China-US rare earths dispute lifts Lynas
Lynas shares have leapt a further 8pc on a looming Chinese ban on rare earths exports to the US.
Shares in rare earths producer Lynas Corp have surged another 8 per cent in early trade after soaring more than 14 per cent yesterday after it emerged China is looking to ban the export of the crucial materials to the US as part of the deteriorating trade relationship between the two nations.
Yesterday’s 14.4 per cent jump in Lynas to $2.26 a share — its highest level since late last year — came as the company used its investor day to flesh out plans for a doubling of production.
The company, which earlier this year rebuffed a $1.5 billion, $2.25 per share takeover offer from Western Australian conglomerate Wesfarmers, flagged a proposed $500 million expansion of its operations and processing facilities.
The plans would lift its production of neodymium and praseodymium to 10,500 tonnes a year, up from the 5444 tonnes it produced in financial 2018.
But the more immediate boost appeared to come from reports suggesting China would suspend shipments of rare earths to the US.
China dominates the global market for rare earths — which are used in a host of hi-tech products including smart phones, electric cars and weaponry. Lynas is the biggest producer of rare earths outside China.
Reports of the latest supply disruptions to the US came just hours after Lynas announced a memorandum of understanding with Blue Line Corp to develop a downstream rare earths processing plant in Texas.
Speaking at the investor day yesterday, Lynas vice-president of sales and marketing Pol Le Roux said the latest reports reflected why Lynas was looking to build a processing presence in the US.
“Of course it opens the door for us,” Mr Le Roux said of the trade dispute disruptions.
“All American companies are extremely concerned about their rare earths supply. In the last year we have really concluded a number of contracts for US companies and the move to the US is part of the answer to that.”
The downstream processing flagged for the US will allow Lynas to produce two of its key materials, dysprosium and terbium, as stand-alone products. Dysprosium fetches around $US230 a kilogram and terbium $US450 per kilogram as stand-alone products, multiples higher than Lynas currently receives for the combined materials.
The company also fleshed out details about its plans to tackle its current regulatory headaches in Malaysia, where it operates a facility that processes ore from its Mt Weld mine in Western Australia into rare earths products.
Members of the Malaysian government have flagged concerns about the environmental impact of the plant and there is ongoing uncertainty about Lynas’s ability to operate its Malaysian plant beyond the expiration of its current permit in September.
Lynas yesterday confirmed it intended to carry out the early stage “cracking and leaching” processing — which generates the mildly radioactive material that has become a magnet for environmental controversy in Malaysia — in Western Australia near the Mt Weld mine itself.
Lynas CEO Amanda Lacaze told The Australian the processing footprint spelled out yesterday, which would involve various facilities in Western Australia, Malaysia and the US, was the logical one for the company.
“This makes sense irrespective of any external pressures,” Ms Lacaze said.
“It makes sense for us to do our upstream processing close to the resource and our downstream processing closer to the customer.”
In other news, Lynas has withdrawn its Sc2O3 in concentrate figures for its 2025 project following ASX queries about a slide presented at its investor say presentation yesterday.
In a statement to the market this morning, the company said date and forecast rates of concentrate production included in yesterday’s presentation were not material and would be withdrawn.
Clarifying to the market today, Lynas said those figures were “opportunities” for the future and they were not relied on for the 2025 project presentation.
“In any event, those figures were not intended to be read as mineral resource or ore reserve figures and accordingly they should not be relied on and are withdrawn,” Lynas said.
Shares in the company have surged another 8 per cent to $2.44 in early trade after surging 14.4 per cent yesterday before entering a trading halt ahead of this morning’s announcement.