9 April 2019
Proposal to acquire Lynas Corporation – Update

On 26 March 2019, Wesfarmers announced that it had made a conditional, non-binding indicative proposal
(Proposal) to the Board of Lynas Corporation (ASX:LYC) to acquire Lynas for $2.25 a share, payable in
cash, pursuant to a scheme of arrangement. The Proposal was at a premium of 44.7 per cent to the last
closing price and a premium of 36.4 per cent to the 60-day volume weighted average price of Lynas to
25 March 2019.

The Proposal is conditional on, among other things, ensuring that relevant operating licences in Malaysia
are in force and will remain in force for a satisfactory period following completion of the transaction. This
important condition recognises the significant regulatory and licence uncertainty that Lynas has faced for
many years, heightened since the Malaysian Government announced in December 2018 that further
conditions would be applied to any licence renewal beyond 2 September 2019.

On Friday 5 April 2019, the Prime Minister of Malaysia, Tun Dr Mahatir Mohamad, commented at a press
conference that Lynas may continue to operate if raw materials are brought to Malaysia after initial
processing. As a licence condition, this would require Lynas to undertake the cracking and leaching
process offshore. This decision is consistent with the Government’s longstanding reluctance to accept
further build-up of WLP waste in Malaysia.

On Monday 8 April 2019, Lynas acknowledged that it is well progressed with the planning of various
options to geographically diversify processing, which would address this licence condition. Lynas has
previously referred to this option as part of its growth strategy.

Wesfarmers views these announcements as positive progress towards satisfactory licence certainty.
Wesfarmers expects that detailed licence conditions will be communicated in due course by the Malaysian
Government. This will allow a detailed assessment of the costs and timeline to address the licence

Wesfarmers is disappointed at the mischaracterisation of its discussions with Malaysian Government
officials and rejects any inference that these were inappropriate or intended to interfere with Government

As is customary in proposed transactions of this nature, Wesfarmers has engaged in discussions with the
Malaysian Government to better understand the licensing and regulatory regime affecting Lynas’
operations in Malaysia, and to present its credentials as a potential acquirer of Lynas. This is critical for
Wesfarmers to address the conditionality of its Proposal, so stakeholders can consider the Proposal on its
commercial merits. Based on usual practices, Wesfarmers understands that any change of control of Lynas
would trigger a review process by the Malaysian Government under Lynas’ operating licences.

In all its discussions with the Malaysian Government, Wesfarmers advised that it does not speak for Lynas,
that its Proposal remains subject to a number of conditions and that there is no certainty its Proposal would
result in a transaction.

Wesfarmers Managing Director Rob Scott said, “We see the Prime Minister’s statements as a positive step
towards the resolution of longstanding regulatory and operating uncertainty for Lynas. With greater clarity
around licence renewal and Lynas’ plans to address these licence conditions, Wesfarmers remains open to
engage with the Lynas Board on our Proposal, with a view to progressing a less conditional proposal.
Wesfarmers is a disciplined, principled investor with opportunities to invest across a range of sectors, in
addition to our core businesses.”

For more information:
Media Investors
Cathy Bolt Erik du Plessis
Media and External Affairs Manager Manager, Investor Relations
+61 8 9327 4423 or +61 417 813 804 +61 8 9327 4603 or +61 439 211 630
cbolt@wesfarmers.com.au EduPlessis@wesfarmers.com.au
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Lynas suitor defends tactics 



Wesfarmers has fired back at critics of its approach to the $1.5 billion play for rare-earths producer Lynas, defending its decision to engage directly with the Malaysian government and flagging it could drop some conditions attached to its proposal. The Perth conglomerate has come under fire for meeting the Malaysian government to discuss a regulatory impasse that has dogged Lynas and yesterday said its talks were designed to help it better understand the licensing and regulatory issues affecting Lynas. “Wesfarmers is disappointed with the mischaracterisation of its discussions with Malaysian government officials and rejects any inference these were inappropriate or intended to interfere with government process,” the company said. 


Lynas has been in talks with the Malaysian government for months over the future of its rare-earths processing plant there, and in particular what it should do with the mildly radioactive waste that comes out of the plant. Lynas had been pushing for an extension of its current licence , which expires in September , but some members of the Malaysian government had advocated for a shutdown of the plant if Lynas did not remove all current and future radioactive waste from Malaysia. 


On Friday, Malaysian Prime Minister Mahathir Mohamad said Lynas could continue in Malaysia if it started carrying out the early stages of processing, which generate the contentious waste, in Australia. Dr Mahathir referred to “other companies willing to buy up” Lynas that had “given us a promise” they would decontaminate the rare-earths material before it arrived in Malaysia from Lynas’s mine at Mount Weld, Western Australia. 


