Lynas and Sojitz ink landmark deal to fast track Mount Weld Rare Earths project
Short Only
Seeking Alpha Analyst Since 2009
Lynas Corporation (ASX:LYC, OTC:LYSDY) has finalised a US$325 million (A$325 million) financing package with Japan's Sojitz Corporation (2768.T) to fast track a phase-two expansion of its rare earths project at Mount Weld.
J.P. Morgan has underwritten an institutional equity placement and share purchase plan at a price of A$2.07 per share to raise a total of $75 million.
The institutional equity placement has been completed today.
Lynas, which owns the richest known deposit of rare earths in the world at Mount Weld, near Laverton in Western Australia, has executed the deal as demand for the materials steadily rises amid fears China will continue to restrict exports.
The landmark agreements allow Lynas to accelerate marketing to Japanese customers and enable phase two construction to be committed in April 2011 and be completed in 2012.
Proceeds from the loan facility and the Sojitz placement will enable the company to increase planned production of rare earth oxides (REO) to 22,000 tonnes per annum (tpa) from the expected phase one run-rate production of 11,000 tpa.
The package consists of binding financing, distribution and agency, and availability agreements with Sojitz.
The financing agreement forms the basis of a financing package, of which US$250 million is to be used for the acceleration of the expansion of the Lynas Rare Earths Project to Phase two.
The availability and distribution & agency agreements secure additional supply of rare earths products for the Japanese market.
The agreements with Sojitz provide for the allocation of a minimum of 8,500 tonnes (+/- 500 tonnes) per annum of rare earths products to the Japanese market over a period of ten years.
It will also provide the joint marketing and distribution of a minimum of 8,500 tonnes (+/- 500 tonnes) of rare earth products in Japan.
There will be a loan facility for US$225 million (A$225 million) to be provided by a special purpose company (SPC) established by Sojitz and the Japan, Oil, Gas and Metals National Corporation (JOGMEC).
In addition, there will be a subscription by the SPC for US$25 million (A$25 million) of new fully paid ordinary shares in Lynas at a price of A$2.12 per share.
The new shares issued under the Sojitz placement will rank equally with existing shares and will settle on draw down under the loan facility.
Settlement under the loan facility is expected to occur in April 2011 and conditions for the loan facility are required to be satisfied by 30 May 2011.
Nicholas Curtis, Lynas’ executive chairman, said “the expansion in production will allow Lynas to take advantage of positive industry dynamics as the global supply of rare earths remains constrained.”
Settlement of the institutional placement is scheduled for 5 April 2011 and Lynas expects the new shares will be allotted and commence trading on the ASX on or about 6 April 2011.
The institutional placement and share purchase plan are not conditional on completion under the funding agreements with Sojitz.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.