Post on 03-Sep-2020
Lynas Corporation Rare Earths – we touch them everyday
Annual General Meeting
CEO Address 29 November 2013
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Disclaimer
This Presentation has been prepared by Lynas Corporation Limited (ABN 27 009 066 648) (Lynas or the Company). This Presentation contains summary information about Lynas and its subsidiaries (Lynas Group) and their activities current as at the date of this Presentation. The information in this Presentation is of general background and does not purport to be complete or to comprise all the information that a shareholder or potential investor in Lynas may require in order to determine whether to deal in Lynas shares. It should be read in conjunction with Lynas Group’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX), which are available at www.asx.com.au. This document is not a prospectus or a product disclosure statement under the Corporations Act (Cth) 2001 (Corporations Act) and has not been lodged with the Australian Securities and Investments Commission (ASIC).
Not investment or financial product advice
This Presentation is for information purposes only and is not financial product or investment advice or a recommendation to acquire Lynas shares and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek financial, legal and taxation advice appropriate to their jurisdiction. Lynas is not licensed to provide financial product advice in respect of Lynas shares. Cooling off rights do not apply to the acquisition of Lynas securities.
Financial data
All dollar values are in Australian dollars (A$) unless stated otherwise and financial data is presented within the financial year end of 30 June 2012 unless stated otherwise. Any pro forma historical financial information included in this Presentation does not purport to be in compliance with Article 11 of Regulation S-X of the rules and regulations of the US Securities and Exchange Commission.
Past performance
Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.
Future performance
This Presentation contains certain “forward-looking statements”. The words “estimate”, “expect”, “should”, “could”, “may”, “will, “predict”, “plan”, “scenario”, “forecasts”, “anticipates” and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Forward-looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Such forward-looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements.
Investment Risk and other risks
An investment in Lynas securities is subject to investment and other known and unknown risks, some of which are beyond the control of Lynas Group, including risk factors associated with the industry in which Lynas Group operates, such as: nature of mineral exploration and production; mineral and ore reserves; construction risks; progressing risks; project developments; market price and demand risk; credit and market risks; regulatory, political and environmental risks; tax and other risks generally relating to equity investment.
Not an offer
This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. Securities in Lynas have not been, and will not be, registered under the U.S. Securities Act of 1933 or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold in the United States unless the securities are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, registration.
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Rare Earths market data - Disclaimer
The slides in this presentation containing Rare Earths market data have been sourced from independent analysis of end application demand, along with Lynas estimates of quantities of Rare Earths end use in various key applications.
Although Lynas believes that the outcomes expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance. Forward-looking statements are based on assumptions and contingencies which are subject to change without notice. Factors that could cause actual results to differ materially from those in forward-looking statements include new Rare Earths applications, the development of economic Rare Earths substitutes, and general economic, market or business conditions. While Lynas has made every reasonable effort to ensure the veracity of the information presented, Lynas does not guarantee the accuracy and reliability of the estimates, forecasts and conclusions contained herein. Accordingly, the Rare Earths market data in this presentation should be used for general guidance only. There can be no guarantee that actual outcomes will not differ materially from forward-looking statements.
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Introduction
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Lynas Vision: To be the leader in Rare Earths for a sustainable future
Business Model
Safe for people
Safe for the environment
Secure for customers
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Employee Safety
Lynas global operations were Lost Time Injury (LTI) free during the September quarter
12-month rolling LTI Frequency Rate for Lynas global operations as at the end of September was 0.8 (per millions hours worked)
Results so far…
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1
Environmental Monitoring
Lynas environmental emissions are strictly monitored and are well below permissible limits
Air emissions
Water treatment
Solid residues
2 Environmental monitors at the LAMP
Lynas „Safety Champion‟ Badges
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Triple Certification
Western Australian operations maintained certification to:
OHSAS 18001 (Occupational Health and Safety)
ISO 14001 (Environmental Management Systems)
ISO 9001 (Quality Management Systems)
In November, Lynas Malaysia operations were certified by Bureau Veritas to OHSAS 18001, ISO 14001 and ISO 9001 standards.
No major non-conformances were identified in the audit
Results so far…
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3
Solid Residues 4
ISO Certification
Road base products – two “WLP” based products tested and proven to be:
non-leachable
non-radioactive
non-toxic
Soil conditioning products
Successful results from pot trials
Field trials ongoing
Batching plant and
RB-10 product
Canola field trials in
Western Australia
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Customer expectations: Together for
Sustainability (TfS) example
• The initiative was founded in 2011 by six multinational companies.
