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Soaring rare earths prices ease Lynas’ water problems

Peter Ker
Peter KerResources reporter

Thriving miner Lynas will change the way it processes rare earths in Malaysia to ensure its output is not hampered by an unreliable water supplier.

Another rise in prices for rare earths helped to add $197.2 million to Lynas cash balance in the past three months despite production volumes slumping 26 per cent below levels achieved in January-March.

The reduced production volumes stemmed from a familiar problem; Lynas’ Malaysian water supplier failed to deliver a regular and constant supply to the processing plant in Kuantan province where Lynas turns Australian ore into the separated elements needed for industrial magnets.

Chief executive Amanda Lacaze told investors on Monday morning the water disruptions in recent months were “so significant” production was brought to a halt on occasions.

“The frequency and severity of the outages this quarter necessitated several partial or complete temporary production halts which affected production volumes,” Lynas said in a statement to the ASX.

“Our team has now designed a process modification with the objective of decreasing fresh water consumption by 40 per cent.”

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The process modification will be introduced before the end of the year, but Ms Lacaze warned those on an investor call on Monday that it was not a complete solution for its water problems.

“Hopefully that will give us further protection, but frankly if there is no water coming through the pipes and there’s no water coming out from the sky it can be very difficult, even with the best recycling technologies in place,” she said.

Lynas is the only major producer of separated rare earths outside China and the slump in production volumes likely helped boost the average price that Lynas received for its product.

Lynas’s average selling price in April-June was $US79.2 per kilogram; almost 23 per cent higher than that achieved in January-March and the seventh consecutive quarter of higher prices.

The $US79.2 per kilogram received in the past three months was more than double the $US39.1 per kilogram Lynas got in the year-earlier period, and more than four times the average selling price achieved between July-September 2020.

Lynas had $965.6 million of cash on hand at June 30, meaning it is well-placed to fund construction of a new rare earths separation plant in Texas after getting $US120 million ($176 million) of US government funding support for the project.

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US support for the Texas project is part of efforts to reduce reliance on Chinese supply of rare earths like Neodymium, Praseodymium, Terbium and Dysprosium.

Rare earths are processed into the industrial magnets that are required for the manufacturing of both traditional petrol-powered cars and electric vehicles.

The magnets are also crucial for defence applications like drones and clean energy infrastructure like wind turbines.

Lynas shares were as low as $1.26 in March 2020 but have traded above $8 in recent days. On Monday, they traded 2.5 per cent firmer at $8.25 at 10.30am AEST.

Peter Ker covers resource companies, based in Melbourne. Connect with Peter on Twitter. Email Peter at pker@afr.com

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