CLSA analyst Dylan Kelly accused Wesfarmers of “brazenly torpedoing” Lynas’s negotiations with the government. Matthew Ryland from Lynas shareholder Greencape Capital said Wesfarmers’ conduct “raised questions” about its corporate governance. 


Wesfarmers yesterday said it had advised the Malaysian government that it did not speak for Lynas and that its proposal was subject to a number of conditions. Wesfarmers chief Rob Scott said: “With greater clarity around licence renewal and Lynas’s plans to address these licence conditions, Wesfarmers remains open to engage with the Lynas board on our proposal, with a view to … a less conditional proposal.’’ 


Lynas’s problems with Malaysian authorities predate Wesfarmers’ recent meetings. Lynas has attracted numerous protests in Malaysia dating to 2012. Last May’s election, which preceded Wesfarmers’ original approach to Lynas about a potential joint venture by three months, increased the power of key anti-Lynas politicians.

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Sydney Morning Herald - Business: 10 April

WA government hints at support for Lynas rare earths plant


Lynas Corp has confirmed that all five sites it is considering for expansion outside of Malaysia are in the state....

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Looks as if the Lynas CEO has been doing her homework (as she has in the past) re., plans B and C etc. What appeared dire for Lynas 5 days ago now seems a little less traumatic with some possible avenues of approach.

However, the fallout for the WES CEO is deserved and as I have said previously, it is a good thing that these 'indiscretions' happened in a developing nation. In the US, the legal reaction would have been more strident and forthcoming. Further, the Malaysian PM would also have been in hot water for suggesting after one company had put a bid in for Lynas, that there was, in fact, more than one company who were interested in buying Lynas. This might have been seen as potential stock manipulation if it had been done by a directly related party to Lynas. Luckily for him he is not. Also, he has made a good number of less than informed statements over time and, therefore, is not going to generate the same sort of attention that e.g. ,Musk got when he claimed there were 'backer's out there for his (phantom) privatization of Tesla.

I am thankful that Lynas appears to be in the hands of one of the best turnaround CEO's out there.  
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As noted in the Lynas Corporation Limited (ASX:LYC, OTC:LYSDY) announcements dated 8 April 2019 and 17 October 2018, for some months, Lynas has been developing detailed plans to grow with the market and deliver long term shareholder value. These plans will also assist the company to mitigate risk from any regulatory changes in Malaysia.

We see value in operating alternative cracking and leaching processing close to our resource, and therefore the primary locations that we have been considering for growth are in Western Australia.

Part of this planning has been to scope our future industrial footprint. Our preference has always been to add to our Malaysian capability, not replace it. Our Malaysian cracking and leaching operations are performing very well as a result of the IP our Malaysian team has developed and owned – IP which others cannot use – and the hard work of all the Lynas team.

We remain committed to supporting the Malaysian economy and protecting our people’s jobs. However, this same work means we are well placed to deal with any change in Malaysian government policy. This planning is critical for our customers, our staff, our shareholders and Malaysia, as Malaysia seeks to build its 4.0 industries that rely on the use of Rare Earth materials.

At this time, no decisions have been made, however the events of the past few weeks mean we are accelerating this work, and we will share this with you when it is ready.

For all media enquiries please contact Jennifer Parker or Lauren Stutchbury from Cannings Corporate Communications on +61 2 8284 9990.

Andrew Arnold

Company Secretary

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10 April 2019

Dear Shareholder,

Re: Non-Binding Highly Conditional Indicative Proposal Received from Wesfarmers

Shareholders do not need to take any action in relation to the Indicative Proposal.

Lynas’ unique value and irreplaceable assets

The Lynas Board and management team has a strong track record

Regulatory Matters

Next Steps

What can you expect?

Read the following for a detailed outline


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Wes who? Lynas workers on front line of takeover battle

Financial Review 

Apr 11, 2019 — 12.00am

Lynas Corporation boss Amanda Lacaze and her board have had a swipe at spurned takeover suitor Wesfarmers after hundreds of the company’s Malaysian employees took the fight to protect their jobs to the national capital. Six busloads of workers, family and friends protested outside parliament house in Kuala Lumpur on Wednesday over an edict by Prime Minister Mahathir Mohamad on Friday.

Dr Mahathir said rare earths from the Mount Weld mine in Western Australia must be processed to remove radioactivity before being sent to the Lynas processing hub at Kuantan, on the east coast of Malaysia.

 Lynas workers at Kuantan protest outside Malaysia's parliament in Kuala Lumpur on Wednesday.  Lynas

Speaking from Kuantan on Wednesday, Ms Lacaze turned up the blowtorch on Wesfarmers managing director Rob Scott over his meeting with Dr Mahathir in the lead-up to the apparent policy change on Lynas.

Lynas estimates the jobs of more than a third of its 650-strong Kuantan workforce are at risk if the company cannot continue cracking and leaching operations in Malaysia.

