Lynas Rare Earths Limited · ASX:LYC
Lynas Rare Earths — 5th International Rare Earths Conference, Hong Kong 2009
35 slides from Lynas Rare Earths's conference presentation, Nov 18, 2009
Slide 1: Observations of an Emerging Producer
Observations of an Emerging Producer 5th International Rare Earths Conference, Hong Kong November 2009
Slide 2: Disclaimer
Disclaimer ► The release, publication or distribution of this presentation in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this presentation is released, published or distributed should inform themselves about and observe such restrictions. ►
Slide 3: Observations of an Emerging Producer
Observations of an Emerging Producer ► Demand and pricing ► Supply realities ► Mineral Scarcity within the Rare Earths industry ► Required characteristics of new supply sources ► The Lynas approach and experience ► Working together as an industry -3-
Slide 4: Decrease in end application sales will reduce Rare Earths consumption in '09
Decrease in end application sales will reduce Rare Earths consumption in ‘09 Key Rare Earths Applications Change in 08 – 09 Demand Automotive industry ↓ 27% Catalytic convertor wash coat Rare Earths magnets Hybrids ↓ 14% Rare Earths Rare Earths magnets NiMH battery alloy consumption in e
Slide 5: Inventory destocking will reduce raw material demand in '09 by a further 20,000t REO
Inventory destocking will reduce raw material demand in ‘09 by a further 20,000t REO Japanese Rare Earths Imports Jan to June 2007, 2008, 2009 Tonnes REO 20,000 15,000 Raw material 10,000 demand estimated at 90,000t REO 5,000 for 2009 0 2007 2008 2009 January to June Source: Japanese Finance Ministr
Slide 6: Rare Earths prices drop due to reduction in raw material demand
Rare Earths prices drop due to reduction in raw material demand Prices drop to US$/kg REO Chinese cash cost 18 of production Average Rare Earths FOB price for Mount Weld REO distribution 16 14 12 Mt Weld FOB Price ~$10/kg 10 Adjust REO distribution 8 Less VAT 6 Less Export Tax Baotou Distribution
Slide 7: Prices at cash cost of production is supported by closure of Rare Earths Plants in China
Prices at cash cost of production is supported by closure of Rare Earths Plants in China -7-
Slide 8: Government stimulus has focused on green technologies
Government stimulus has focused on green technologies Hybrid Vehicle A key demand driver for Rare Earths Toyota and Honda total target over 1 million in 2010 (NiMH) Now 30 hybrids available from over a dozen manufacturers Wind Turbines Switch from geared electromagnetic induction wind turbin
Slide 9: US Hybrid cars sales vs. Rare Earths prices
US Hybrid cars sales vs. Rare Earths prices Tracking hybrid US$/kg US Hybrid Sales REO ‘000s sales 18 45 Average Rare Earths FOB price for Cash for 40 Mount Weld REO distribution 16 clunkers 14 35 Decrease in hybrids 12 30 sales H1’08 v H1’09 10 25 Floor price for Rare 8 20 Earths in H1 ’09 equa
Slide 10: 2010: Application growth and inventory restocking. Demand forecast to be over 140kt
2010: Application growth and inventory restocking. Demand forecast to be over 140kt End Application Raw Material Rare Earths Consumption Rare Earths Demand Tonnes Tonnes REO REO 160000 160000 150000 150000 140000 140000 130000 130000 120000 120000 110000 110000 100000 100000 90000 90000 80000 80000
Slide 11: The realities of supply are expected to result in a shortfall
The realities of supply are expected to result in a shortfall Rare Earths Supply Sources Chinese Policy Issues (reported capacity, REO) Baotou 50,000t 2009 Production Quota is 82,320t Relocation of iron ore mining Baotou and Sichuan: 72,300t Tailing facilities near capacity Southern Ioni
Slide 12: 2010 Elemental Pinch Points – Scenario 1
2010 Elemental Pinch Points – Scenario 1 2010 Supply Assumptions Supply/Demand imbalance (REO, separated products) (REO, separated products) Baotou 50,000t Lanthanum - 9,000t -25% ’09 output 46,000t concentrate Cerium -12,000t -25% Material from strategic stockpile Praseodymium -1,000t -
Slide 13: Review of Cerium shortfall for Scenario 1: 25% demand shortfall
Review of Cerium shortfall for Scenario 1: 25% demand shortfall 2010 Supply Assumptions Cerium demand by application (REO, separated products) Baotou 25,500t Auto catalyst 7,000t ~ 51% Cerium oxide Other catalyst 1,500t Sichuan 5,000t FCC, diesel, minor ~ 50% Cerium oxide Glass addit
Slide 14: Scenario 2: Reduction of Southern Ionic clay
Scenario 2: Reduction of Southern Ionic clay 2010 Supply Assumptions Supply/Demand imbalance (REO, separated products) (REO, separated products) Baotou 50,000t Lanthanum - 15,500t -40% ’09 output 46,000t concentrate Cerium -12,500t -26% Material from strategic stockpile Praseodymium -2,5
Slide 15: Mineral scarcity – it not about size of resource, it is about production!
