Lynas in Pentagon funding breakthrough

Lynas has scored a big win over Republican foreign policy hawks who tried to shoot down Pentagon backing for the company’s plans to build a heavy rare earths separation plant in Texas (reports The Australian Financial Review).
31st July 2020
Resources Rising Stars

Lynas has scored a big win over Republican foreign policy hawks who tried to shoot down Pentagon backing for the company’s plans to build a heavy rare earths separation plant in Texas (reports The Australian Financial Review).

Amanda Lacaze-led Lynas and the US Department of Defence (DoD) have signed off on a contract for work toward the plant, which Lynas intends to build in partnership with Texas-based Blue Line Corporation.

The plant, which analysts expect to cost about $US50 million ($70 million), is expected to break China’s stranglehold on commercial-scale separation of heavy rare earths materials that are essential in military applications.

Lynas announced the contract breakthrough on Monday, just days after refusing to speculate on an email from a DoD official which said an independent review had cleared funding for the Lynas-Blue Line plant.

The email said the review found Pentagon funding for the plant was in the best interests of the US government and would go ahead.

The plant will separate heavy rare concentrate produced via Lynas’ Mount Weld mine in Western Australia and its light rare earth separation facilities in Malaysia.

Lynas said the phase one funding from the DoD would be put towards a detailed market and strategy study plus detailed planning and design work for the heavy rare earth separation plant. It expects the work to be completed in this financial year.

The Lynas share price had jumped almost 10 per cent to $2.38 by late on Monday, its highest level in more than six months.

The phase one funding is expected to open the door to more financial support for what the Pentagon views as a strategically important project after China signalled its willingness to cut off rare earths supply to the US.

China moved this month to halt supply to US arms producer Lockheed Martin in a development Ms Lacaze said would put all Western users of rare earths on high alert.

Lynas is the world’s biggest non-China producer of light rare earths. It sells heavy rare earths concentrate to China, including to a major separation plant visited by President Xi Jinping last year in what was seen as a thinly veiled threat to the US.

DoD funding for the Lynas plant came under threat in May when it faced a backlash from a powerful group of Republican Senators who raised concerns about large parts of Lynas’ supply chain being based in Australia and Malaysia.

Texas Senator Ted Cruz, a 2016 presidential candidate, Wyoming Senator Mike Enzi and others were among those who lobbied for DoD to reconsider funding the Lynas project.

Ms Lacaze said the company looked forward to working with the DoD to build the plant near San Antonio, Texas, where privately owned specialist chemical procurement company Blueline is based.

“We are very pleased to have signed a contract with the DoD for this phase one work,” she said.

“Heavy rare earths are essential for the high performance magnets used in electric motors, and Lynas has the feedstock, intellectual property, and track record to deliver a heavy rare earths facility in a timely and low risk manner.”

In a note to clients, Ord Minnett analyst Dylan Kelly said the signing of the contract should come as no surprise to investors given recent geopolitical events, including the tit-for-tat consulate closures by the US and China.

 

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