By Glenn Dyer | More Articles by Glenn Dyer

Lynas has again confirmed there is a lot of money to be made in the rare earths game by taking on China and proving to be a reliable, low-cost provider not influenced by the eccentricities and price gouging of the Communist Party government of President Xi JinPing.

 Lynas reported a 58% rise in quarterly revenue as the miner cashed in on soaring global demand for greener sources of power, especially demand for magnets (in wind power) and batteries and EVs.

Demand for rare earth minerals – which are used in everything from cars to laptops to missiles – has surged in recent years and shown no sign of easing as countries and companies look to cut their carbon emissions.

The surge in output and prices saw Lynas end the 2021-22 financial year with year-end cash balance of $965.6 million which it said “provides a confident basis for funding continued growth as demand grows.” That was up sharply from the $681 million at June 30, 2021.

Record sales receipts of $351 million were achieved in the quarter. While Lynas’ fourth quarter revenue grew by nearly three-fifths year-on-year to $294.5 million, the miner reported lower revenue compared with third-quarter figure of $327.7 million.

Total receipts from customers for the year to June was $855 million, almost double the $465 million reported for 2020-21.

Lynas said its quarterly rare-earths oxide (REO) production fell 26.2% sequentially as the company experienced water supply disruptions in Malaysia where drought conditions continue to hit processing capacity.

The company also revealed quarterly production of 1,579 tonnes of neodymium and praseodymium (NdPr), down from 1,687 tonnes in March quarter.

Minerals like NdPr are mostly used by automakers to make magnets used in electric vehicles.

Lynas’ also reported an average selling price of $79.2 a kilogram for its product range, double the value it got last year.

“In the quarter, demand for rare earths for NdFeB [neodymium] magnets inside China weakened impacted, in particular, by the Covid-19 related lockdowns in several industrial regions in China. In the longer term, global demand for NdFeB magnets is forecast to grow from 130,000 [metric] tons of NdFeB magnets consumed in 2020 to 265,000 tons in 2030.

“The demand for Lynas products, mostly sold in outside China markets, remained very strong during the period,” the company said.

Operations at its Mt Weld mine in WA “continued Mining Campaign 4-1 during the quarter and transitioned from waste mining to waste-and-ore mining. Ore mined in this campaign is being transported to the run of mine stockpile for future blending. Campaign 3 ores were processed in the mill during the quarter.”

“The Lynas Malaysia plant remains focused on delivering nameplate capacity production of NdPr. However, water shortages due to supplier issues limited production in this quarter.”

Lynas said it has implemented a number of mitigating strategies, “but the ongoing water shortages from our commercial supplier resulted in several complete or partial temporary production halts during the quarter. NdPr production was prioritized as reflected in the total production volume.”

Like so many resource companies, cost rises were a problem in the quarter

“As has been reported across industry, various cost categories have seen significant increases over the past 12 months. Royalty cost increases follow price increases in the market, freight costs were approximately double due to global shipping cost increases and the addition of charter ships to mitigate the impact of port and shipment delays. Chemical input costs have increased by approximately 20% with some specific chemicals seeing changes of up to 70%,” Lynas said.

Lynas shares closed up 0.7% at $8.12 after being in the red for part of Monday’s session.

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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Kazia Therapeutics (KZA) announced yesterday morning that paxalisib did not meet the threshold to move into stage 2 of the GBM AGILE clinical trial (NCT03970447). The study was an adaptive trial designed to assess the potential of new therapeutics to treat the highly aggressive brain cancer glioblastoma (GBM) in a cost-effective manner. Demonstrating efficacy in GBM is an extremely high hurdle as shown by the fact that there is only one approved drug for the disease, temozolomide, and it is only effective in 1/3 of patients.

Given the high nature of the hurdle, in our original initiating coverage report on KZA, we only gave paxalisib a small chance of returning a positive result from the overall study. That is the nature of drug development with one group estimating only 6% to 7% of new chemical entities that commence clinical trials reach launch (Dowden & Munro (2019) Nat Rev Drug Discov). The small percentage that do make it to launch, however, more than make up for the cash spent on those that don’t.

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Terracom will report their FY2022 results in September 2022. In the last two months there have been a number of company announcements that have given us improved visibility on our earnings forecasts and valuation metrics so we have taken this opportunity to update our numbers.

With the combination of geopolitical factors in the northern hemisphere as well as disruption from other supply regions, we believe the visibility on export coal prices over the next 12 months has also improved since our March note.

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Based on our current forecasts, we derive a DCF equity value for SGI of $0.33 per share, with potential upside if full synergies can be extracted. We note SGI is currently trading on very undemanding forward multiples.

