Lynas, One of Few Rare Earth Miners Outside of China in Play But There are Risks

Australian rare earths miner Lynas reported a 27% jump in revenue to $101.3 million in Q1 despite a forced shutdown of its Malaysian operations in December. Radioactive waste concerns are clouding $LYC ($LYSCF), who rejected an unsolicited $1.5 billion takeover bid from Wesfarmers.

Australian rare earths miner Lynas reported a 27% jump in revenue to $101.3 million in Q1 despite a forced shutdown of its Malaysian operations in December. Radioactive waste concerns are clouding $LYC ($LYSCF), who rejected an unsolicited $1.5 billion takeover bid from Wesfarmers.

Lynas Rare Earth

Lynas is one of the only rare earths producers outside of China. Rare earth materials arecrucial elements in new-economy products such as mobile phone components, wind turbines and batteries.

Wesfarmers Offer To Buy Lynas

The bid is highly conditional and sent Lynas’ shares 35 per cent higher to $2.10 on the announcement, 

“An investment in Lynas leverages our unique assets and capabilities, including in chemical processing, and will deliver Lynas’ shareholders with an attractive premium and certain cash return,” said Wesfarmers managing director Rob Scott of its first major deal to be announced since spinning off Coles last year.

The deal is dependent on Lynas retaining an operating licence in Malaysia for a “satisfactory period following completion of the transaction”, which is still an uncertainty. Lynas shares plunged last year after the new Malaysian government reviewed its operations and introduced tough new conditions on its licence to operate, including the removal of radioactive residues produced by its processing plant.

The unique nature of Lynas being the largest rare earths producer outside of China and has significant market share has long been promoted as being subject to bidding war for the company, if they can get their environmental house in order. The materials it produces are key ingredients in the manufacture of electric vehicles and other new economy technology including giant wind turbines and cell phones.

Lynas said its board had evaluated the $2.25 per share cash offer for the company “and concluded that it will not engage with Wesfarmers on the terms outlined in the indicative and highly conditional proposal”. “In coming to this conclusion, the board has drawn on the company’s extensive knowledge of stakeholder interests, and current market and operating conditions. It has also consulted with its advisers on the terms of the proposal, and validated its view as to value.”

Mining analyst with CLSA Dylan Kelly said the Wesfarmers bid was “materially undervaluing” Lynas. “We think Lynas is worth at least $2.5 billion,” he told The Age and The Sydney Morning Herald.

Yes the risks, a regulatory cloud around hangs over the 450,000 tonnes of radioactive waste produced by its Malaysian operations since 2013. Lynas says they are still “seeking clarification” on comments earlier this month by Malaysian Prime Minister Mahathir Mohamad, which appeared to solve the problem of the licence pre-condition that Lynas says it cannot meet, that is the removal of the radioactive waste by September 2 of this year.

Mahathir said Lynas, or any potential acquirer would be able to continue to operate in Malaysia if it agreed to extract the radioactive residue from its ore before it reached the country.

However there have been two cabinet meetings since that announcement and Mahathir has failed to clarify his comments, or confirm whether it means Lynas might not need to move the existing mountain of radioactive waste that has been accumulating at it’s processing facility in Kuantan province. 

There has been intense speculation that Malaysia’s newly elected government could close down Lynas’ six-year-old are earth processing plant. The Australian company is the only processor outside of China of the rare earths used in industrial magnets.

Last year Prime Minister Mahathir Mohamad made the point that the committee reviewing the plant was not being directed solely by anti-Lynas members Chairman Fuziah Salleh and Wong Tack. Both have been both long time opponents of Lynas.

“There are other members on the committee. They can give their opinions. It’s not as if they are being dictated by these two people,” the PM  told reporters.

On that announcement shares in Lynas closed 9.9% higher on the Australian Stock Exchange after being up as much as 12% on the day.

A report in Malaysia’s The Star newspaper also wrote of a more conciliatory comments from Fuziah on Friday. Fuziah said that her environmental audit committee acknowledged Lynas and its employees were important stakeholders in the review. She added that the report on behalf of Malaysia’s government would be made transparent. These comments were made earlier in the week.

Fuziah had said earlier that week that the review would focus on the plant’s radioactive waste emissions.

Lynas Map

The LAMP, Kuantan, Malaysia

The Lynas Advanced Materials Plant (LAMP) is one of the largest and most modern rare earths separation plants in the world. The LAMP is designed to treat the Mt Weld concentrate and produce separated Rare Earths Oxide (REO) products for sale to customers in locations including Japan, Europe, China and North America. Lynas operates in Kuantan, Malaysia The LAMP is located in the Gebeng Industrial Estate near Kuantan, Malaysia, close to the Kuantan deep-water port.

The plant is built on a 100 hectare site that is adjacent to established manufacturers of key chemical reagents within the industrial estate, and has access to a skilled labour force and excellent infrastructure including water and electricity, chemical and gas supplies. The plant was designed to comply with the modern safety and environmental practices to support our aim of providing a sustainable supply chain of rare earths.

Lynas is committed to engaging with and being a respected part the local community in Kuantan. We employ more than 600 people from the local community. The LAMP has been designed and built in two phases, with full Phase 2 capacity capable of p​roducing up to 22,000 tonnes per annum of separated REO products. Commissioning of the LAMP started in late 2012. Currently, the most valuable product produced at the LAMP is praseodymium/neodymium, NdPr. From mid-2015, the LAMP has been operating at approximately 75% of its NdPr production capacity, with three out of four SX5 (NdPr and LaCe separation) trains in operation.

There are three steps in the processing of the Mt Weld concentrate:

​1. Cracking and Leaching ​​​Mt Weld concentrate, which is essentially rare earth phosphate mineral, is mixed with concentrated sulphuric acid and cracked at a high temperature to convert the rare earth phosphate minerals to rare earth sulphate. Water is added to the rare earth sulphate in the leaching stage and impurities in the form of iron phosphogypsum are removed. The solution is neutralised to provide rare earth solution as feed to solvent extraction. ​ Mt Weld kilns.pngTwo out of the four 60 metre long gas fired kilns where the rare earth concentrate/acid mixture is “cracked” to become rare earth sulphate suitable for water leaching.​

 ​​2. Solvent Extraction Solvent Extraction (SX) employs two liquid phases (organic and aqueous) and is carried out in liquid-liquid counter current SX trains to progressively separate the rare earths into groups and individual elements. The main products are light rare earths including praseodymium/neodymium – PrNd; cerium – Ce; lanthanum – La; LaCe – lanthanum cerium solutions, and medium/heavy rare earths (samarium, europium, gadolinium – SEG and other Heavy Rare Earths – HRE) solutions.​ SX5 train.png One section of mixer settlers from SX5 train. NdPr is separated from LaCe. Each SX5 train has 110 stages (4 sections). Three out of four SX5 trains are currently in operation.

3. Product Finishing In the final stage of the process, the rare earth elements in the solution are precipitated as solid carbonates or oxalates. Some are then calcined (cooked) to the respective oxides. The LAMP produces NdPr oxide, Ce carbonate, Ce oxide, LaCe carbonate and LaCe oxide, and SEG oxide.

Source: Mining Weekly , Lynas Corp, SMH

From A Sunburnt Country

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