Lynas Corporation Ltd (ASX:LYC) Shares Whacked 20% On Review

The Lynas Corporation Ltd (ASX: LYC) share price got walloped 20% on Wednesday following the release of a review by the Malaysian government.

Lynas Corporation is a ‘rare earths’ minerals producer. Rare earths are minerals which are used as inputs to create many of the electronic devices (e.g. mobile phones) we know and use each day.

Lynas has two large projects: Mt Weld in WA is a deposit and mining facility; Kuantan in Malaysia is a rare earths separation facilities in the world. Lynas is one of the world’s largest products of rare earths outside of China.

What Happened? 

In an ASX statement Lynas responded to a statement from Malaysia’s Energy and Environment Ministry which announced it would impose two new licence conditions on Lynas’ $800 million Kuantan plant.

The plant takes the minerals Lynas produces in Western Australia and processes them.

The Government appears to be concerned with environmental issues and risks to the local community. Lynas was adamant it has met all of the requirements, upholds international standards and employs thousands of locals directly and indirectly.

“This appears to be policy based on politics, not policy based on science,” Lynas CEO Amanda Lacaze said. “It is very disappointing to receive this on the same day that the Review Committee report was released.”

At a time when global trade tensions are a concern for some resources companies, traders and investors, Lynas was primed to benefit. Now, Lynas’ investors will be anxiously awaiting news of waste storage licence renewals throughout 2019.

Lynas says it is considering legal options, but Lacaze said the company remains well-placed to deliver on its long-term strategy.

“However, we are confident we are well placed to manage potential changes and our long term investment thesis remains strong,” Lacaze added.

Now What?

For years Lynas has been a company which has been long on potential and a little too short on delivery. In 2018, the company made its first profit in 10 years. Here’s hoping it can achieve more of the same in 2019.

Personally, I won’t be buying Lynas shares anytime soon — even at these prices — because it’s well outside of my circle of competence.

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Our lead investment analyst has identified 3 growth stocks in a net cash position, with strong competitive forces and obvious tailwinds at their back. That’s why he already owns shares in all three companies!

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