LYC -3.63%: fell as much as 9.1% but recovered as the day progressed after June-quarter sales and production came in below expectations, while the cost of its heavy rare earths expansion increased materially.
Quarterly sales revenue rose 9% to A$288.9 million, a 4 year high, but well below consensus of A$391 million. Rare earth oxide production improved 7.7% quarter-on-quarter to 3,481 tonnes, although sales volumes declined 6.1% and neodymium-praseodymium production fell 7%.
Fourth-quarter highlights:
- Sales revenue of A$288.9 million, up 9% quarter-on-quarter.
- Rare earth oxide production of 3,481 tonnes, up 7.7%.
- Rare earth oxide sales of 2,941 tonnes, down 6.1%.
- NdPr production of 1,857 tonnes, down 7%.
- Cash of A$1.21 billion, up 13%.
The weaker result was partly driven by issues at the new Mt Weld water-recycling plant, which disrupted downstream production during the quarter. Management said the problem has now been resolved.
The other key negative was a substantial increase in the cost of the heavy rare earths expansion, which rose to A$294 million from A$180 million. Lynas attributed the increase to additional equipment, sourcing outside China and broader cost inflation.
On the positive side, Lynas remains well funded, with A$1.21 billion in cash, while first customer orders for samarium are expected to be fulfilled in the current quarter.
A softer update but the longer-term strategic appeal remains intact as one of the few major rare earth producers outside China, although after a very strong run earlier in the year, the stock was vulnerable to any operational miss. We don’t own LYC.
MM remains cautiously bullish LYC ~$15
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