Wesfarmers plans to build a cracking and leaching plant at Kwinana, south of Perth, and Lynas has a shortlist of five sites for a similar plant.

Ms Lacaze said the protest was worker-led and, although the workforce was non-unionised, it was doing what unions would do in Australia if jobs were threatened. “This is workers saying 'we want our voice to be heard',” she said.

“On Friday afternoon, they heard that a company that they didn’t even know – the response was Wes-who? – had made promises to their government, to their Prime Minister, to put them out of work.”

Ms Lacaze was referring to Dr Mahathir's statement saying companies interested in acquiring Lynas had “given us a promise that in future, before sending the raw material to Malaysia, they will clean it up first, they will crack it and decontaminate it in some way with regard to radioactivity”.

We believe this is still an achievable path. These plans will also assist the company to mitigate risk from any future regulatory changes in Malaysia.

 “So, they, this company or even Lynas, they can continue if they promise that the raw material from Australia would be brought here only after, what they call, cracking and cleaning it up,” he said. Mr Scott met Dr Mahathir last week, as reported by The Australian Financial Review on Tuesday, but his Perth-based conglomerate denies overstepping the mark in discussions held in the context of long-standing concerns about the processing of low-level radioactive material and the storage of residue around Kuantan.

Rival protestors from enviromental groups were also out in force on Wednesday demanding Lynas's operating licence be suspended. Both Lynas and Wesfarmers are seeking clarity on Dr Mahathir's comments, including some that seemed to suggest Malaysia might relent on forcing Lynas to remove 435,000 tonnes of residue already accumulated at Kuantan by September when its operating licence is up for renewal.

Ms Lacaze said Lynas would prefer Kuantan keep operating as it was, including cracking and leaching, even if it built another such first-stage processing plant in WA. "We are exposed to a growth market, we want to grow with the market and our preference is always that we are adding to capacity, not replacing it," she said, foreshadowing expansion at Kuantan to boost downstream capacity once a second cracking and leaching facility was operational.

Ms Lacaze said she agreed with the sentiments of a substantial Lynas investor who wondered how Wesfarmers would react if a third party approached a key regulator such as the Australian Competition and Consumer Commission to raise issues about Bunnings and market power, and then pledged not to open any more stores if it took control.

The Lynas board wrote to shareholders on Wednesday to update them on the response to the indicative and conditional Wesfarmers all-cash bid of $2.25 a share that lobbed on March 26. The letter listed Luminis Partners, Moelis New York, King & Wood Mallesons and Cannings as advisers and included a pointed reference to Wesfarmers chairman Michael Chaney. "Luminis’ prior engagements include advising Oil Search on its successful defence from the $11.2 billion unsolicited proposal from then Michael Chaney-led Woodside," the board said.

"We have been working on plans to grow with the market and to deliver long-term shareholder value, for some months. Our objective in developing these plans is to add to, not to replace, our current operations. "We believe this is still an achievable path. These plans will also assist the company to mitigate risk from any future regulatory changes in Malaysia."

Four of the six Lynas directors made share purchases immediately after the release of the company's half-year results on February 28, and after Lynas terminated confidential talks sparked by Wesfarmers initial approach. Lynas said it had no reason to believe that Wesfarmers had an ongoing interest in the company at the time shares purchases, then worth about $170,000 in total, were made by directors John Humphrey, Kathleen Conlon, Philippe Etienne and Grant Murdoch.

"As in all instances, Lynas actively considered the opening of the share trading window after the half year results, in accordance with our share trading policy," the company said. "Lynas had told Wesfarmers they were not interested in receiving a proposal and understood the matter was closed."

Lynas general manager of radiation safety, regulations and compliance, professor Ismail Bahari, who took part in Wednesday's protest, said multiple reviews, including by the government committees and the Atomic Energy Agency, had endorsed the operations at Kuantan as low-risk, safe and compliant with regulations. "I have many scientific colleagues here and overseas. They keep asking me why there is continued controversy when the science is clear and the company has been audited and reviewed so many times," Professor Bahari said.

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Wesfarmers boss bites back at Lynas attacks on 'reputation, integrity'

Matthew StevensColumnist

Apr 12, 2019 — 12.00am

 Wesfarmers insists that direct discussions with the Lynas Corporation board and management continued for months beyond the point its potential rare earths target says negotiations were terminated. Speaking exclusively to The Australian Financial Review on Thursday, Wesfarmers chief executive Rob Scott disputed claims by Lynas that contact between bidder and potential target ended immediately after his intentions moved from a joint venture to a $1.5 billion takeover proposal.

Mr Scott also claimed Lynas had been advised after the Wesfarmers approach had been made public in March that his company planned to directly engage with the Malaysian government over its intentions. That advice included an invitation to joint discussions with ministers and officials. Mr Scott would not comment on the nature of the Lynas response.