• The purpose of this TfS Initiative is:
• to develop and implement a global audit program
• to assess and improve sustainability practices within the supply chains of the
chemical industry
• The founding members are:
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Customers focus on environmental, social and
governance issues in sustainable sourcing
Sustainable sourcing:
Suppliers are no longer assessed purely on the basis of price, quality and on-time delivery
Sustainability topics such as health & safety, labour and environmental issues are additional business criteria
Product Quality
On-time Delivery
Price
Management
Environment
Health & Safety
Labour &
Human Rights
Governance
Supply Chain focus from...
Sustain-ability
Product Quality
On-time Delivery
Price
Customers want key sourcing markets to know that:
They care about supplier‟s sustainability performance
They aim to identify and mitigate sustainability risks in their supply chains
They engage with suppliers to focus on a process of continuous improvement
…to
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TfS supplier audits – Lynas was audited
against these criteria in September 2013
Management
Environment
Health & Safety
Labour &
Human Rights
Governance
Management
• Management in Charge
• Policy & Continuous Improvement
Environment
• Environmental Compliance
• Waste
• Emissions to Air and
Climate Change
Health and Safety Criteria
• Product Safety
• Transportation Safety
• Process Safety and Storage
• Occupational Health and Safety
Labor & Human Rights
• Child labour
• Forced and Compulsory Labour
• Working Hours
• Minimum Wages
Governance
• Business Integrity
• Privacy and Intellectual Property
• Risk Area: Conflict Minerals
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Mt Weld – operational update
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Overview of Australian assets
Mt Weld Project and
Concentration Plant
Mt Weld Concentration Plant Mt. Weld Mine
The highest grade known deposit of Rare Earths in the world
Defined ore reserves of 9.7 million tonnes at an average grade of 11.7%, for a total of 1.14 million tonnes of contained REO
Reserves support more than 25 year mine life at 22,000tpa REO production rate
Simple, conventional open-pit mining operation
Mt. Weld Concentration Plant
Phase 1 commissioned in May 2011
Phase 2 commissioned in April 2013
Concentration Plant operating at 80% capacity during September quarter
Operations focused on cost efficiency
18.4kt of dry bagged concentrate ready for shipment to Malaysia as at end September
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Future milestones
Increase realised prices further
Optimise production at Phase 1 capacity until market prices recover
Phase 2 commencing operations in December quarter
The usage of the additional 11,000tpa capacity will be determined by various factors, primarily by market conditions
September 2013 quarter
Production: 253 tonnes REO equivalent products
Shipments: 218 tonnes REO equivalent products
Each Rare Earth element approved and sold at one or more customer
Premium over market prices obtained due to supply chain sustainability
Lynas Advanced Materials Plant (LAMP) –
operational update
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Leaching units
Work programs are progressing in line with expectations
They are addressing issues including:
Filter press clogging
pH adjustment process
Cracking units
Work programs in the cracking units are complete
They have addressed:
Wearing of stainless steel devices (replaced with alloys
LAMP – current work programs
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Finishing units
Upstream variability has impacted the ramp-up of downstream operations to date
Upstream improvements lead to more consistent finishing units output
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December quarter update
Production has increased in line with work program expectations
LAMP – production profile
LAMP REO Production
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Note: Current quarter to date includes product finishing output
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200
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400
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Q4 FY13 Q1 FY14 Oct-Nov
to date
ton
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EO Nov
est.
Oct
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Lynas operational outlook in summary
Lynas expects to produce at the 11ktpa REO run rate for the first calendar quarter of 2014 2
Phase 2 capacity will provide support to Phase 1 volumes and the ability to ramp up to 22ktpa capacity subject to increased market demand and prices
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Lynas will continue to develop further products upon customer request 4
WA production rates synchronised to LAMP needs, focusing on cost efficiency 1
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Speculative traders
enter the market and
stockpile REs to take
advantage of price rises
Consumers forced to
build up inventories
(above actual
consumption) to secure
future supply
0
50
100
150
200
250
Jan-2
008
Jul-2008
Jan-2
009
Jul-2009
Jan-2
010
Ju
l-20
10
Jan-2
011
Jul-2011
Jan-2
012
Jul-2012
Jan-2
013
Jul-2013
Lyn
as B
asket
Pri
ce (
US
$/k
g R
EO
)
China Domestic RE Prices
China FOB RE Prices
Rare Earths market: Recap on the price crisis
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2010:
China announces efforts to
crack down on illegal production
that is non-compliant and
damaging the environment
Chinese export quotas almost
halved from previous years
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2 Unsustainable price
increases for consumers
and excess inventories
impact demand and
prices
RE based production
shifts from outside China
to inside China
Increase in productivity
of RE based solutions in
some applications
Source: Metal Pages
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Where is the Rare Earths market today?
