Lynas shares up on significant cost reduction progress
PERTH (miningweekly.com) – The share price of rare earths miner Lynas increased by more than 18% on Friday as the company revealed that its cost saving initiatives had resulted in greater-than-expected benefits.
CEO Amanda Lacaze told shareholders this week that cost reduction initiatives had initially been forecast to deliver a A$26-million capital saving, on a yearly basis. However, to date, annualised savings of more than A$35-million had been achieved.
During the quarter ended March, the cost saving initiatives resulted in a 38% saving on overheads, while a further 21% savings were reported in salaries and wages, and a further 33% savings in repair and maintenance costs.
In addition, input cost reductions had also been realised across the board by improved procurement practices, the renegotiation of contracts, the use of alternate suppliers and more efficient stock management.
Lacaze said the company’s continued focus on efficient practices was expected to deliver further savings.
Meanwhile, Lynas reported a slight reduction in rare-earth output during the March quarter, with production affected by the instability of the solvent extraction phase at its Lynas Advanced Materials Plant, in Malaysia. This translated to low sales revenue and negative cash flow during the start of the quarter.
Lacaze said that the negative cash flow was further exacerbated by restructuring charges, as well as yearly charges related to business insurance.
Production declined from the 2 177 t of rare-earth oxide (REO) produced in the December quarter, to 1 973 t for the three months ending March.
During the quarter under review, Lynas sold 1 970 t of REO, compared with the 2 014 t sold during the previous quarter. As a result of the lower production volumes, revenue decreased from A$35.9-million reported in the December quarter, to A$29.8-million in the March quarter.
Despite the foreshadowed tough quarter, Lynas shares were trading at a high of 5.6c a share on Friday.
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