Contact between Wesfarmers and five government ministers including Prime Minister Mahathir Mohamad has since become a point of fierce controversy. Mr Scott and his company have been accused of unethical behaviour by interfering in negotiations between Lynas and the sovereign government that hosts the company’s $1 billion rare earths processing plant.

Last December Malaysia’s environment minister ordered Lynas to export an estimated 450,000 tonnes of low-level radioactive waste from its Kuantan facility in Malaysia and just last Friday the prime minister made post-cabinet comments indicating Lynas would need to repatriate its primary processing operation to Australia. Mr Scott dismissed suggestions Wesfarmers had influenced the prime minister’s decision-making and expressed disappointment and frustration with what he claims is a consistent misrepresentation of both the timelines of a process still in train and of the way the transaction has so far been conducted.

Disappointing mischaracterisation

“Wesfarmers continues to be disappointed by the mischaracterisation of the discussions and events relating to our proposal to acquire Lynas,” Mr Scott said. “Discussions between Wesfarmers and Lynas commenced in August last year on a range of options including a partnership. They later moved to broader options including a control transaction. We disagree that discussions ceased at that time,” Mr Scott said.

“As acknowledged by the chairman and CEO of Lynas this week, Lynas received our proposal in March and Wesfarmers chose to announce the proposal on 26 March 2019,” he said. It has consistently been reported Lynas terminated talks about five months ago. But Wesfarmers first approached Lynas about a change of control transaction in early February and sources suggest that discussions continued for several weeks beyond that.

Mr Scott refused to comment on speculation that Wesfarmers management had held talks with their Lynas equivalents through January and February and that he and Lynas chief executive Amanda Lacaze had met over dinner in February. It has been claimed this was the first point of contact between the two chief executives and that, up until that dinner discussion, talks had been led by Wesfarmers industrial boss, David Baxby.

Limited by confidentiality obligations

“We are being limited in our responses because we want to continue to honour our obligations to Lynas, as frustrating as that is given some of the attacks on our reputation and integrity, which are of the utmost importance to us,” Mr Scott said. “After our proposal was announced and Lynas declined to engage, Wesfarmers advised Lynas that we intended to meet with senior Malaysian government officials to better understand the regulatory regime affecting Lynas’ operations in Malaysia.

“We were very clear in our meetings that we could and did not speak for Lynas and that our proposal remained subject to a number of conditions and there was no certainty it would result in a transaction.

“It is our view that the Malaysian prime minister’s comments last Friday reflected the government’s long-standing frustration with Lynas’ lack of progress in achieving a solution to the accumulation of waste at its processing plant in Malaysia. We also note Lynas’ confirmation this week that an offshore cracking and leaching plant has been part of the company’s growth plans for some months.”

No plans to shut Kuantan

The final misapprehension Mr Scott wanted to deal with are claims the Wesfarmers plan involved shutting down the Kuantan processing operation. Hundreds of Lynas employees protested in the Malaysian capital on Thursday over the prime minister's edict. “Very importantly, we recognise and acknowledge the importance of the Lynas operations and highly skilled team in Malaysia,” he said.

“In the event Wesfarmers was to be in a position to acquire Lynas, we anticipate the plant and the team in Malaysia would benefit from the attributes that Wesfarmers has stated we could offer, including further capital investment and a track record of working with stakeholders to deliver sustainable, positive outcomes for local communities.,

“We remain welcome to engage with Lynas on the matter that is most important to both companies’ shareholders, being the value of Lynas,” Mr Scott said.



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Dissonant narratives condemn Wesfarmers to hostile progress on Lynas

Matthew StevensColumnist

Apr 15, 2019 — 6.01am



The increasingly divergent public narratives on Wesfarmers’ progress to its conditional and non-binding approach on Lynas Corporation are important not least because they suggest the West Australian’s preferred path to success is now an extremely unlikely option.

I mean, if neither side can agree on the facts of first contact, first rejection, first bid indication and final rejection then getting to the point where a Lynas board might co-operate on a scheme takeover would seem to be an impossibility. So, given it does not retreat, then it very much looks like Wesfarmers will need to go hostile to secure its quarrying quarry. So what are the differences here?

The Lynas lens

Well, looked at through the Lynas lens, Wesfarmers has behaved with cavalier disregard for the assumed protocols both in its opening indication that hostility was not an option and then by inviting itself to discussion with a Malaysian government whose cabinet was in the process of deciding on the fate of the Malaysian half of the rare earths producer's business.


The Lynas view is that once it decided that forming a joint venture processing business was unwieldy, an excessively complicated imposition on an otherwise integrated mine-to-processing business and likely to trigger government concern over transfer pricing, that was supposed to be that.

Lynas chief executive Amanda Lacaze says that a first and supposedly definitive rejection landed with Wesfarmers in November last year. The Lynas view is that discussions that had opened in August were then terminated.