Customers working through large inventories of REs built up along the supply chain during the crisis
Demand reduced for REs in some end markets due to productivity improvements, formulation changes and some temporary „switch‟ back to older technologies
Slower global economic growth conditions impacting end market demand
Since the peak of the crisis when
prices became unsustainable for
consumers, prices decreased to levels
that are now unsustainable for
producers again, due to:
However,
there are
emerging
signs of
„green shoots‟
as the RE
market moves
towards the
right balance
First signs of improved supply discipline inside China, consolidation of numerous producers and moving towards more sustainable production practices
Reduced significant excess of inventories for both RE products and RE-based (semi) finished goods
End market applications continue to grow (cars, energy, electronics etc)
Since July, prices for a number of RE
products have moved again as a result
of:
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Mt Weld basket price May-November 2013
Recent Rare Earths price trends
Source: Asian Metals
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5
10
15
20
25
30
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May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13
USD
/REO
kg
China domestic China FOB
China domestic basket price up 32%
since mid-2013
Prices recovered since June 2013
China domestic basket price up 32%
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Prices need to be higher to secure long term supply visibility to customers
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The market will grow to its full potential when prices are sustainable for both customers and suppliers
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RE market outlook – key demand side trends
A number of key trends will drive the future growth of the global RE market
Energy efficient and green applications continue to accelerate strong NdPr demand growth
Wind energy, HEV/EVs, general auto, energy efficient drives for household and industrial applications
This will only occur under long term sourcing sustainability of raw materials – price and quantity
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Higher vehicle demand and reduced emissions continue to support steady growth rates in large market segments
Autocatalyst market (Ce), FCC market (La), metallurgy & ferrosilicon market (La,Ce, mischmetal)
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0
5
10
15
20
25
30
35
40
45
50
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
kt
RE
O
Other
Automation & Drives
Electronics
HEV/EV
Conventional Autos
Wind Turbines
2010-2020 CAGR: 9%
Estimated REO demand in magnet industry
Source: Lynas estimates and industry sources
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RE market outlook – key demand side trends
A number of key trends will drive the future growth of the global RE market
While currently tight, there are questions in relation to the long run outlook for HREs
Phosphors (Eu,Tb and Y) – how quickly will LED substitution take place globally? Or will the continued move to ban high energy consuming lamps globally grow the phosphors market?
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NiMH battery technology is continued to be used in HEVs, potentially securing La demand in the future
Chinese exports of lanthanum have risen strongly since 2011
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2006 2007 2008 2009 2010 2011 2012 2013E
ton
ne
s R
EO
Chinese exports of lanthanum products (REO equivalent)
Source: Chinese customs statistics. Note: 2013 data annualised. Lanthanum products include metal, oxide, carbonate and chloride
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Rare Earths market outlook – summary
Based upon forecast demand in key end markets,
the global RE market could grow at 5-6% per annum to 2020
with demand for some elements growing at higher rates
However, the RE market will not grow to its full potential unless there is long term price visibility and sustainable volume security to justify investment by both customers and producers
Reduced volatility and “wild” fluctuations in RE prices
RE consumers: increased visibility of supply sustainability at price levels that remain competitive with alternative technologies
RE producers: increased visibility that RE prices support the environmentally sustainable development of RE resources to meet demand growth
Lynas‟ goal is to support the RE market in growing to its full potential
customers have been supportive so far
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Sales and marketing – customer agreements
Lynas has agreements to supply Rare Earths products to credit-worthy counterparties globally
Based on current customer agreements and negotiations, Lynas currently expects to sell its annual Phase 1 production
The Company has achieved more than 25 product qualifications across the customer portfolio
Lynas has offtake agreements in place with major Rare Earths consuming companies in Europe, Japan, USA, North and South East Asia
Market growth is expected to be secured through
growth in existing and new technology product applications
Lynas‟ long-term environmentally sustainable supply visibility
Estimated above-GDP growth rates in key product demand
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Company overview
Key Lynas strengths
World-scale Rare Earths production platform at the LAMP
• located within a well established and cost competitive industrial and petrochemical estate
Focus on cost efficiency and “right-sizing” business
• yet ready to respond to improved market conditions
Experienced management team
• from the Rare Earths and chemicals industries
Rare Earths experts from the main RE locations (Europe, China, Brazil, India)
• Industrial, Product development, Sales, Laboratory, Product Quality, Process control
Off-take arrangements through strong customer relationships
• Contracts, sustainability-based pricing
Favorable long-term market fundamentals
• estimated above-GDP growth rates in key product demand
High quality, long life assets
• more than 25 years of proven reserves in Australia and significant additional resources
ISO standards (Quality, Health & Safety and Environment) for both Lynas sites
• Sustainability-based customer audit implemented for the LAMP
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