Mineral scarcity – it not about size of resource, it is about production! Shortages occur when supply as a function of time can no longer keep up with demand as a function of time The ultimate recoverable resource in the ground is irrelevant in this respect We have reached this point in the Ra
Slide 16: Required characteristics of new Rare Earths supply sources
Required characteristics of new Rare Earths supply sources Ability to Concentrate with a low cost (physical) processing route Amenable Mineralogy Sufficient grade REO distribution Environmentally Sound Beach sand monazite banned from processing in Australia, Europe, China Tin tailings
Slide 17: The Lynas plan
The Lynas plan Multiple Multiplemine mine sources for sources for concentrate concentrate supplies supplies Mount Weld Malawi IndustrialInfrastructure Industrial Infrastructure Chemical Gebeng Industrial Estate Chemicalindustrial industrialland land Gas, East Coast Malaysia Gas,Water, Water,El
Slide 18: Raising funds requires a strong project, lots of persistence and good timing…
Raising funds requires a strong project, lots of persistence and good timing… Convertible note and senior bank project debt Investors in convertible note blocked release of funding in January 2009 Senior bank project debt could not be drawn without full funding in place Industrial partner so
Slide 19: In Summary
In Summary 2010 is forecast to be a year of application growth and inventory restocking Supply is a function of available production not resource in the ground Mineral Scarcity is likely to be a characteristic of the industry for at least the next five years Future Rare Earths supply chain m
Slide 20: Opening Presentation speech (cover slide)
Mr Nicholas Curtis Opening Presentation 5th International Rare Earths Conference 18 November 2009 Hong Kong (Cover Slide) A very good morning to everyone. Lynas Corporation is proud to be the lead sponsor of the Metal Events and Roskill International Rare Earths Conference. In its fifth year running
Slide 21: (Slide 3) Observations on demand and pricing
(Slide 3) Today, I would like to discuss our observations on the demand and pricing of Rare Earths, the anticipated supply realities, Mineral Scarcity within the Rare Earths industry and from our perspective the required characteristics of new supply sources. I will also discuss the Lynas approach a
Slide 22: (Slide 5) Inventory destocking and price impact
(Slide 5) However due to the economic uncertainty in 2009 and the desire for all companies to preserve cash, 2009 was a year where inventories through-out the supply chains of these industries were run-down. Rare Earths “Raw Material” purchases dropped substantially from late 2008. I believe we will
Slide 23: Baotou 'In China' price adjustments
If we adjust the REO distribution, and deduct VAT, the export tax and the export quota costs we can get to the Baotou “In China” price – that is the cash collected by the Chinese processors of Baotou material whether they sell in side China or export. This price had dropped to less than US$5/kg REO.
Slide 24: (Slide 8) Positive side to the Global Financial Crisis
(Slide 8) There has been a positive side to the Global Financial Crisis. Active government stimulus around the world, including strong support for the automotive industry, has enabled governments to ensure that the importance of ‘green technologies’ is emphasised. The automotive industry is now unde
Slide 25: Application demand dropped from second half of 2008 and into 2009
Application demand dropped from second half of 2008 and into 2009 Prices trailed but followed the same pattern until a floor price was reached When applications sales began recovery, prices did not move – inventory destocking occurring. See effects of government stimulus package “cash for cl
Slide 26: (Slide 11) The industry is likely to face a shortfall
(Slide 11) ….the reality is, the industry is likely to be facing a shortfall in the supply of these materials. The current Chinese suppliers, Baotou, Sichuan and the Southern Ionic Clay deposits provides for approximately between 85 and 115,000t REO. Baotou has limited growth potential, and potentia
Slide 27: There is Production Quota
There is Production Quota. The total Production Quota for 2009 is 82,320t, some 3,000 to 33,000t lower than current production estimates. The policy also states that there will be no prospecting or mining licenses for Rare Earths until mid next year. Once produced there is Export Quota – some make r
Slide 28: Price increases for light rare earths
Based on the earlier 140,000t REO raw material demand forecast, which was built up by application and by the Rare Earths used in each of the applications, we forecast a shortfall in the light Rare Earths. This may surprise some. However as I noted earlier prices are starting to increase, and if we c
Slide 29: Hybrid battery composition and heavy rare earths supply
The average hybrid battery composition is lanthanum rich compared to the natural distribution in Rare Earths but the mischmetal still contains more cerium than lanthanum. Whilst I am sure we can debate the finer details, at 25% the forecast total shortfall is significant (Slide 14) So why the ge
Slide 30: Ultimate resource in the ground is not the issue
Therefore the ultimate resource in the ground is not the issue, what is important is time to production. We have reached this point in the Rare Earths industry where growth forecasts on the current market size are greater than new supply coming to market. This is likely to be a feature of the rare e
Slide 31: Environmentally sound deposits and processing routes
2. The deposits and processing routes need to be environmentally sound. o Beach sand monazite is banned from processing in many regions in Australia, China, Europe due to the relatively high levels of actinides to lanthanides. o From 1982, Rare Earths were recovered from tin tailings in Malaysia in
Slide 32: (Slide 17) Lynas' high level strategy
(Slide 17) Moving on to Lynas’ high level strategy. We plan to have multiple-mine sources for concentrate, suppling a processing hub with exceptional infrastructure in Malaysia. The industrial infrastructure at the Gebeng Industrial Estate is world class – the plant site has good access to chemical
Slide 33: (Slide 18) Lynas obstacles and funding this year
(Slide 18) Lynas has had its own share of obstacles this year. As many of you would be aware, investors in our original project funding structure blocked the release of the necessary funding earlier this year. Lynas looked for an Industrial partner as the financial markets were closed. While there w
Slide 34: How can we as an industry help each other accelerate supply
So, how can we as an industry help each other accelerate supply to help meet demand? The demand and supply issues within the Rare Earths market are much more well-understood by the press, the end application customers and the capital markets today than even a year ago. Ironically the proposed CNMC a
Slide 35: Industry association and summary
those that want to be mining focused companies mine and produce concentrate, and those which have completed the process engineering for separation be the processors. An industry wide association is needed to help facilitate this. (Slide 19) So, in summary: 2010 is forecast to be a year of applicat
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