But the Wesfarmers view of things is mighty different, with misalignments on both the nature and timing of discussions. For example, Wesfarmers chief executive Rob Scott told The Australian Financial Review exclusively last week that discussions with Lynas persisted for months after the November rejection.

Wesfarmers bites back

To refresh, Scott told the AFR: “Discussions between Wesfarmers and Lynas commenced in August last year on a range of options including a partnership. They later moved to broader options including a control transaction. We disagree that discussions ceased at that time.”

Scott refused our invitation to explain why he might disagree with the Lynas view and also refused to comment on speculation that he and Lacaze had dined in early February to discuss Wesfarmers’ intentions. But he was making it clear that the original talks included options other than a joint venture that would see primary processing of the rare earths that Lynas digs up in Western Australia done at a new facility built onto Wesfarmers’ chemicals and fertiliser operations at Kwinana.

While no one at Wesfarmers feels free to make further comment, it is our firm understanding that discussions at various management and executive levels waxed and waned through January and into February and that, indeed, the first meeting between the now sparring chief executives occurred over dinner in the first week of February. We also hear that right up until March, Wesfarmers people at Kwinana were still being asked for information by the people Lynas had working on the rejected joint venture option.

Wesfarmers says Lynas was warned

To be clear there, Wesfarmers approached Lynas months before the Malaysian government’s December edict that the low-level radioactive waste being stored in over-covered stockpiles at the company’s Kuantan plant had to be exported and that it required a firm management plan for the less problematic waste.

And, according to one count offered to us, Wesfarmers told Lynas on at least four separate occasions that, with a joint venture not possible, it was minded to a control-changing transaction. Nonetheless, Lacaze was apparently left angry and stunned by the March 26 decision to go public with the possibility of a $2.25 share, $1.5 billion takeover offer for the company.

There is talk that the corporate cop has taken a passing interest in the dissonance around the pathway to this contest with a view to tracking buying of Lynas shares by four of its directors. As far as I can see, it is another needless cul de sac in what should be a conversation about shareholder value, risk and opportunity. The more important reason to clarify the breath and timing of contact between the two companies is that the questions about the integrity of Wesfarmers sit front and central to Lynas’ case for the defence. 

The value case largely ignored so far

That case has pretty much ignored the usual value angles. Instead Lynas has run an effective and damaging assault on Wesfarmers’ unprotected underbelly, its corporate reputation. There are two orbits of vulnerability there.

The first circles around the claim by Lacaze that when Wesfarmers approached in August, management told Lynas that hostility was not in its DNA and would not be an option. The implication is that Lynas would not have engaged in discussions around partnership if that guaranteed had not been offered.

The second and more dangerous front of this assault on reputation was opened by Wesfarmers' decision to make a fact-finding mission to the Malaysian government. Scott and other senior managers ended up meeting five Malaysian government ministers including Prime Minister Mahathir Mohamad.

The fact of these meetings, and their coincidence with a decision-making process that ended with Mahathir’s cabinet deciding that the cracking and leaching process at Kuantan must be repatriated to Australia, has invited outrage from many.

There is a view that Wesfarmers did not have economic interest enough in Lynas to justify reaching out to the Malaysian government in the first place. Remember there is and was no actual bid. Wesfarmers just revealed an intent and possibly a price but conditions that included certainty in the fraught re-licensing of Kuantan plant and further due diligence.

That Mahathir then emerged from discussions maintaining that promises had been made only magnifies a widely shared sense of unease over Wesfarmers’ conduct.

Scott dismisses any idea that Wesfarmers had any role in shaping the cabinet’s decision. Other disagree and point to the Prime Minister’s comment that unspecified others had promised to remove the 450,000 tonnes of troublesome waste from Kuantan and conduct the disputed processing that produces that waste somewhere else. Scott remains comfortable with the fact-finding logic that inspired the visit. He is comfortable too that Lynas was told that Wesfarmers would introduce itself to the Malaysian government. Lynas denies this.

Was Wesfarmers verballed

Now it is a fair bet that Mahathir has verballed Wesfarmers. It is a fair bet too that cabinet was informed of the potential that Lynas was already reviewing the potential of primary processing in Australia. But that doesn’t protect Wesfarmers from allegations of ill-judgement. The company allowed itself to become a tool of Malaysian politics by the timing of its first contact. A bit of patience was required. As things stand, there is still no clarity over how Mahathir’s determination will affect the re-licensing of the Kuantan plant.

Yes, we know the government wants cracking and leaching done elsewhere, but what is the timeframe and will it allow Lynas the two or three-year space it needs to run the existing plant while building new plant elsewhere? How might Lynas finance that build and will any new funding arrive with extended and more constraining marketing rights over end products. And what of the 450,000 tonnes of low-level radioactive waste that is presently sitting on stockpile at Kuantan? Will it be enough to find a more secure permanent home for that stuff in Malaysia or will a previous export edict by the environment minister still hold?

