has shown softer demand, affecting overall pricing.
- Potential risks associated with sulfuric acid supply in Western Australia due to prospective closure of the BHP smelter.
- Ongoing need to manage production costs and efficiencies in a low-price environment to remain competitive.
Q & A Highlights
Q: Lynas mentioned considering merger and acquisition opportunities. Are you interested in early-stage rare earth exploration projects or companies currently producing rare earth concentrate?
A: We assess all opportunities. Some early-stage projects have been stagnant due to various challenges. We diligently evaluate them, especially for additional feedstock capacity, but we are pleased with our current Mount Weld ore body.
Q: Given weak rare earth prices, is your acquisition strategy opportunistic? Are you looking for rare earth concentrate to maximize downstream capacity?
A: As we complete Mount Weld, we can feed downstream capacity. The key issue with weak pricing is to remain a low-cost producer. Additional feedstock is not needed today, but we always assess alternate sources to enhance operations.
Q: On cash costs, is the $30 per kilogram cash cost an indication of unit costs going forward?
A: The $30 per kilogram is on a rare earth oxide basis. We only produced for 20 out of 26 weeks, so the numbers are higher than when producing at nameplate for the full period. We do not see this as a target.
Q: What is required to see the market move back into balance? Is it EVs or industrial demand recovery?
A: It’s a bit of all. The Chinese quotas were modest. We expect inventory build in China to unwind over the calendar year. Demand outside China remains strong, and we are confident China will recover from its current challenges.
Q: Can you sell all of your produce this year despite market conditions?
A: Yes, we can sell everything we produce. We have more inquiries than we can serve today. Ensuring our assets are in place and operating is crucial for securing high-value contracts.
Q: What can you do to get better pricing outcomes?
A: We need more magnet making outside of China. Government policy supports rebuilding the manufacturing ecosystem. We focus on being cost-competitive and exploring opportunities to enhance pricing, especially with NdPr and other rare earth elements.
Q: How does pricing and volume interplay work this year with increased capacity?
A: We aim to run our facilities efficiently, not necessarily at 100% all the time. We will drive to achieve 10,500 tonnes by the end of the year and optimize operations based on market conditions.
Q: What is the timeline for breaking ground on the US facility?
A: We expect to break ground later this year. We are finalizing a particular piece of technology but remain on track to start construction this year.
Q: How do you assess jurisdiction risk for ionic clay opportunities outside Australia and Malaysia?
A: We are very alert to jurisdiction risk. Our focus is on developing Malaysian operations and potentially partnering with local companies. We also consider opportunities in Australia and globally, assessing how our expertise can accelerate development.
Q: Would you consider additional funding from the US Government in a low-price environment?
A: Our discussions with governments are positive. The US understands the importance of ensuring facilities remain efficient and competitive. We will engage with key government partners to align with policy during periods of low pricing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
