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Buy Lynas (LYSCY.PK)

posted on November 6, 2009 at 2:36 pm
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Lanthanum. Neodymium. Dysprosium. Terbium. The words don’t exactly roll off the tongue. But they’re the names of four of the seventeen rare earth elements.

You can’t build a Prius, an accurate missile, or a wind turbine without them.

And we’re not talking about trace amounts of these elements either. The electric motor in a Toyota Prius uses about two pounds of neodymium in its permanent magnets. Each Prius battery also uses 20 to 30 pounds of another rate earth lanthanum. The huge magnets in wind turbines use about a ton of neodymium for every one megawatt of generating capacity. (For more on rare earth minerals see my September 11 post http://jubakpicks.com/2009/09/11/rare-earths-you-cant-build-hybrids-or-wind-turbines-without-them-and-china-is-putting-the-squeeze-on-supplies/)

Which is why, as of November 6, I’m adding shares of Lynas (LYSCY.PK) to Jubak’s Picks.

 China controls about 95% of the global supply of rare earth minerals. And until September 24 China Non-ferrous Mining looked like it was going to buy 52% of Lynas (LYSCY.PK), the Australian company that owns the world’s richest rare earths deposit. But Australian regulators said No to any deal that gave Chinese investors majority control and China Non-ferrous Mining walked away.

That left Lynas scrambling to find alternative financing. The company finally did in early November and now it can move ahead with construction of a concentrating plant to do initial processing of the 773,300 metric tons of ore the company has stock piled at the site of its mine, and with the construction of an advanced processing plant in Malaysia that produce rare earth minerals ready for export. (For more on the details of that financing see my November 6 post http://jubakpicks.com/2009/11/06/read-their-balance-sheets-to-see-why-youd-rather-own-lynas-than-ford/.)

You can buy either the Australian shares (LYSCF.PK) that traded for 46 cents a share on November 6 if your broker has a decent foreign desk and doesn’t charge too much in commission for an overseas purchase or the U.S. American Depositary Receipts (ADR: LYSCY.PK) trading at $22.25 on November 6. That’s easier and cheaper but the ADRs don’t trade with much volume so you need to be careful and use limits when placing an order. The shares and the ADRs are weighted so you get the same stake of the company no matter what you buy. And despite the low Australian price per share, Lynas isn’t a penny stock. The company has a market capitalization of $595 million.

As of November 6 I’m adding shares of Lynas to Jubak’s Picks with a target price of $29 a share by October 2010.

Full disclosure: I own shares of Lynas ADRs in my personal portfolio. I will buy more three days after this is posted.

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  • viwi on 7 November 2009


    How do you handle those stocks with very low trading volume? On a typical day, only 7,000 stocks of Lynas change hands.

    Another question is related to Lynas strongest competitor – Chinese company SHA:600111, which I believe is the largest producer of rare Earth elements. Does it make any sense to buy them in addition or instead of Lynas?

  • Run26.2 on 7 November 2009

    Jim… I think this is an interesting stock, but am always leery of OTC stocks. Is there a reason that it is not traded on NASDAQ or another exchange? I did a quick look on their investor relations area and did not see a de-listing announcement. As always, you give some great companies/opportunites upon which to do more research.

  • phigbee on 7 November 2009

    I am really intrigued by the idea of rare earth metals and alternative energy, but I want to do more research on the company and can’t find anything on my usual resources. Please share sites that give investing data on these smaller companies.

  • gooddeal on 8 November 2009

    Would love to follow on this trade, but looking on google finance at volume history this trades just a few hundred shares a day and many days no shares at all. The day you recommended tho it traded 70k shares. You have a large following but I think this is too thinly traded to be rec’ed.

  • carmwoman on 24 March 2011

    Hi Jim,

    I have been a shareholder in Lynas for 5 years now, even held Lynas when they couldnt get any finance.

    Have been happy until the last few weeks when I have read that N.C. Chariman of Lynas wants to sell some of our tenenemtns to his other company which is Forge, the tenements he wants out of Lynas is Crown and Swan, he is now waying that he would like to sell for a poultry pirice, but most of the shareholders in my forum are deeply distressed about this, and we do not want to sell, this is certainly a case of double dipping here, and I suggest yu look into the Lyc forum on hotcopper, to find out more. We are trying to halt this sale, but we have just found out the independent review that the Lynas board have used to vlue these tenements to disclose to us that it is a fair and reasonable statement, has been employed by the chairman of Lynas a certain Mr. N.C. in Sino a company which he was also associated with, however they are now changeing their name to Riverstone, we are most upset and trying to find out what we can do to halt this sale of going through. Can you give us any direction please?

    Kind regards,

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