Thursday, October 28, 2010

"...Is Lynas The Best Rare Earth Play?" (LYC.AX; LYSCF; MCP; AVL.TO; REE)

From via ZeroHedge:
...Here is 13D's October 21 take on Lynas:
Lynas Corp (LYC:AU, AU$1.76; LYSCF, $1.73)- which announced a new agreement with a major Japanese firm a day after our last article-remains our favorite in the field, and likely provides the shortest path to free cash flow among major rare earth miners. We expect that recent rare earth supply concerns will enable Lynas to continue signing agreements to sell essentially all phase-1 production and enough phase 2 output to accelerate expansion. Thereafter, it may be able to separate and market rare earth concentrate from other mines, such as its own resource in Malawi and output from Northern Uranium's Australian resource before developing its Crown polymetallic depost.
Another indcator that LYC may be due for a major move higher is the October 26 downgrade by JPM from overweight to neutralm with a A$1.71 price target. As is well known, when a broker is downgrading something, it is buying it from clients. Nuff said. An extract from the JPM report authored by Alistair Reid:
Overall, we believe LYC has a strong competitive advantage given its position as a viable source of new non-Chinese supply of rare earths. However, given the stock’s recent out-performance and potential risks around the timing and cost of delivery of the IREP, we believe investors should consider reducing any OW position. We continue to watch for further progress in bringing the IREP on-line including completion of the concentrator by early CY11E, securing funding solutions for the expansion, executing further customer offtake agreements, updates on the construction schedule and marketing of synthetic mineral products.
Without doubt the stock has had a dramatic run up, and has returned about 194% YTD, and 130% in just the past three months, and is due for a pullback. That said, it would appear that while many of the other names in the space, which have had a comparable move higher, would be far more of the story-type picks, Lynas may be positioned to be a relative outperformer and a likely long hedge to all short "bubble pop" exposure.
We will present more on the name in the coming days. In the meantime we present JPM's initiation report in Lynas for all those who wish to get acquainted with the name....MORE