{"id":51811,"date":"2014-05-27T02:47:19","date_gmt":"2014-05-27T06:47:19","guid":{"rendered":"http:\/\/countingpips.com\/?p=51811"},"modified":"2014-05-27T07:12:08","modified_gmt":"2014-05-27T11:12:08","slug":"why-the-lynas-share-price-rose-today","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/05\/why-the-lynas-share-price-rose-today\/","title":{"rendered":"Why the Lynas Share Price Rose Today"},"content":{"rendered":"
May 27, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

What Happened to the Lynas Share Price?<\/h2>\n

Shares of Lynas Corporation [ASX:LYC]<\/strong> rose by 13.33% on Tuesday, closing at $0.17. The company has risen 54% since last Wednesday. <\/p>\n

Why Did This Happen to the LYC Share Price?<\/h2>\n

China Daily, one of China\u2019s leading newspapers, reported last Wednesday that several ministries \u2018are discussing heavier taxes on rare earth producers\u2019. These taxes could be implemented in the second half of this year. <\/p>\n

In my opinion, this is nothing new. <\/p>\n

China has been talking about taxing its rare earth producers for a couple of years. It wants to see higher rare earth prices and curb illegal exports. Nonetheless, impacting supply conditions could potentially see its monopoly affected as it was in 2012. <\/p>\n

2012 was a year that marked the rare earth\u2019s bubble. China temporarily put a freeze on rare earth exports, causing the western world to react by opening additional rare earth mines. <\/p>

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This was the last time Lynas shareholder\u2019s had something to celebrate. <\/p>\n

Known global rare earth resources are abundant, enough to dig up and last for over 285 years. And China controls over 92% of this market. Because of its monopoly, China has the power to control prices.<\/p>\n

What Now for the Lynas Corporation?<\/h2>\n

Lynas shareholder confidence is low after a series of environmental protests at its Malaysian rare earths plant, production delays, and capital raisings.<\/p>\n

The issue lately has to do with the company\u2019s balance sheet. The company is currently raising $40 million dollars to repay debt \u2014 this isn\u2019t a good sign. After this debt has been repaid and restructured, there will still be US$440 million due for repayment by mid-2016.<\/p>\n

Shareholders are starting to view Lynas as an extremely high risk play; it would be difficult to blame them. <\/p>\n

As a result of China\u2019s significant influence on the rare earths\u2019 market, Lynas has seen its average rare earths\u2019 \u2018basket sales price\u2019 fall from above US$200 per kilogram in 2012 to US$22.63 per kilogram. This is roughly the company\u2019s cost of production.<\/p>\n

As Lynas is producing at roughly its breakeven price, it can\u2019t afford to pay for additional capital expenditure, administration fees or even its debt repayments. It must continue to raise equity to pay for these necessary expenses. <\/p>\n

Lynas can continue to increase its production and it will still struggle based on its current fundamentals. The more rare earths Lynas processes at current prices, the more unprofitable it will be for them. <\/p>\n

Looking forward, if China goes ahead and bans rare earth exports or implements a tax, rare earth prices may increase. Nonetheless, China doesn\u2019t want to encourage new mines opening around the world again which could further hinder the rare earths\u2019 price in the long term. <\/p>\n

In this case, as I have been for the past couple of years, I\u2019m cautious about these Chinese rumours.<\/p>\n

Jason Stevenson+<\/a>
\n Resources Analyst, Diggers and Drillers<\/em><\/strong><\/p>\n<\/p>\n

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\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au What Happened to the Lynas Share Price? Shares of Lynas Corporation [ASX:LYC] rose by 13.33% on Tuesday, closing at $0.17. The company has risen 54% since last Wednesday. Why Did This Happen to the LYC Share Price? China Daily, one of China\u2019s leading newspapers, reported last Wednesday that several ministries \u2018are discussing heavier […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-51811","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/51811","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=51811"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/51811\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=51811"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=51811"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=51811"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}