Lynas Rare Earths results overshadowed by a fresh blowout in its plant costs

Lynas’ results have been overshadowed by a 45 per cent cost blowout at its Kalgoorlie cracking and leaching plant.

The concentration plant for rare earth ore near the Mount Weld mine in Western Australia.

Lynas Rare Earths has confirmed it is facing a $230m cost blowout at its Kalgoorlie cracking and leaching plant, and that the company is in a race to get the facility commissioned by the end of the year.

Lynas released its annual financial results on Tuesday, It posted a $310.7m net profit, down from $540.8m last financial year. The rare earth producer booked $739.3m in revenue, down from $920m, and recorded EBIT of $315.5m and EBITDA of $377.7m. Lynas finished the financial year holding $1.01bn in cash.

Revenue and earnings fell on lower rare earth oxide prices, the company said, with Lynas receiving an average price of $46.20 a kilogram for its basket of products, down from $60.30 a kilogram the previous year. But the new blowout in the costs at Kalgoorlie overshadowed the result, with managing director Amanda Lacaze telling shareholders the company now faced a total cost of $730m – plus about $50m in commissioning costs – to get the cracking and leaching plant finished.

That is $230m more than initial estimates of $500m, and a $155m boost on the company’s last estimate. Lynas faces a pressing need to get the plant up and running as the company faces the loss of its licence to operate the equivalent plant in Malaysia from January 1.

The company is still appealing that decision through the Malaysian courts, but has no guarantee of success.

Ms Lacaze said on Tuesday the urgency around the plant’s construction was a major factor in the blowout, along with the broader cost inflation in WA’s tight resources sector.

“The new forecast includes costs associated with additional resources mobilised to accelerate construction activities and contractor management challenges due to the accelerated schedule,” she said. “Key areas where significant cost increases have been incurred include structural, mechanical, piping and electrical works, concrete, and dam earthworks.”

Lynas shares closed up 22c at $7.17 on Tuesday.

Originally published as Lynas Rare Earths results overshadowed by a fresh blowout in its plant costs