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Lake Resources (LKE. ASX) – LKE has signed two non-binding MOU’s in the space of 10 days. Ford Company (Ford) has signed an MOU for ~25,000t/year and last week Hanwa, a Japanese commodity trader signed a MOU for up to 25,000t/year. Subject to execution, this is an amazing feat as Ford and Hanwa are prepared to enter into longer-term strategic partnerships with LKE. Commercial negotiations are still ongoing but are expected, especially if Ford & Hanwa inject new equity into LKE, to further de-risk the project financing & thus ensure LKE and Kachi are fully funded.

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TNG Ltd is an ASX-listed technology owner and developer of the world-class Mount Peake near-surface vanadiferous titanomagnetite deposit. To unlock value, TNG will concentrate ore from its central Northern Territory mine for processing through its patented TIVAN® process produce three premium quality revenue streams: hi-purity vanadium pentoxide (V2O5) for steel alloys and Vanadium Redox Flow batteries, a quality titanium pigment for paints and a premium steel input with >64%Fe iron ore fines.

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Two recent gravity surveys have considerably exceeded expectations and revealed potential for extensions to the existing MRE at Lake Throssell, plus a material growth opportunity at Lake Yeo. This reinforces the potential for a multi-decade, Tier-1 SOP production hub based around Lake Throssell.

TMG is currently completing work towards the PFS due early 2023, including drilling to start in Q3 2022, evaporation trials and permitting activities. Results from these programs will support the PFS and any future resource upgrade.

Benchmark SOP prices have risen to ~US$940/t due to recent geopolitical developments. The Oct 2021 Scoping Study assumed a SOP price of US$550/t and contained a sensitivity analysis showing every 10% increase in price drives a +$144m increase in the project NPV of $364m. The c.70% increase above the Scoping Study thus implies a project NPV of ~$1.4bn.

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The news being reported about the performance of biotechnology has been dour, to say the least, for some time now. Those dour articles have been deserved with the iShares Biotechnology Exchange-Traded Fund down 25% and the SPDR® S&P® Biotech ETF is down 45% from their highs. However, those articles are backward-looking, and successful investors need to be looking forward.

Recently, however, an article in Nature Reviews Drug Discovery caught our eye which we believe should point the way forward for the vast majority of Australian biotechnology investors. This article indicates that, at least, two companies, Antisense Therapeutics (ANP) and Kazia Therapeutics (KZA), are right in the sweet spot in terms of the future of drug development.

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Despite the lower realised oil and gas price, which fell by 5.4% and 19.7% respectively in August, Calima managed to show improvement in its key business metrics.

We expect higher production in November due to the contribution by the new Thorsby wells which will be drilled in August/September which will see Calima meet its 2021 production guidance of 4,500 boe/d.

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WT Financial Group Limited (WTL) is a growing diversified financial services company, founded in 2010 and listed on the Australian Stock Exchange (ASX) in 2015. Its advice and product offerings are delivered primarily through a group of independent financial advisers operating as authorised representatives of WTL under its Wealth Today Pty Ltd (Wealth Today) and Sentry Group Pty Ltd (Sentry Group) dealer group operations. It has around 275 advisers across more than 200 financial advice practices Australia-wide. It also operates a direct-to-consumer operation under its Spring Financial Group brand.

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In May 2021, Corporate Connect analyst Marc Sinatra published a comprehensive research report on ASX-listed biotech Immutep Ltd (ASX: IMM). So impressed was he with IMM that Corporate Connect felt it imperative that a follow-up report be released placing a valuation on the company, because the market was not seeing the vast potential of eftilagimod alpha (efti).

This follow-up report has been released today. Using comparables, after adding cash back to their EV estimate and dividing by the total number of issued shares, Corporate Connect now places the fair value of an Immutep share at $A2.20.

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Phillips 66 (PSX) has entered into an agreement with NVX to acquire 77.9m new shares for US$150m (A$203m). PSX is the worlds largest producer of speciality petroleum coke a precursor for battery grade synthetic graphite anode materials found with an Enterprise Value of US$47.5Bn and assets of US$57Bn.

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PayGroup (PYG) delivers multi-country BPO services and cloud SaaS HCM solutions, assisting companies to manage employees in multiple, complex jurisdictions. The company has many growth opportunities, including new clients, new jurisdictions, new products, partner expansion, and new revenue sources. PYG’s scalable business model allows operating leverage and with savings from in-housing third party technology, support margin expansion.

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OpenLearning (OLL) is a higher education technology company that operates a scalable online learning platform through a software-as-a-service (SaaS) business model and provides a global marketplace of high quality courses for learners of all levels. Its primary customers are education providers based in Australia and South-East Asia (primarily Malaysia). OLL started operations in Australia in 2012 and expanded to Malaysia in 2015, Singapore in 2018, and recently also Indonesia.

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