Where to now

There is a chance that Lynas and its owners will know more about the government’s intention as early as Monday afternoon given the Prime Minister has called a press conference. Given that is correct then it will add more weight to the Tuesday morning’s investor briefing that Lacaze has booked for a chat about Lynas’ quarterly production numbers.

And what of Wesfarmers? Well, it has had an uncomfortable ride so far and it really cannot do a whole lot until there is certainty over the Kuantan licence, Mahathir’s plan and how Lynas might pay for whatever changes it might require. But if its ambitions survive that clarity, then it would appear that its options for progress are now limited to hostility.

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WES going hostile??

What is the chance that a hostile bid would succeed even if WES was to initiate one? Who would vote 'yes' to a sale with their shares? IMO only more recent holders might be tempted. Such a view has emerged from comments made on other Forums. However, I think that those who have held since before the reverse split would be far less tempted.

Would the big block holders sell? Again, there seems to have been comments from such holders of their support for Lynas management.  Further, you don’t get the feeling that Lynas officials (even though several just bought extra shares) would want to hand those over to WES after how AL has been describing the company view of WES’ interceding with the Malaysians.

I have read comments elsewhere that the Japanese don’t care who holds Lynas as long as they continue to get their NdPr and the debt is paid. This may be correct, but I have a feeling that the Japanese have gone through thick and thin with Lynas and its board. There is some honor to Japanese business dealings and as the article suggests further Japanese money might give them more future Lynas production benefits. There seems more reason for them to hold with the present Lynas than let it go to another’s hands, where who knows what the future might hold for Japanese interests. However, a possible Japanese buyout bid or a more controlling joint venture might be a another possibility.

I may be wrong, but I do not see WES acquiring Lynas, hostile or not. Their bid was low ball based on premium to present price and scare tactics re the licence; also their actions were without doubt, debatable. Lynas has too much going for it re., its resource, facilities, production, contracts, workforce, IP, Japanese support, etc., and the future trends for RE in the EV and electrification world. 
All these factors need to be taken in to any buyout consideration and would be more prominent if not for the politics going on in Malaysia. 

The waste is the issue holding the share price from beginning to reflect these positives for the company. I trust the CEO to find a compromise with the Malaysians. This may involve some cleaning in Australia and removal of the Malaysian waste. However, the PM knows that moving approx. ½ mill tons of waste is not going to happen in 6 months, and a much longer transition is going to be needed. In return he gets the ROW moat RE company staying in his backyard with all that such situating might draw to Malaysian development over time. Further he does not alienate the Japanese with all their potential investment bonds and money. The PM also gets an appreciative Australia who is looking to build up its own critical metals world image, which includes Malaysian backed juniors. Overall, China no longer appears Malaysia's only economic hope. 

Again, we shall see.

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Lynas drifts as fundamentals back in focus

Sarah Thompson andAnthony Macdonald

Apr 15, 2019 — 9.33pm


Amid all the corporate drama, mock outrage and takeover theatre at Lynas Corp, it's easy to forget the one thing that may ultimately dictate whether Wesfarmers catches its prey: valuation fundamentals. When Wesfarmers volunteered news of its $2.25 a share indicative bid, the offer was at a 44.7 per cent premium to Lynas' then trading price of $1.55.

Lynas CEO Amanda Lacaze has since made it abundantly clear the company is not for sale, but the reality is that its big institutional shareholders are buying and selling stock in this company and others every day.  Lynas chief executive Amanda Lacaze has rebuffed Wesfarmers; advances - so far.  Peter Braig

And their trading is mostly predicated on fundamental factors - earnings forecasts, rare earths price expectations and the like - which is why Lynas' shares are drifting south and look like heading back below the $2 mark.

Absent a bid by Wesfarmers - or at least news that Lynas' board is willing to engage - it's hard to see that drift ending anytime soon. Because it's no secret Lynas has some challenges, including a muted macro outlook for its main product Neodymium Praseodymium (NdPr).

Bulls like Greencape Capital are not going anywhere, but there are funds below the substantial mark pushing through sell orders.

In that context, Tuesday looms as an important day, with Lynas due to report its March quarter earnings and cash balance. Fundies will be watching for an update on two key drivers.

pic 1.png 

The first is the realised NdPr price, relative to forecasts. There are a bunch of long-term broker forecasts for the two metals, but hardly the in-depth study you would find for its copper, coal or iron ore forecasts. Long-term broker forecasts at $US64/kg are well above spot price ($US39/kg) and 60 per cent higher than Lynas' disclosed price for fiscal 2018-19.

The second is capital expenditure and the likely cost of a "cracking and leaching" plant Lynas may need to build back home in Western Australia. Sell-side estimates have ranged from $100 million to $500 million. [For context, Lynas had $53 million in the bank and debt to shareholders equity of 52 per cent as at December 31].


