Guest author: Björn Junker

Investors punish the Australian rare earth producers Lynas (WKN 871889 / ASX LYC), after announcing a long-awaited funding to improve its balance sheet. The company had announced that it would raise a total of 40 million of fresh capital to cover short-term working capital needs.

 

A message that the market today posted a drop of 10% to 13,5 cents per share, as the price of financing is a discount of 17,5% on the average price of the five days to 27. May be.

Lynas CEO Eric Noyrez said the company needed the capital as it was about to ramp up the Malaysian processing plant. Lynas was at a critical juncture between starting production and achieving the plant's planned capacity, Noyrez said.

He added that the operational problems at the plant in Malaysia from last year have been resolved and that the biggest challenge for the company now is to continue production and sell the product at a premium.

Lynas also announced that Nomura Australia has been hired to adjust loan terms with Japan-based companies Sojitz and JOGMEC. The current repayment plan is to be replaced by a single repayment of the entire loan in June 2016. The successful completion of this transaction, Lynas said, will further strengthen the company's financial footing as it can then build cash flow from production and sales.

The market has probably now priced in the expected financing - the shares have lost around half of their value since the end of February. Analysts had already predicted that Lynas will probably be able to make the payment due in January to Sojitz, but for further repayments probably a loan financing or capital increase is necessary.

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