Lynas Jumps Double Digits on Small Malaysian Win

Lynas shares surged 12% yesterday after Malaysian authorities gave Lynas a six-month extension to allow it to continue operating its rare earths separation plant.

But the company wants a current agreement covering the plant to be upheld.

The news saw the shares close at $7.37 on the ASX on Monday.

Lynas said in an early statement to the ASX that it had been advised of a variation to the Malaysian operating licence conditions of its wholly-owned subsidiary Lynas Malaysia to import and process lanthanide concentrate for another six months to January 1, 2024.

“This change has been made by the Minister of the Ministry of Science, Technology and Innovation (MOSTI) in response to the appeals filed by Lynas under the Atomic Energy Licence Act 1984 (as announced on 16 and 24 February 2023). The MOSTI Minister has otherwise dismissed Lynas’ appeals.”

Lynas said the variation allows the Lynas Malaysia cracking and leaching plant to continue to operate until for another six months and will remove the requirement for a shutdown at the plant prior to January 1 next year.

Lynas said it had “applied to the MOSTI Minister for the removal of the conditions which limit operations at the Lynas Malaysia facility as they represent a significant variation from the conditions under which Lynas made the initial decision to invest in Malaysia.”

“Further, the conditions do not follow the recommendations of the Malaysian Government’s 2018 Executive Review Committee report on Lynas Malaysia’s operations, the Atomic Energy Licencing Board’s own audits of Lynas Malaysia’s operations or any of the 3 prior independent expert scientific reviews of Lynas Malaysia’s operations.

“Malaysia offers legal avenues for the review of the licence conditions. Lynas has made significant investments in its Malaysian facility and will seek review through these processes in respect of the conditions to ensure that Lynas is treated fairly and equitably as a Foreign Direct Investor and as a significant employer and contributor to the Malaysian economy.”

The Lynas rare earths refinery in Malaysia is the largest outside China, but has been hampered by environmental and political opposition.

The government issued a fresh three-year license to Lynas’ plant based in the state of Pahang in February, with one of the conditions requiring the need to move “cracking and leaching” of lanthanide concentrate to an area outside of Malaysia by July 1.

Malaysian authorities claim the business unit generates radioactive waste.

Lynas said in late April in its quarterly report that it had been preparing for a three-month shutdown later this year if the Malaysian decision went against it.

The company’s Kalgoorlie rare earths processing facility is entering its final phase of construction with dry commissioning having also commenced. Raw material ‘feed on’ is expected to commence at Kalgoorlie in the June quarter.

The progress of the Kalgoorlie plant is key to solving the Malaysian problems where a forced shutdown of the cracking and leaching component of the Malaysia facility looms.

Lynas aims to rectify this shutdown by using MREC (a different type of rare earth raw material) from the Kalgoorlie plant as feedstock for downstream processing.

“As indicated in previous reports, Lynas has been planning for this for some time with a key focus on inventory management to assist in meeting our key customers’ requirements during any transitional period of reduced production,” Lynas CEO Amanda Lacaze said in the March quarterly report released Wednesday.

“Notwithstanding these actions, if the Lynas Malaysia cracking and leaching plant is required to shut down from 1st July 2023, the whole Lynas’ Malaysia facility will shut down in mid-July until the new MREC feedstock is received.

“In light of the current target date for feed on at the Kalgoorlie Facility (Q4 FY23), the first MREC from Kalgoorlie will likely be received at Lynas Malaysia in about August 2023.”

But Lacaze said the commissioning and ramp up of the Kalgoorlie plant remains “inherently unpredictable” and Lynas has altered its expectations accordingly.

“We are planning for either a complete shutdown or very low production at Lynas Malaysia for at least up to three months, followed by a period of reduced production which will increase as the ramp up to capacity of the Kalgoorlie rare earths processing facility is achieved.”

The company said its Mount Weld mine produced sufficient concentrate to feed the Lynas Malaysia plant and, at the same time, build inventory ready for feed-on at the new Kalgoorlie Rare Earths Processing Facility in the next month or so.

The company said total rare earth oxide (TREO) production dropped 12% to 4,348 tonnes in the three months to March from 4,945 tonnes produced in the same period in 2022 thanks to a shortage of a key acid which restricted output of lanthanum and cerium.

Despite this hiccup, sales revenue increased hit $237.1 million in the latest quarter and is up 45% since the start of the 2022-23 financial year last July. But the March figure was $90 million lower than the strong $327 million reported a year ago.

“The demand for Lynas’ NdPr product family from customers outside China remained very strong during the quarter,” Lynas commented in the quarterly report.

“This, together with excellent NdPr production volumes, resulted in strong sales performance in the quarter despite a decrease in the average selling price.”

Lynas reported an average selling price of $A48.3/kg in the March quarter, down sharply from the $A64.7 a kilogram a year ago.

Lynas’s cash and liquids position improved dramatically compared with a year ago – $A1.11 billion against $A768 million. That’s more than enough to help the company handle any delays at Kalgoorlie or in Malaysia.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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