The last time Lynas was in the building phase was in 2010, when it spent more than $US150 million for the first two kilns and associated infrastructure at its LAMP facility in Kuantan. Add Western Australian labour rates, and the need to build a permanent disposal facility, and it's easy to see how the top half of that range would appear more likely.

The question, of course, is whether Wesfarmers will keep banging its head against a closed door. It's the one thing that could prop up the share price heading into the all-important June 30 year end for fund managers.

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Inside Amanda Lacaze's Malaysian nightmare (Financial Review)

A seismic shift in Malaysian politics has left Lynas chief executive Amanda Lacaze facing a fractured coalition government and some old enemies with powerful new connections. 

Michael Smith

Updated Apr 29, 2019

Kuala Lumpur | Security is light at the sprawling Lynas Corp rare earths processing plant in an industrial estate on Malaysia's east coast.

A chain-link fence surrounds the site where covered stockpiles of residue – a byproduct of the process to extract the products needed to make mobile phones, computers and countless other devices – can easily be seen from the road.


The Lynas Advance Materials Plant (LAMP) was built near Kuantan, Pahang, Malaysia.  Ian Teh

While this waste is at the centre of a political storm in Malaysia it is peaceful at the plant, about 30 kilometres from the eastern city of Kuantan. It is a contrast to 2014, when 1000 protesters blockaded the gates of the plant as angry local residents and environmental activists fought to have the company shut down.

"Back then, we got scared. We were worried what people would do when we went out wearing our [Lynas] shirts. Now we can walk freely. We are proud," says Khairul Suhaimi, a burly plant manager, who has been working for Lynas since 2009. "We are strong. We are fighters. We want to be treated fairly."

Lynas survived that battle in a period when staff like Mr Khariul said their cars would be "keyed" because the company was hated so much in the local community. But it now faces a new fight for its survival. The latest campaign is playing out in the corridors of power in Putrajaya – a Canberra-esque city south of the Malaysian capital where the government offices are located – rather than on the streets of Kuantan.

The environmental concerns surrounding Lynas' seven-year-old plant and how it handles the low-level radioactive waste are not new.  But the political landscape has changed, and some of Lynas' old enemies now have more influence than they used to after Mahathir Mohamad's shock election winalmost one year ago.

Lynas chief executive Amanda Lacaze, along with everyone else in Malaysia, admits they did not see the political change coming. "We were not an issue a year ago," Ms Lacaze says. She is right. When The Australian Financial Review visited Kuantan a year earlier – just weeks leading up to the polls which was expected to see former prime minister  Najib Razak's regime regain power – no-one was talking about the company's environmental credentials.

It was the first change of government in Malaysia in the 61 years since the country's independence from Britain. Instead of the old one-party government, which did not have any issues with Lynas, a fractured four-party coalition led by Mahathir was suddenly in power.

Two of Lynas' old enemies, who have been in the frontline of a long-running campaign to get the plant closed down, are now Members of Parliament. They are Fuziah Salleh – an MP for the major city near the Lynas plant - and Wong Tack – a feisty  member of the Democratic Action Party who was once quoted as saying he wanted to burn the plant down. He now says that comment was taken out of context, but he still believes whatever regulations would apply to Lynas in Australia should apply in Malaysia.

However, Lynas' biggest problem is Yeo Bee Yin, a 35-year-old Cambridge-educated politician who is making a name for herself by tackling the illegal dumping of foreign plastic waste in the country. Ms Yin (or YBY as she is widely known) is the Minister for Energy, Science, Technology, Environment and Climate Change, which means she has direct oversight on the Lynas issue.

On the same day in December when a government committee reviewing the plant's operations found it was low risk and had complied with Malaysia's regulations, YBY's office dropped a bombshell. She issued a letter outlining two preconditions for Lynas' to renew its licence renewal on September 2. The company must export an estimated 450,000 tonnes of low-level solid waste known as water leach purification (WLP) residue, and come up with an action plan for the disposal of its other waste known as NUF.

Lynas has appealed and is still waiting for the Minister's office to respond. Malaysian government sources say there is little goodwill between the Australian company and YBY's office but they are not ruling out efforts to reach a compromise. "It is very difficult to please them," one source said when asked about Lynas.

The main gripe from politicians opposed to Lynas is that it has had since 2012 to come up with solutions to recycle, store or export the waste but nothing has happened and they say it did not build the proper facilities from day one. This is something Lynas disputes vehemently, saying it has always complied with local regulations and the conditions of its licence.

Comparisons between another rare earths refinery near the town of Bukit Merah in central Malaysia, which was closed down in the 1990s, have not been helpful for Lynas, which says radioactive levels at that operation was 60 times what its plant produces.

