Lynas Rare Earths Limited · ASX:LYC
Lynas Rare Earths — Lynas — Investor Presentation (June 2007)
33 slides from Lynas Rare Earths's investor presentation, June 2007
Slide 1: Executive Chairman's Presentation June 2007
Executive Chairman’s Presentation June 2007
Slide 2: Disclaimer
Disclaimer ► The information contained in this presentation has been prepared using the information available to Lynas Corporation Limited (Lynas) at the time of preparation of the presentation. ► For further information about Lynas, you can obtain a copy of recent ASX announcements made by Lynas at
Slide 3: Lynas has a clear vision to become a global company in the Rare Earths industry
Lynas has a clear vision to become a global company in the Rare Earths industry Vision We will lead the growth of the global Rare Earths industry by creating a reliable, fully-integrated source of supply from mine through to a diverse set of customers Values Strive for excellence in safety, health
Slide 4: Lynas is listed on the Australian Stock Exchange
Lynas is listed on the Australian Stock Exchange Listed on the Australian Stock Exchange (LYC) Shares on issue 501,557,164 Options outstanding 28M with strike price between A$0.17 – A$0.80 Major institutional support, substantial shareholder announcements Merrill Lynch 9.7% Goldman Sachs 9.1
Slide 5: Rare Earths are vital for three important developments in our society
Rare Earths are vital for three important developments in our society Greenhouse Gas Reduction Digital Technology Energy Conservation Reduction in car exhaust Enabling miniaturisation Energy efficient products • Catalytic converter • Rare Earth magnets • Compact fluorescent lights • Hybrid vehicles
Slide 6: Rare Earths have many applications in the automotive industry
Rare Earths have many applications in the automotive industry UV cut glass Glass and Mirrors • Cerium polishing powder • Cerium Diesel Fuel Additive • Cerium • Lanthanum HYBRID electric motor and generator • Neodymium • Praseodymium • Dysprosium • Terbium HYBRID NiMH battery • Lanthanum 25+ Electric
Slide 7: Electronics is also a key industry for Rare Earths
… Electronics is also a key industry for Rare Earths Screen Hard Disk Drive/CD/DVD • Eu, Tb phosphors – CRT & PDP • Nd magnet in spindle – Backlight for LCD • Nd magnet in voice coil motor • Ce glass polish Optical Lenses • La glass additive • Ce glass polish Speakers • Nd magnets in headphones of I
Slide 8: The global chemical companies who purchase Rare Earths include
The global chemical companies who purchase Rare Earths include: -8-
Slide 9: Demand is growing over 10% p.a. from both existing and new applications
Demand is growing over 10% p.a. from both existing and new applications Demand ► Existing applications are driving sustained growth of the 95,000t Rare Earths global market Neo magnets 13% p.a. to 2010 NiMH batteries 30% p.a. to 2010 Catalysts (automotive and FCC) 4% p.a. to 2010 Phosphors 1
Slide 10: Where do Rare Earths come from?
