The Lynas Advanced (rare earth) Materials Plant : Money matters
This page explains the finance aspect of the LAMP project; including the estimated profits, the significance resulted from the tax break given to them by the Malaysian government etc.
The term rare earth elements is a collective terminology for 17 metal elements, which are regarded as precious industrial metals. As far as the Australia Mt. Weld rare earth mineral is concern, it represents a group of c.a. 11 rare earth elements, three of which are too small and hence negligible in this analysis, the remaining 8 elements and their respective composition are presented in the first and the second column in Table 1.
The rest of the Table 1 demonstrates the prices of each individual elements dated from 2008 till 20th June 2011. Whilst the bottom row shows the 'basket' price of the combined rare earth elements, taking account of the individual composition and its respective price. All prices in USD/kg
The LAMP project was first approved in year 2008 by the Malaysian government, thus the economic and engineering feasibility studies must have been performed pre-dated this. Even back then, prior 2008 when the rare earth basket price was reasonably to be presumed lower than US$14/kg, the project was still profitable. It's also noted that a drastic surge in price in the past 18 months (2010 - 2011) or so.
Table 2 shows the profit estimation done by JP. Morgan (ref *) in June 2010, and my estimation based upon the latest Mt. Weld rare earth basket price as of 20th June 2011.
In June 2010's estimation, the basket price was estimated at c.a. US$12.6/kg. After just over a year, the basket price per kg has now increased to US$203/kg! By assuming the operating cost, depreciation and interest remained constant, the net profit of the LAMP at production rate of 22,000 tonnes/year is staggering 4.13 billion dollar/year!
How much tax is saved??
Assuming the corporate tax imposed by the Malaysian government to LAMP is 25%, the Malaysian government would have been paid just over 1 billion USD per year, depending on rare earth market price. But instead, LAMP will be given tax break for 12 consecutive years, i.e. more than 12 billion USD based on $203/kg!
So, how much tax the 12 years tax break benefit has been by Lynas?
Based upon June 2011's price, at US$203/kg, the tax will be saved is 1 billion USD per year, which is:
- 10 times more than what Mitsubishi Chemical has spent to clean up the radioactive contaminated sites at Asian Rare Earth, Bukit Merah, Malaysia
- 5 times the entire engineering, procurement and construction costs for the 100-heactare LAMP premises.
