Management led by Nick Curtis (ex. Macquarie Bank & Sino Gold) also Jake Klein & David Davidson from Sino Gold with Curtis in particular holding a lot of LYC stock & options.
Global demand for rare earths expected to grow by 10% per annum while the worlds biggest producer (China) is having their exports restricted as well as losing VAT rebates and gaining a 10% tax. LYC are sitting in the wings as the only commercially viable deposit outside China and one of the lowest-cost producers in the world (though they haven’t produced anything yet?).
Key action of the last 12mths for LYC is seen as the call to move the planned China plant to Malaysia which will save approx 27% in present costs, be tax free for 10yrs and have no restrictions on exporting. This has obviously pushed back production dates though the longterm benefits are sound.
Having transformed from a development phase into implementation they have already signed a longterm material supply contract with French chemical company Rhodia.
Looking at the charts… trading volume has picked up over the past year, last 6mths in particular and sp pushing up to it’s all time highs of late ’03 but there looks to be more substance to the climb now.
With all this going on the sp has climbed from .15 to .60 without the company actually producing anything. When Malaysia is fully operational (late ’08), the China restrictions kicking in and overall market growth/demand LYC could be looking pretty good.
What do we reckon on timeframes? 18mths-2yrs? My guess is the sp will move gradually (in either direction) for the next while as the biggest changes have already happened until they are ready to produce & supply. That said, the entire resources sector will be interesting to watch over the next couple of years as there are no shortage of predictions about this sector.
One other thing… safety concerns. Rare earths are difficult and dangerous to mine. There is a history of environmental concerns around mining and production of rare earths (radiation etc.) and with a completely new operation being built any safety or environmental problems will no doubt dent investor confidence. People don’t tend to forget radiation scares in developed countries!
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