Where do Rare Earths come from? ► Whilst Rare Earths are relatively abundant in the earth’s crust, they are rarely present in economic concentrations ► They are never found as free metals but as a ‘cocktail’ of the Rare Earths elements, which need separating for commercial use ► Chinese mines curren
Slide 11: Supply is undergoing a structural change due to environmental and regulatory issues
Supply is undergoing a structural change due to environmental and regulatory issues Supply ► China continues to dominate the world’s supply of Rare Earths (>95%) ► Chinese Government announced a mining production quota equal to 77,500 tpa of Rare Earths oxides for 2007, an increase of 2% from 2006 ►
Slide 12: Supply-demand imbalance suggests price increases will continue over the next few years
Supply - demand imbalance suggest the price increases will continue over the next few years Rare Earths market history and independent forecast (US$/kg) (REO Metric Tonnes) Based on Mt Weld Composition, FOB China basis 12.00 US$11.64/kg 175000 11.00 • Tech Crash 28 May 07 10.00 150000 • Substantial
Slide 13: The supply-demand imbalance for elements used in magnets is particularly severe
The supply - demand imbalance for elements used in magnets is particularly severe Neodymium and Praseodymium Oxide price movement (US$/kg) 35 28 May 07 30 25 Rare Earths Price FOB China basis 20 15 10 5 0 2 2 3 03 05 06 07 04 04 05 06 '0 '0 '0 3' 3' 1' 3' 1' 1' 1/ 3' 1 3 1 Q Q Q Q Q Q Q Q Q Q Q Neod
Slide 14: Our strategy is to develop a transparent, environmentally sound, integrated supply chain
Our strategy is to develop a transparent, environmentally sound, integrated supply chain Australia Malaysia Malaysia and China Separation - Malaysia: 5,000 tpa modular solvent Mining: extraction separation plants 121,000 tpa of ore, Processing: 14.8% REO Integrated processing plant to float, crack a
Slide 15: Mt Weld is the richest grade Rare Earths resource in the world
Mt Weld is the richest grade Rare Earths resource in the world INSITU RECOVERABLE GRADE RESOURCE RESOURCE DEPOSIT (REO) (t REO) (t REO) NOTE Mt Weld Rare Earths Project 12% 917,000 503,000 4% cut-off Baiyun Obo, Baotou PRC 5% 17,000,000 1,700,000 Govt pressure to reduce mine rate China Southern Ioni
Slide 16: Mt Weld's grade and composition are a natural advantage
Mt Weld’s grade and composition are a natural advantage Mt Weld Composition vsvs Baotou Baotou Composition Composition By Weight By Weight By Value By Weight By Value Lanthanum oxide 25.50% 25.50% 10% 25.70% 13% Cerium oxide 46.70% 46.74% 17% 51.30% 24% Praseodymium oxide 5.30%5.32% 10% 5.40% 13% Ne
Slide 17: Grade control drilling confirmed robustness of resource and a ultra-high grade zone
Grade control drilling confirmed robustness of resource and a ultra-high grade zone Ultra-High Grade REO Drill Intercepts Drill hole Easting Northing From To Interval REO Grade No (MGA) (MGA) m m m % RC915 455800 6807100 54 58 4 45.54% cut-off RC922 455820 6807140 48 50 2 45.5 RC923 455820 6807160 5
Slide 18: Mining contractor mobilised, June ground breaking for Mt Weld Rare Earths project
Mining contractor mobilised, June ground breaking for Mt Weld Rare Earths project All environmental approvals are complete and in good standing Aboriginal Heritage studies and artefact clearances complete, no Native Title issues Mining Proposal has been approved by the Department of Industry and Res
Slide 19: 18% REO ore will be transported via road, rail and ship to Lynas plant in Malaysia
18% REO ore will be transported from mine via road, rail and ship to Lynas plant in Malaysia -19-
Slide 20: Malaysian environmental and project approvals for the processing plant are underway
Malaysian environmental and project approvals for the processing plant are underway -20-
Slide 21: Why Malaysia is an ideal location for the processing plant
Why Malaysia is an ideal location for the processing plant ► Granting of “strategic pioneer status” in Malaysia, with a related 10 year tax free period ► Excellent infrastructure at Teluk Kalong Industrial Estate Flat industrial land available at reasonable rates Close to deep water all weather
Slide 22: Initial production of the processing plant will be 10,500t REO p.a.
Initial production of the processing plant will be 10,500t REO p.a. Lynas’ concentration process employs a proprietary state-of-the-art flotation re-agent Bench test results achieved recoveries in excess of 70% at 40% REO grade A pilot plant has been completed in Australia achieving a steady state p
Slide 23: The processing plant scope includes rapid brown-field expansion to 20,000t REO p.a.
