Lynas warns of forced Malaysian shutdown as auditor flags uncertainty over ability to continue as a going concern

Lynas’ auditor has warned of uncertainty over its ability to continue as a going concern amid Malaysia shutdown fears.

FILE - In this Thursday, April 19, 2012 file photo, a worker walks at the site of Lynas rare earths plant under construction in Gebeng, eastern Malaysia. Australian miner Lynas Corp. said Wednesday, Sept. 5, 2012 it has secured the Malaysian government's approval to fire up a controversial rare earths plant. (AP Photo/Lai Seng Sin, File)

Rare earths producer Lynas Corp has warned it could be forced to close down its Malaysian processing facility in just six months, with the company’s auditor warning of material uncertainty over Lynas’s ability to continue as a going concern.

But Lynas (LYC) chief executive Amanda Lacaze says she is still confident the company will find a way resolve the latest regulatory roadblock threatening the company’s future.

Lynas’s regulatory headaches in Malaysia are also being exacerbated by soft market prices for its rare earths, a situation that Ms Lacaze said reflected efforts by rival rare earths players trying to squeeze Lynas out of the market.

While Lynas has attracted warnings of material uncertainty from its auditors in the past, they have previously centred on its debt position. This time, however, the accounts warned of material uncertainty over whether Lynas’ advanced materials plant in Malaysia will be able to operate beyond September 2 following the new conditions imposed on the plant late last year.

Malaysian regulators in December announced rules requiring the export of water leach purification residue from the plant, the latest in a line of regulatory and political difficulties to encounter Lynas during its time in the country. Lynas, which has since appealed the decision and is negotiating with regulators over alternative options for the residue, said yesterday that meeting the new conditions was “unachievable”.

Shares in Lynas fell almost 10 per cent immediately after the release of the result, before recovering late in the day to close 2 per cent lower at $1.76 a share.

Ms Lacaze told The Australian that the board had made an informed and carefully considered decision to sign off on the latest accounts.

“The directors of the company firmly and very comfortably reached the conclusion that the accounts should be issued on a going concern basis. As directors, we are confident that is the right decision,” she said.

“Accounting standards are at times unforgiving instruments, and they point particularly auditors into a particular direction.”

Ms Lacaze said she still believed Lynas had a future in Malaysia despite the persistent opposition to the project from some politicians.

“For most people we are simply not an issue. We’ve been here for five years, we’ve run our business without any negative effect, we’ve worked hard to contribute to the local community,” she said.

“We recognise there is a small minority who make a lot of noise.”

The auditor’s warnings overshadowed a financial result that was otherwise better than expected, given the combination of both softer rare earths prices and the month of production lost as a result of the Malaysian regulatory decisions.

The company’s first half net profit was $19 million, down 62.6 per cent from a year earlier, while revenue fell 10 per cent to $179.8m.

Ms Lacaze said the softer rare earths prices were being driven by a drop in sentiment in China and ongoing work by competitors trying to fight Lynas for market share.

“There are those who still think it would be a good idea to keep pressure on the price and keep pressure on Lynas, particularly at a time when there’s a little bit of uncertainty,” Ms Lacaze said.