Lynas mulls alternative processing plans as it welcomes Malaysian comments

Lynas says plans to transfer some of its operations to WA are well advanced as it takes aim at Wesfarmers.

Activists hold placards during a demonstration against Australian miner Lynas in front of Malaysia's landmark Petronas Twin Towers in 2011.

Lynas Corp chief executive Amanda Lacaze says the rare earths producer is well advanced in its plans to replicate some of its Malaysian processing operations in Western Australia, with the company’s key Japanese financier also pledging its support for the company.

Ms Lacaze this morning also took another shot at the company’s suitor Wesfarmers, warning that “the rare earths market is littered with examples of private equity guys who thought they could build and run a rare earths business”.

Lynas (LYC) has been under immense pressure from Malaysian authorities to find an alternative solution to its current processing operations in the country, and in particular the mildly radioactive waste that processing generates.

On Friday, Malaysian Prime Minister Mahathir Mohamad said that Lynas could continue with its operations if the early stage of processing — which generates the contentious waste — was carried out in Australia.

Wesfarmers has been talking to the Malaysian government about such a plan since it revealed it had approached Lynas with a conditional $1.5 billion, $2.25 a share takeover offer.

This morning, Lynas said it had been working on similar plans for several months and saw value in moving those early processing stages closer to its Mt Weld rare earths mine in WA.

Speaking to investors this morning, Ms Lacaze declined to expand on key details of the plan — such as its scale, cost, location and timetable — but stressed that only Lynas had the skills to deliver it.

“The same work we’ve already done means we are very well placed to deal with any change in Malaysian government policy. If we do need to organise our operations, we are confident,” she said.

“That confidence is based on our experience, our proven performance, and our company-owned and developed IP, that we can do it faster, cheaper and with less risk than any other company.”

In a clear swipe at Wesfarmers (WES), Ms Lacaze noted the previous failures by private equity groups trying to enter the rare earths space, citing the failure of MolyCorp and its Mountain Pass assets in the United States.

She also said that its Japanese partners, Sojitz Corporation and Japan Australia Rare Earths, had affirmed their support for the company and the management team amid reports the company could face difficulty in raising funds to back an Australian plant.

“Our Japanese partners continue to be very supportive and have publicly stated that support for our company, our management and our continued growth,” she said.

Funding for the plan, she said, could come from Lynas’ existing cash flows but the company would look at debt or even equity solutions.

Shares in Lynas were 1.9 per cent lower to $2.07 in afternoon trade, putting them on track for their lowest close since the Wesfarmers approach was first revealed.

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