Malaysia delays may cause balance sheet difficulties for Lynas

By: Esmarie Swanepoel
10th August 2012

PERTH ( – The share price of rare earths miner Lynas dipped on Friday after stockbroking firm Fosters put a sell recommendation on the stock.

In a note to clients, Fosters cast doubts on whether the much-contested temporary operating licence (TOL) for a plant in Malaysia would be issued before a political election, given the sensitivity around the project.

The Malaysian Minister of Innovation, Science and Technology recently dismissed an appeal against the granting of the two-year TOL, and Lynas has submitted plans to satisfy additional conditions that have been applied to the licence.

However, Fosters said on Friday that the “saga” was expected to continue.

“The controversy over the plant is expected to affect four marginal seats in the area. Two are already opposition-held, two more are expected to swing based on the environmental and health concerns of the community; therefore, it’s hard to see any incentive from the government to issue the TOL until post election,” the firm said.

Fosters added that the expected delays would also have funding implications and would cause “balance sheet difficulties” in the interim.

“We estimate A$10-million a quarter in working capital requirements in a ‘stand-still’ scenario. Therefore, should the TOL be delayed until next year we would expect additional funding would be required. While Lynas does have sufficient funds to survive for some time, it is unclear just as to how long ‘some time’ will be.”

Lynas recently reported a A$4-million increase in the capital cost for its Lynas Advanced Materials Plant (Lamp), citing additional claims from subcontractors and additional project management costs.

The Lamp was now forecast to cost some A$353.2-million to develop, of which A$308.4-million had already been spent by the end of June this year.

Lynas lost 1.3% on the ASX on Friday, trading at A$0.76 apiece by late afternoon.

Edited by: Mariaan Webb


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