Caixin
Dec 13, 2019 05:28 PM
BUSINESS & TECH

U.S. to Fund Australia's Lynas Rare Earths Processing Plant

President Trump said it was essential for U.S. defense to have domestic capability to separate and process light and heavy rare earth materials. Photo: VCG
President Trump said it was essential for U.S. defense to have domestic capability to separate and process light and heavy rare earth materials. Photo: VCG

(AFR) — The United States military is poised to put its money where its mouth is as Lynas Corp. Ltd. looks to build a new heavy rare earths processing plant in Texas.

The U.S. Department of Defense has called for tenders as it looks to pour money into new on-shore processing plants, with Lynas considered a frontrunner given its track record in rare earths production, ownership of the world-class Mount Weld mine in Western Australia and existing joint venture plans in the U.S.

Lynas said it expected to lodge a compliant tender after reports the U.S. military will meet the majority of the cost of building a processing plant as well as cover most operating costs, and potentially fund more than one project in a sign of how determined it is to reduce reliance on supply from China.

It is understood the source of the raw rare earths material will be a factor in deciding the tender, putting Lynas in the box seat for what is touted as the US military's first investment in large-scale rare earths production since World War II’s Manhattan Project to build the atomic bomb.

The company's share price has jumped sharply this week, from AU$2.10 ($1.45) on Monday to AU$2.56 in late trade on Friday, with the window to lodge tenders set to close on Monday.

Rare earths materials are used in everything from night vision goggles to cruise missiles and are also in increasing demand for uses in electric vehicles, wind turbines, automation, electronics and oil and gas refining.

The Australian Financial Review reported in May that Lynas was likely to have the might of the U.S. military on its side as it looked to develop rare earths processing capacity near San Antonio, where its joint venture partner Blue Line, a privately-owned specialist chemical procurement company, is based.

Under a proposed joint venture, Lynas plans to send heavy rare earths material to Texas for separation into high-value dysprosium and terbium.

The company believes it can fill a hole in the US supply chain, in what Lynas managing director Amanda Lacaze has said is a move likely to be welcomed by the Department of Defence.

“We are very pleased that governments around the world are recognising the importance of rare earths," she said on Friday.

"We have previously indicated our intent to expand our industrial footprint to the US and we are confident that we have the feedstock and the technical know-how to create a viable heavy rare earths separation business."

Dylan Kelly, a mining analyst at Australian wealth management group Ord Minnett, said the tender process appeared a near one-horse race based on Lynas’ capacity to supply feedstock and its experience and expertise in rare earths processing.

Kelly said the processing plant could be built at an existing Blue Line site for about $30 million with the US military picking up most of the bill.

U.S. President Donald Trump raised the issue of rare earths in discussions with former Australian Prime Minister Malcolm Turnbull as far back as February 2018, and the U.S. Department of Defense has since increased its engagement with Australian rare earths companies.

Lynas is the world's largest producer of rare earths material outside China. However, it does not have capacity to separate heavy rare earths into dysprosium and terbium.

The company currently supplies heavy rare earths mined at Mount Weld and refined at its AU$1 billion processing plant in Malaysia to China, where it is separated into what have emerged as key ingredients in military applications.

The Lynas-Blue Line joint venture will focus on heavy rare earths separation, and may also include light rare earths separation, including neodymium, praseodymium and lanthanum.

Chinese President Xi Jinping raised fears about cutting off supply to the U.S. earlier this year at a flash point in the trade war between the two global heavyweights.

Trump made developing non-Chinese supply chains a top priority in July when he cleared the way for the Department of Defense to fund rare earth technology and resources.

Trump said it was essential for U.S. defense to have domestic capability to separate and process light and heavy rare earth materials, as well as to make permanent magnets.

This story was first published in The Australian Financial Review.

Contact editor Yang Ge (geyang@caixin.com)

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