The processing plant scope includes rapid brown-field expansion to 20,000t REO p.a. The cracker and initial separation plant on the same integrated site as the concentrator allows process optimisation Cracking plant is mature Rare Earths industry technology A pilot plant has been completed in Austra
Slide 24: The Malaysian plant will also separate 5,000 tpa REO to individual oxides initially
The Malaysian plant will also separate 5,000 tpa REO to individual oxides initially Lynas will separate approximately 5,000 tpa REO in Malaysia, and is likely to expand this separation capacity shortly after commencement of production The engineering for the separation capacity is being fast tracked
Slide 25: Commissioning of the plant in Malaysia is planned for late 2008
Commissioning of the plant in Malaysia is planned for late 2008 ► MIDA approval received Strategic Pioneer Status with associated 10 year tax break ► EPCM contract discussion with Ranhill WorleyParsons Offices in Sydney, Beijing, Kuala Lumpur and Kerteh ► Engineering design underway Completed
Slide 26: Rare Earths project schedule for Malaysian site
Rare Earths project schedule for Malaysian site, EPCM schedule currently being finalised ► Ramp-up to 10,500t REO, including commissioning, is expected to take 6 -12 months, ultimately continued expansion to 20,000t by second half 2010 -26-
Slide 27: The project capital costs will increase significantly due to location, scope and design philosophy
The project capital costs will increase significantly due to location, scope and design philosophy changes 2006 Project capital cost estimate for China A$ 65.0M Malaysia based project capital expenditure A$ 65m + additional Mt Weld mine contractor cost A$ 22.6M Processing plant capital costs TBA
Slide 28: Forecast operating costs estimated at US$4 – US$5/kg REO
Forecast operating costs, from mine to separated product inclusive, is estimated at US$4 – US$5/kg REO Total forecast operating costs (± 10%) US$ 4.50/ kg REO Percentage breakdown Mt Weld costs (A$ exposure) 4% Transportation (mine to plant) (US$ exposure) 14% Concentration (MYR, US$, and RMB
Slide 29: The basket price of product suite shows Neodymium and Praseodymium are key value drivers
The basket price of product suite shows Neodymium and Praseodymium are key value drivers ► Neodymium and Praseodymium 23.8% x $31.00 kg = $7.38 Magnet market, capacitors, NiMH batteries ► Lanthanum 25.5% x $2.50 kg = $0.64 NiMH battery, FCC and glass polishing ► Cerium 46.7% x $2.50 kg = $1.17
Slide 30: Lynas has signed a Supply Agreement and a number of other Letters of Intent
Lynas has signed a Supply Agreement and a number of other Letters of Intent ► Supply Agreement Major international Rare Earths consumer Value of contract is in excess of US$90M over 5 years Due to product mix, ~30% by volume and 15% by value Five year contract sets new benchmark in Rare Eart
Slide 31: Rare Earths summary
Rare Earths summary ► A perfect storm has hit the Rare Earths market, with demand growing strongly and supply restrictions in place ► Lynas is the alternative global supplier of Rare Earths to China, from a unique resource base, and will be one of the lowest cost producers in the world ► The plant i
Slide 32: Crown Polymetallic resource
Crown Polymetallic resource Category Indicated Inferred Total Mt 1.5 36.2 37.7 Crown & Coors Ta2O5 0.037% 0.024% 0.024% Rare Metal Nb2O5 1.4% 1.06% 1.07% Deposit TLnO 1.65% 1.14% 1.16% ZrO 0.32% 0.3% 0.3% FeO3 46.5% 42.6% 42.8% P2O5 8.9% 7.96% 7.99% Y2O3 0.1% 0.09% 0.09% Al2O3 9.94% 11.3% 11.3% TiO
Slide 33: Summary
Summary In achieving our Vision we will: ► Create the globally unique integrated Rare Earths company ► Create sustainable long term earnings with exposure to growth through technology advancement ► Create long term shareholder value in excess of current share price -33-