Lynas Rare Earths Ltd (ASX: LYC, OTC: LYSDY) released its financial report for the six months ended Dec. 31 and announced a significant increase in revenue and profit, buoyed by the rise in prices of rare earths minerals. The company also retained strong cost control and an enhanced balance sheet for future growth.
Strong 2H 2020 results
The company reported Net Profit of $40.6m (1H 2020: $3.9m); Revenue of $202.5m (1H 2020: $180.1m), with record sales achieved in the December quarter; EBIT of $46.1m (1H 2020: $8.4m); EBITDA of $80.6m (1H 2020: $44.2m); and Cost of sales of $150.8m (1H 2020: $151.6m).
Balance sheet enhanced
LYC reported that $425m equity raising was completed to fund Lynas 2025 foundation projects. The company also reported closing cash and cash equivalents of $312.6m (1H 2020: $111.8m) plus $200.0m held in short term deposits.
Lynas said that its debt position was also reduced following the conversion of the final tranche of convertible bonds by the bondholders. The company’s only remaining debt is the JARE facility in the principal amount of US$145m.
Updates and next steps
The company reported that its USA projects team continued to progress the Phase 1 planning and design work for a U.S.-based Heavy Rare Earths separation facility. The Phase 1 work is expected to be completed in the 2021 financial year.
Lynas had recently signed an agreement with the United States Government for the development of a Light Rare Earths separation plant in the United States. The Department of Defense funding is expected to be capped at approximately US$30 million and Lynas is also be expected to contribute approximately US$30 million under the agreement.
Lynas Rare Earths CEO and Managing Director, Amanda Lacaze, said: “This half year demonstrated our ability to achieve strong results across all key financial metrics, while running production at 75% of Lynas NEXT rates.
Despite ongoing uncertainty in the global economy and logistics/supply chain systems due to the effects of the pandemic, Rare Earths market settings were favourable and pricing for Rare Earths materials improved. We demonstrated our ability to capitalise on this upside during the period, with cost of sales maintained at $150.8m while achieving an increase in sales revenue to A$202.5 million.
“During the period, we enhanced our balance sheet with a $425m equity raising to fund our Lynas 2025 foundation projects, being the planned Kalgoorlie Rare Earth Processing Facility and associated upgrades at the Lynas Malaysia plant. We now have over $500m in cash and short term deposits, and following the conversion of the final tranche of convertible bonds during the half year, our only remaining debt is the US$145m JARE facility.
Lynas has a unique position in an exciting market. We are the 2nd largest producer of separated Rare Earths in the world and have a proven track record in developing and operating our production assets. Our team remains absolutely focused on serving our long-term strategic customers with high quality products and on contributing to the development of a sustainable Rare Earths supply chain outside China.”