Debt concerns knock Lynas shares to five-year low

MELBOURNE, March 11 (Reuters) - Rare earths miner Lynas Corp

LYC.AX warned on Tuesday it is likely to need to raise new funds or seek a reprieve from its lenders in the next 12 months or could face the risk of bankruptcy.

The warning sent its shares down as much as 17 percent to a five-year low, even though the company said it believed it would be able to raise the money it may need.

Lynas has been hit by a triple whammy; it faces debt repayments, problems ramping up output to a target of 11,000 tonnes a year at its plant in Malaysia and a slump in rare earths prices from their peak in 2011 as demand has dropped.

"These conditions indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity's ability to continue as a going concern," Lynas's auditor, Ernst & Young partner Graham Ezzy, said in a report attached to the company's half-year accounts.

It faces repayments over the next two years on one of its two debt facilities, a $225 million loan from Japan's Sojitz Corp 2768.T and Japan Oil, Gas and Metals National Corp (JOGMEC), which is fully secured by Lynas's assets.

It has already repaid $10 million on the Sojitz facility and needs to repay the rest in four stages by March 2016, including $35 million due in September.

That could be challenging as delays in ramping up output at its Malaysian plant have drained Lynas's cash balance to A$74.7 million ($67.38 million) as of the end of December from A$226 million a year earlier.

With the debt deadlines looming and the production problems, Lynas said it expects it will need to sell new shares, borrow more money or restructure its debt over the next 12 months and is already in talks about those alternatives.

The company said its directors and management "are confident that there are reasonable grounds to believe that if additional funding is required, it will be obtained in a timely manner."

Lynas also has a $225 million unsecured convertible bond issued to U.S. hedge fund Mt Kellett maturing in July 2016. The conversion price on the Mt Kellett bond is A$1.15.

The stock last traded down 8 percent at A$0.27, valuing the company at A$530 million, in a broader market that was up 0.3 percent.

The rare earths miner reported a net loss of A$59.3 million for the six months to December, wider than the A$56.6 million loss it reported a year earlier.

Lynas said it was confident it would reach its target run rate of 11,000 tonnes a year in the June quarter.

($1 = 1.1086 Australian dollars)

(Reporting by Sonali Paul; Editing by Matt Driskill)

((Sonali.Paul@thomsonreuters.com)(+61 3 9286 1419)(Reuters Messaging: sonali.paul.thomsonreuters.com@reuters.net))

Keywords: AUSTRALIA LYNAS/DEBT