Lynas calls for cash after share rally
Lynas Corp is set to test the support of its shareholders, by seeking to raise another $200 million to strengthen its balance sheet after extended delays in starting up its Malaysian refinery.
It is to raise $150 million via two sets of institutional placements, with the remaining $50 million to come from other shareholders via a share purchase plan.
The placement and offering is priced at 75 cents, a slight discount to its close yesterday of 80 cents.
The flagged $200 million raising should help overcome the company’s immediate funding issues.
Earlier, Deutsche Bank told its clients additional funding would be needed for Lynas to get it through to first cash flows, since it faced a prospective three-month minimum commissioning period.
It forecast Lynas would need $120 million to cover any further operational delays, provide the working capital needed for phase 1 and phase 2 start-ups, along with funding for any overruns.
Lynas entered into a trading halt this morning to raise the fresh funds as it moved quickly to tap into improved investor sentiment towards the company after its quick 10 per cent rally yesterday when the legal threat to the start-up of its Malaysian refinery was removed.
But the focus is now firmly on its balance sheet - and its need for cash/Lynas needs to finalise a new working capital facility ‘‘imminently’’, JPMorgan told its clients in a note earlier today.
‘‘We estimate Lynas will have only $14 million in unrestricted cash by year end. Given there is still a five month ramp-up period to come, Lynas is looking to secure a new working capital facility.
‘‘We believe it has been difficult for Lynas to finalise arrangements with financial institutions until a firm start-date for the LAMP was achieved and this underlines the importance of the resolution to the court proceedings, notwithstanding any further appeals.’’
Before the outcome to yesterday’s court ruling, analysts had around a $1.50 valuation for Lynas shares, although few have been willing to recommend clients buy into Lynas until all of the legal and operational issues surrounding the Malaysian refinery are closer to resolution.