Lynas Rare Earths only supplied ‘key’ customers as water shortage hit output
Lynas Rare Earths is facing a $75m blowout in the cost of its Kalgoorlie cracking and leaching plant, as water shortages in Malaysia again hit its rare earths output.
Lynas Rare Earths is facing a $75m blowout in the cost of its Kalgoorlie cracking and leaching plant, as water shortages in Malaysia again hit its output, with the company recording a 33 per cent drop in its key rare earth product in the quarter.
Lynas’s Malaysian refinery produced 1045 tonnes of neodymium and praseodymium (NdPR) in the September quarter, down from 1579 tonnes in the June period after the company lost 16 days of production because the plant had no water.
“A catastrophic equipment failure experienced by the local water supplier to our Malaysian facility resulted in approximately 16 days of lost production during the quarter,” Lynas chief executive Amanda Lacaze said.
“Mitigating strategies included sourcing water from alternative local sources and trucked water. As a result, quarterly production of 1045 tonnes ready for sale production volume of NdPr and sales revenue of $163.8m was achieved.”
Lynas said it had been forced to supply only “key customers” because of the drastic fall in its output, with output expected to recover in the current quarter as its water supply had now been restored to normal levels.
Its quarterly revenue was also hit by a sharp fall in pricing during the quarter, after Chinese authorities flagged a 25 per cent increase in production quotas at state-owned miners.
Lynas does not disclose the price it receives for specific products but says the average selling price for a mixed basket of rare earth oxides tumbled more than 37 per cent compared to the June quarter, to $49.30 a kilogram.
Lynas said that average price was partly a reflection of market concerns about the lift in Chinese supply, but was also the result of the sale of several large orders of a lower value product, cerium.
“Our NdPr customers (mostly outside China) continue to forecast very strong demand and we remain focused on overcoming the effects of the unpredictable water supply to recover our maximum production rate,” it said.
Lynas has also been hit with a 15 per cent rise in the likely cost of building a processing plant in Kalgoorlie, forced to pay a premium to ensure parts of the job are finished on time.
The plant was initially expected to cost $500m but Ms Lacaze said logistics and construction costs had increased since work started, although it had managed to keep equipment costs in line with the original budget.
“The Kalgoorlie project now includes the additional scope of works to implement the industry-first rare earth carbonate refining process which received co-funding through the Australian federal government’s Modern Manufacturing Initiative and upgrades to certain equipment and infrastructure to allow for future capacity expansion at Kalgoorlie,” she said.
Lynas shares closed up 44c to $8.34 on Thursday.
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