PERTH (miningweekly.com) – Rare earths miner Lynas has reported positive free cash flow for the quarter ended June 30, on the back of increased production and record high revenues.

Production for the quarter reached 2 606 t, up from the 1 973 t produced in the previous quarter, allowing for a record gross sales revenue of A$51.9-million, up 74% on the previous quarter.

However, market prices were, at the end of the quarter, affected by announcements by the Chinese government regarding the rare-earth export and resource taxes.

Export taxes had been cancelled, as expected, reducing the cost handicap between magnet makers in and outside of China.

Further, a new resource tax had fallen short of the expectations of a number of speculators, which were now realising a loss, with a negative effect on market price.

“The rare earths market is one that is characterised by speculative activity. Company valuations can show great volatility based on announcement and rumours.

“While we expect a level of uncertainty in the rare earths market to continue in the near term, we remain focused on becoming the strongest-performing company within this market,” said CEO Amanda Lacaze.

She noted that the results achieved in the fourth quarter were the next step in Lynas’s resolve to build a company whose valuation was based on actual performance rather than speculation.

Meanwhile, Lacaze pointed out that Lynas had successfully completed significant change programmes in a number of areas, including resetting its cost base, improving business efficiency, accelerating its production ramp-up, growing market share, acquiring customers to ensure consumption and further developing solutions to minimise and manage all waste streams.

In addition, the company had also focused on embedding a company culture focused on continuous improvements.

“Actions implemented over the last year have significantly reduced the Lynas cost base. Most initiatives have been focused on fixing a number of basic commercial elements including reducing overhead costs and reviewing supply contracts,” Lacaze noted.

Lynas on Friday also announced amendments to its contract with the supplier of two major chemical reagents for the Lynas Advanced Materials Plant.

The company had carried a provision for onerous contracts, which represented the expected value of obligations arising under take-or-pay clauses of its supply agreement.

Since signing the contract, Lynas had paid A$25.1-million in take-or-pay payments and other penalties. The company said on Friday that as usage was forecast to continue at rates significantly below the original contracted qualities, the company had provided an overall liability of A$42.3-million at the end of December last year.

However, the company had now successfully completed negotiations with the supplier and further penalties were not expected under the amended agreement.

The take-or-pay volumes had now been reduced to current and expected future volume consumption and the term of the amended supply contract would expire in January 2025.

Over the next six months, Lynas was expected to pay A$460 000 a month to discharge the existing take-or-pay amount. A further existing A$4.41-million would be settled through the issue of Lynas shares.