LYNAS Corporation intends to use up to Aus$40 million to be raised in a share purchase plan and placement to augment working capital during the ramp-up at the Lynas Advanced Materials Plant (LAMP). As part of an equity raising and proposed financing transaction announcement made in early May, the company also proposed to purchase and amend the Sojitz/JOGMEC loan facility.

Company chairman Nicholas Curtis said: “We believe the capital raising and proposed debt amendment provides a solid financial base for the company and addresses any liquidity concerns that the market might have had.

“The LAMP achieved a new record month of production in April 2014 of 709 tonnes on an REO equivalent basis, more than 20% higher than the previous record month in March. The ramp-up of production and sales from the LAMP is now well advanced. The equity raising will secure our short-term working capital requirement.

“Completion of the proposed purchase and amendment of the Sojitz/JOGMEC loan facility is conditional on matters including requisite approvals, completion of due diligence and definitive documentation. This would remove the obligation of debt repayments until mid-2016, giving Lynas time to further strengthen its financial profile through the build-up of cash flow from production and sales.”

Following receipt of expressions of interest from various financial industry participants, Lynas has selected Nomura Australia to arrange the purchase and amendment of the Sojitz/JOGMEC senior secured facility. The proposed transaction includes replacement of the current Sojitz/JOGMEC repayment schedule with a single repayment of the entire facility in June 2016.

The aim of Lynas and Nomura Australia is to complete this transaction well before September. Nomura Australia is a wholly-owned subsidiary of Nomura Holdings, a financial services group headquartered in Japan.

Total production at the LAMP for the March quarter was 1089 tonnes on an REO equivalent basis, a 47% increase on the previous quarter. Total tonnes shipped were 751 tonnes, an increase of 84%.

The average selling price increased 5% to US$22.63/kg REO from US$21.48/kg in the prior quarter. The company enjoyed a favourable product mix in the quarter, resulting in the average selling price representing a premium to the market price. Management was confident of achieving the targeted annual production run rate of 11,000 tonnes from the LAMP on a sustainable basis during the June quarter.

Lynas continues to implement measures to reduce its production costs and reiterates cash cost guidance of $14-15/kg REO at a 22,000 tonnes annual production rate. Unit cash costs are estimated to be 70% variable costs and 30% fixed costs. Approximately 70% of costs are in the Malaysian operations, including a small proportion for freight, with the remainder at the Australian operations.

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