Lynas Rare Earths Limited

Good morning, and welcome to the Lynas Corporation briefing for the quarter ending 30 June, 2020. Amanda Lacaze, CEO and Managing Director of Lynas, will be presenting the update today.

And she is joined by Gaudenz Sturzenegger, CFO; Andrew Arnold, General Counsel and Company Secretary; and Pol Le Roux, Vice President of Sales and Marketing. I'll now hand over to Amanda Lacaze.

Please go ahead, Amanda.

Good morning everybody and welcome from the heavy industrial zone at both Bay in Sydney. Up until about five minutes ago next door, they were jackhammering tiles, but lovely, lovely cooperative workers who said they've taken early lunch, so that I could do this call without having the background noise.

As always, I will assume that you have read the report and I will make a few opening comments and then open up for questions. So, like just about every other business in the world, the June quarter was a challenging quarter for Lynas.

For us, it marked the first time that we had negative operating cash flow since the end of 2014. And that's quite heartbreaking for many of us who have been involved in the Lynas journey over those years.

But as always, the health and safety of our people and communities is our number one priority. We are very fortunate that we are operating in two jurisdictions, where the performance in -- with respect to the pandemic on a global scale has been really excellent.

Both Australia and Malaysia have recorded very most fatalities from COVID-19 pandemic and the responses have generally been very positive. In Malaysia, we are particularly alert to compliance with government regulations, which certainly have assisted in keeping our people and our community's safe.

So, yes, it was sad to see that we had a negative cash outcome, but on the positive side for the quarter. The first thing, clearly, we implemented the COVID-19 protocols early and with good effect and that is at both sites.

And we've included previously some of the pictures of the way that we're managing there. Certainly, we're managing with lower loads.

We only operate our charters out to five here in Australia at 50%. We've reduced to 50% buses out to size as well.

Our people in camp have been absolutely compliant with all regulations. We've stayed clear of sort of the indigenous community, whose health is absolutely a priority for us, including the way that we have managed those on our workforce who are indigenous, when they return to community.

In Malaysia, similarly, we have temperature checking on site. We have physical distancing at all times.

We've taken a lot of our meetings outside rather than inside to facilitate sort of improved outcome. Also on the positive side, I'm confident that we have managed the extended shutdown well and as we've identified in the report, we were shut down completely -- the temporary shutdowns for COVID, number 44 days.

Of course, once we restart with operations, it can take -- well, to some elements, it takes almost three weeks to get from the front end to the back end of the plant, but certainly, it takes as new days before we have materials flowing through the system through to finished product. But during that time, we were able to avoid many costs within the business, including our most significant inputs.

And of course, as we look at this quarter's results, we're recording a cash outcome today, we do have cash costs, which are related to March production numbers, where we have paid those invoices during April or May. During the time, we determined very early on that we would use this time wisely.

We've diverted people to productive activities. We've completed projects that we would have otherwise had to contract out.

And we've been able to use our own people to complete those improvements and development projects and reduce the time to properly revisit all of our operating and cost parameters. And within the context of expecting that we will be running at lower than Lynas net rates for an extended time, we really have looked at all of those operating and cost parameters to ensure that we are capturing all opportunities.

We started up in good order, and we are running about 75% of our plants. So, just over two times out of four, three and six, five trains [ph] and depending upon product mix six to seven of our tunnel furnaces and we are producing consistently within the 70% to 75% production rate.

During the quarter, also on a very positive note, the Lynas 2025 project teams continue to make very solid progress, including, as we announced last week, we placed our first order for our longest lead-time item related to the Lynas Kalgoorlie project. So, just a few words in terms of outlook.

As we've indicated, the outlook in terms of both demand and price is, of course uncertain, because we had an uncertain time, but feedback from our customers indicates that they expect some improvement in the second half. And I think as most of you know we are primarily exposed to the automotive industry and while the automotive industry in total is significantly down on what it was pre-COVID, electric and hybrid vehicles are holding very well and of course, they are primary engines, no pun intended for our growth.

We can operate efficiently at 75%. We can capture most volume cost efficiencies, at 75%, and we are operating at 70% to 75% level.

And of course, everybody is always very interested in the continued governmental focus is helpful for our business. However, we would make the point as we have made with many governments that ultimately, it does need to be matched by customer behavior.

And our view would be that the COVID-19 pandemic has been a stark reminder to many that outsourcing all of manufacturing to other jurisdictions is may not always be a good idea. We remain very excited about our progress with Lynas 2025.

The teams they're actually having a pretty good time. So, with those comments.

I'm happy to open up for questions.

Terrific. Thank you all.

Lots of questions today, very exciting and look forward to talking to you again soon.