Whether the existing waste stored at the Lynas plant, which is in a huge industrial zone dominated by petrochemical plants, is a long-term health hazard is also a complex issue. While environmental activists say the hundreds living in local fishing villages in the area are worried about the long-term health affects from the plant on their drinking water, it is hard to find evidence of this.

"This issue is created by politicians for different reasons. The politicians who raise concerns are not from here. I am not aware of any complaints and we do not use underground water any more," Zehai bin Shefih, a local village elder, says.

However, Ms Salleh – who has been campaigning against Lynas for years – says many of the locals are unaware of the long-term health risks from the plant's waste which environmentalists say can seep into the ground and well water when there is flooding. Lynas has also done a good job of winning the local community over with its extensive programs supporting local schools, orphanages and other services.


Fuziah Salleh, Deputy Minister, Malaysian government has been fighting Lynas for years Michael Smith 

"It is a complex matter. If you are speaking to the middle classes, yes, there is an issue.  If you are speaking ot the lower-income groups where bread and butter is a bigger issue, they don't know about the long life of the radiation. It may not  affect them but it may affect their children," Salleh said in an interview.

The situation has been complicated by the arrival of Wesfarmers, which had its $1.5 billion takeover bid for the company knocked back last month. Wesfarmers boss Rob Scott met Mahathir in April. Shortly after, the Prime Minister said companies interested in buying Lynas had made a commitment to cleaning up the raw material elsewhere before it was sent to Malaysia.

As well as dealing with existing waste at the plant, the other issue is whether the Mahathir government will force Lynas to remove radioactivity from rare earths minerals mined in Western Australia before it is shipped to Malaysia for further processing. The dumping of foreign waste, particularly plastic, in Malaysia is a hot political issue at the moment.

The Australian High Commission is actively involved in lobbying on behalf of Lynas. The Australian government sees the matter as a market access issue and does not want Lynas to be treated unfairly, which would set a dangerous precedent for foreign investment in the country. But Canberra is also unlikely to sacrifice the bilateral relationship with Malaysia by going in too hard with Mahathir on the issue. The May election also means senior politicians are currently unable to go in and bat for Lynas, even if they wanted to.

Yin has written to Australian politicians asking the government to collaborate on the removal of waste from Malaysia. But while she is a senior minister, sources in Kuala Lumpur she does not speak on behalf of Cabinet and Australia was unlikely to ever agree to accept waste from any country.

The big problem for Lynas is the current political environment in Malaysia is an unknown.  There is no precedent for dealing with  Mahathri's Pakatan Harapan (Alliance of Hope) coalition of four parties, with means there are competing voices and complexities that make an outcome difficult to predict. Even 93-year-old Mahathir himself is learning how to deal with this. The last time he was in power, few would question his authority.

Lynas remains hopeful Cabinet, rather than a single minister, will decide its fate. Its supporters argues the science is clear and Mahathir is a rational leader who does not want to jeopardise foreign investment in the country.

"Everything is up to the Cabinet. Cabinet has met on the issue but there is no consensus," says James Chin, director of the University of Tasmania's Asia Institute. 

"YBY is just part of the picture. She is very young, just got married a month ago. She is a well-known environmentalist and comes from an engineering background rather than the green movement. When this issue is brought into the Cabinet, it is a free flow discussion. So anything can happen. "

People who know Lacaze says she is obsessed with doing the right thing by her 600-strong workforce of mostly Malaysian staff at the plant in Kuantan. Former employees, investors and even Wesfarmers say Lacaze has done an amazing job steering Lynas from the brink of collapse into a profitable business.

Her staff have also been on the frontline of the company' campaign to defend its reputation, with around 300 workers and their families demonstrating in Kuala Lumpur last month. Their testimonies, while rehearsed, are passionate and appear genuine.  Many of the workers are engineering graduates who understand the science around the waste disposal process.

"I'm not saying we don't have radiation. But radiation is everywhere. when we use our phones or watch television we are exposed to radiation. Safety is a big concern here. We are the most reviewed company in Malaysia," says Nor Syaqirah Yasmin,  an associate engineer, and one of many women Lacaze has employed at the plant.

However, the local residents behind the Save Malaysia Stop Lynas Movement say they are confident their long campaign to remove what they say is hazardous waste is finally close to success.

"Lynas has always made people believe they can recycle the waste. This is baloney. They have been doing experiments for years. We think they should be given the Nobel Prize for Science if they can achieve some of the things they say they can achieve," Tan Bun Teet, the chairman of Save Malaysia Stop Lynas, says.

"The villagers have been brainwashed. They don't know anything abut heavy metal poisoning."

The opinion of local street vendors and business leaders is somewhere inbetween. Many say they are more concerned about jobs and the economy and anxiety about environmental issues at the Lynas Advanced Material Plant (LAMP) has subsided.


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