The Malaysian government has kicked the can down the road by granting Lynas a reprieve in the form of an operating licence variation which will allow Lynas to continue processing lanthanide concentrate in Malaysia until 1 January 2024. This should give Lynas the breathing room to complete the build and commissioning of their West Australian processing operations, which will be critical if the Malaysian government ultimately decide to reinstate the operating licence restriction from 1 January 2024 (or some later date).

This decision avoids a huge hole being blown in Lynas' P&L for the latter part of 2023 and potentially early part of 2024, which is why the stock has rallied so hard over recent days.

It's unclear which way the Malaysian operating licence discussions will ultimately go, but it smells to me like the Malaysian government is gearing up to reimpose the restriction. I think this extension is indirectly acknowledging the dissonance and harm the policy pivot will have on Lynas, and is a consolation prize that at least gives Lynas the time to get their plan B in place even though it won't compensate them for the devaluation of their investment in Malaysia.

As intimated by the string of recent broker upgrades, the Lynas sell-off has been getting folks' attention (including mine). Whatever Lord Elon or his minions say apparently strikes fear and panic (or joy) into the hearts of the herd and would appear to have turbocharged Lynas' descent.

As part of my Lynas homework, I came across references to research and commentary from Adamas Intelligence who seem to be a (the?) go-to rare earths research house. They've provided some quite useful commentary regarding the Tesla announcement and authored the pay-to-read "Rare Earth Magnet Market Outlook to 2035" report (though posted some useful excerpts/findings here). They also authored + released for free the "State of Charge: EVs, Batteries and Battery Materials" report covering 2022 H2 global passenger xEV (i.e., HEV, PHEV and BEV) market performance which is tangentially relevant to Lynas.

In a nutshell, Adamas are forecasting a structural supply deficit for rare earths through 2035. Combined with concerns over China's supply dominance and the comparative environmental "dirtyness" of their supply operations vs other non-China minor players, there seems to be a pretty solid outlook for Lynas who are proven, profitable, and growing their production capacity (their Malaysian licencing woes notwithstanding).

Forward estimates look up and to the right if you ignore last year's result as a PCP anomaly, and extrapolating out 2-3 years using some low to mid range PEs suggests there are better than average odds of easily achieving 10-15%p.a. growth at the current ~$6 SP.

I took a ~1% starter position today @ $6.05 and will probably average down if it keeps tanking.