This morning takeover target Lynas Corporation Ltd (ASX: LYC) revealed an operating cash profit of $26 million on sales of $88.2 million for the quarter ending March 31 2019. It finished the quarter with cash on hand of $67.1 million, but still carries US$146.1 million in debt with it repaying US$3.1 million over the quarter.
As we can see Lynas is now producing strong cash flows as rare earth mining volumes lift to record levels with an outlook for increased production, but on the other hand it remains tarred by serious regulatory problems thanks to its ongoing dispute with powerful elements of the Malaysian government demanding it lift its environmental compliance or lose its operating license.
The political problems it's facing in a country most well known for the multi-billion dollar 1MDB government corruption scandal involving Goldman Sachs, among others, makes the bid of investment conglomerate Wesfarmers Ltd (ASX: WES) to takeover the politically-shcakled miner all the more left field.
Lynas's balance sheet is in average shape at best as far as miners go and it's reliant on strength in volatile rare earths prices, before we even consider the scary political risk.
So far Lynas's CEO has rejected Wesfarmers's $2.25 per share takeover bid, which may not be such a bad thing for Wesfarmers investors.
