Boost for rare earths as lithium miners reveal big losses

Andrew Forrest-owned Wyloo unveils a deal to take control of a big rare earth project.

Andrew Forrest-owned Wyloo has unveiled a deal to take control of a stalling rare earth project. Picture: Matt Jelonek/AAP Image

Andrew Forrest-owned Wyloo has unveiled a deal to take control of a stalling rare earth project on a bittersweet day for Australia’s critical metals sector.

Wyloo, which controls the Forrest family’s interests in nickel and gold mining, will form a joint venture with Hastings Technology Metals to develop the Yangibana rare earths and niobium project in WA.

ASX-listed rare earths stocks Lynas and Arafura, both backed by Gina Rinehart, jumped on Thursday amid reports China was moving to tighten its control of supply chains.

Bloomberg reported China plans to prohibit non-state owned companies from mining rare earths in its latest strategy in a looming trade war with the US.

The boost for rare earths stocks came as lithium producers Pilbara Minerals and IGO revealed heavy losses from the prolonged downturn in prices for the battery-making ingredient.

Pure play lithium miner PLS slumped to a $69m first half loss, while IGO reported a loss of $782.1m, including its share of a $525m impairment on a lithium hydroxide plant owned in partnership with China’s Tianqi.

The WA hydroxide plant, the first of its kind built outside China, faces an uncertain future and has never operated at anywhere near nameplate capacity in a sobering reminder of challenges Australia’s critical minerals miners have faced in trying to move downstream.

The PLS loss came after the average price it received spodumene concentrate with 5.3 per cent lithium produced at its flagship Pilgangoora mine fell to $US688 a tonne, down from $US1645 a tonne a year ago.

The rare earths sector has also been hit by lower premiums, with industry players like Iluka Resources boss Tom O’Leary accusing China of price manipulation.

The deal with Hastings also gives Wyloo a 19.9 per cent stake in Toronto-listed Neo Performance Materials, which uses rare earths oxides in the production of permanent magnets found in electric vehicles, wind turbines, electronics and the defence industry.

In return for receiving a 60 per cent stake in Yangibana and the Neo shares from Hastings, Wyloo has agreed to cancel debt in the form of exchangeable notes that would have had a face value of about $220m by the time they matured in October.

Wyloo gave Hastings some breathing space last November when it withdrew a debt default notice that threatened to push the ASX battler into insolvency.

The default notice was issued after Wyloo clashed with Hastings chairman Charles Lew over a $5m loan that would have given another of his companies security over a Hastings, a hydrometallurgical plant held in long term storage. The loan was eventually issued on an unsecured basis.

Hastings’ price tag for developing Yangibana was $474m, with some $158m of that spent up until December 31.

Wyloo will take the reins as manager of the project and has an option to increase its stake to 70 per cent. Hastings has earmarked a site an Onslow in WA and an option in Saudi Arabia for any move into downstream processing of rare earths.

Wyloo chief executive Luca Giacovazzi said it was an exciting time to be a major partner in a multi-decade critical minerals project.

“Yangibana is one of the most advanced rare earths projects in Australia and will become a globally significant source of NdPr (neodymium and praseodymium), a critical component in the manufacture of permanent magnets, as well as a producer of niobium and other by-products critical to the energy transition,” he said.

Originally published as Boost for rare earths as lithium miners reveal big losses