Lynas Rare Earths Limited
Q1 2023 Earnings Call Transcript

Published: 27 Oct 2022

[Operator:]

Good day and thank you for standing by. Welcome to Lynas Rare Earths Quarterly Results Briefing. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Lynas. Thank you. Please go ahead.

[Jennifer Parker:]

Good morning and welcome to the Lynas Rare Earths Investor Briefing for the September Quarter of FY '23. Today's briefing will be presented by Amanda Lacaze, CEO and Managing Director; and joining Amanda on the call are Gaudenz Sturzenegger, CFO; A - Pol Roux, Chief Operating Officer; Sarah Leonard, General Counsel and Company Secretary; and Daniel Havas, VP, Strategy and Investor Relations. I'll now hand over to Amanda. Please go ahead, Amanda.

[Amanda Lacaze:]

Thanks, Jen. Good morning, everybody. Actually, we've got -- we're attending in force today in terms of the Lynas team and it's an interesting reflection of life in 2022 that we are literally scattered all over the world. So we're calling in from a variety of different destinations but we are all very focused on ensuring that we find a better second quarter performance than the first quarter. It was a difficult quarter. I think that everyone on the call is -- well, across the fact that we had the serious issues with water. I think I've said to many of you, it's a matter of ongoing frustration to me that we operate on the wettest content on earth and on the driest content on earth and water is a challenge in each location. During this quarter and previous quarters, we've often had ongoing challenges with our continuity of water supply in Malaysia. But generally, we've been able to implement initiatives which have mitigated the effects of reduced supply. During this quarter, we weren't able to do that when a major pipe burst and we had 0 water delivered to the plant for nearly over 2 weeks. So, I think that the important thing here is that, it's a sign of strength. It's really a sign of how strong the market is, so we still booked $164 million in revenue. And we ended the quarter with over $1 billion in the bank which is particularly pleasing given that we've got a very heavy call on capital at this time as we're really accelerating our activities in Kalgoorlie, in particular. And as we start to invest more in Mt Weld's capability. So notwithstanding some of the challenges of the quarter itself. As we've indicated in the report and as I've said on other occasions, we are really focused on growth. And just to pick out the highlights on that, the big -- we had 2 big pieces of news associated with Mt Weld through the quarter. The first is that, we've commenced the 2-year exploration program into the carbonatite. This is into the primary mineralization below the enriched weather zone which we have been mining to date. We're delighted that via JARE, JOGMEC, Japan Oil, Gas and Metals Exploration Corporation [ph] is providing us with additional technical support on that program. This is really exciting stuff geologically. Our GOs sort of very excited to find out what lies beneath as indeed are our colleagues at OPEC. In addition to that, JARE provided additional financial support for the exploration program in the form of a US$9 million equity placement to fund those program activities. And, of course, the other really big news at Mt Weld is the expansion which we announced in early August. Sometimes sort of say, a little Riley that it appears that most things come in $500 million chunks in rare earth. Indeed, this is another $500 million program at Mt Weld. It's very exciting. It will take us a first step to 12,000 tonnes a year of NdPr. We have 2 further enhancements that the team is working on which we will announce in due course which will see us be able to increase that output by a further 2,500 tonnes each. It is really important to just take a moment to reflect on this. The -- it can sometimes be easy in a market where there's a lot of focus on some of the processing activities that we remember that feedstock is essential. Any downstream investments are only going to deliver a return if they have feedstock and the quality of the Mt Weld ore body continues to be the thing that underpins value and value creation within Lynas. Of course, I know everybody always wait to see what's going on at Kalgoorlie and it is so exciting a couple of weeks ago, I was out there on the Monday with the Board and then on the Wednesday with the U.S. Ambassador which is pretty cool. And even within those 2 days, I could see changes on the site. The team is very excited every day to see this plant really coming together and you can see it in some of the favors that we've included in the report. We have provided a little bit of a further update on this as well. Those of you who listen to these calls often would know that we received a grant from the Australian government under the Modern Manufacturing Initiative for a new industry-first carbonation circuit. I was hopeful that we would be able to accommodate that within our original budget. But with some of the various pressures, particularly around construction costs and logistics, that's not been possible, as well as that remained a decision to put in some circuits which will allow us to further upgrade capacity at Kalgoorlie over time. And then as I said, there has been a few sort of increases in construction contracts and logistics. And so, today, we're just announcing that we expect that will come in about 15% over our initial budget but that, as I said, includes both the scope increases and any cost increases. In the quarter, I've spent quite a bit of time on aeroplanes. So delighted to be back in a single location now, hopefully, for a few days. Being to the U.S., terrific opportunity to view the site and we -- the proposed sites and the plant there, we will update the market on that once we've completed our negotiations but I think that it will be an excellent location for our facility, also had extensive engagement with U.S. government with respect to that contract. And things are progressing well there with the delivery of our Phase II deliverables as part of that program. And then last week, I was in the U.S., again, met with many investors and that was terrific. There's great interest in the rare earths industry. But as well as that, there was sort of probably the premier rare earth conference of the year. And so, I had a great opportunity to really engage with other players in the market as we all seek to ensure that we are actually stepping up to deliver the sort of supply requirements for this market as it continues to grow through to 2030. But notwithstanding all of that, it still remains whilst there's a lot of action in the market, Lynas is the only producer at scale of separated rare earths outside of China. And we see that that will probably be the case for some time yet. And so, ensuring that we maintain a focus on getting back online, having a much stronger second quarter in terms of production, it's really at the sort of the focus of everybody on the team at present. So a bit of a mixed quarter, notwithstanding some of the challenges. We still delivered sort of a nice uplift in cash whilst funding the growth programs and hopefully, we're looking into a better second quarter as we head through to the end of this calendar year. So with those opening comments, I'm very happy to take any questions or if you want to specifically direct your questions to any of the others on the team, please let me know.

[Operator:]

[Operator Instructions] Your first question comes from the line of Paul Young of Goldman Sachs.

[Operator:]

[Operator Instructions] Our next question comes from the line of Daniel Morgan from Barrenjoey.

[Operator:]

[Operator Instructions] Our next question comes from the line of Levi Spry from UBS.

[Operator:]

[Operator Instructions] Our next question comes from the line of Austin Yun of Macquarie.

[Operator:]

[Operator Instructions]

[Operator:]

At this time, there are no further questions on the queue. Back to you.

[Amanda Lacaze:]

Okay. All right. Terrific. I’m sure if any of you think of some further questions, you can drop a note to Daniel and/or Gaudenz, we will certainly -- at Lauren, we’ll certainly get back to you. But once again, thank you all for your time and attention this morning. And I look forward, hopefully, to seeing many of you between now and Christmas, maybe even some of you will come to the AGM. So, thank you all.

[Operator:]

Thanks for participating. You may now disconnect.