LYC ASX: Lynas hit with cost blowout on rare earths plant

Lynas Rare Earths blames inflationary pressures, approval delays and deadlines imposed by Malaysian authorities for a big cost blowout on a downstream processing plant under construction in Western Australia.

The cost of building the cracking and leaching plant at Kalgoorlie has blown out to $730 million, up from $575 million, as Lynas runs down the clock to have it up and running by December 31.

Amanda Lacaze says the rush to finish the Kalgoorlie plant was a big factor in the cost blowout. Carla Gottgens

Lynas boss Amanda Lacaze cannot guarantee hitting that deadline, but is confident it is within reach.

The company is pursuing legal action in Malaysia aimed at lifting onerous conditions retrospectively applied to its original operating licence for downstream processing at Kuantan of rare earths mined at Mt Weld in WA.

Ms Lacaze said the rush to finish the Kalgoorlie plant was a big factor in the cost blowout, along with delays in the initial approval process.

She said Lynas had been forced to build the plant in a “ridiculously compressed timeframe” and that working around the clock escalated costs on top of the inflationary pressures that have hit other critical minerals projects in Australia.

Lynas posted full-year net profit of $310.7 million, down from $540.8 million, on lower rare earths prices countering higher production. Revenue fell to $739.3 million from $920 million and EBITDA slipped to $377.7 million from $601.2 million.

The profit and earnings numbers were slightly better than consensus.

Lynas, the world’s biggest supplier of rare earths outside of China, is continuing to withhold a portion of supply from the market in response to the plunge in prices for the key ingredient in wind turbines, electronics and military applications.

The average Chinese domestic price of neodymium and praseodymium (NdPr) slid to $US60.30 a kilogram in the June quarter from $US86.60 ($129.70) a kilogram in the March quarter, and down from $US120.40 a kilogram last year.

Across its range of rare earths oxides, Lynas received an average price of $46.20 a kilogram in 2022-23, down from $60.30 a kilogram last year.

Lynas said rare earths prices in China were improving but only at about “one renminbi a day” amid concerns about the economy and housing sector.

Ms Lacaze bemoaned that Lynas had been handed such a hard deadline to stop cracking and leaching, a process that leaves behind low-level radioactive waste, by Malaysian authorities.

In addition to the cost blowout at Kalgoorlie, Lynas expects about $50 million of pre-commissioning and commissioning costs before first production.

Lynas said it could cover the additional costs from available reserves and without affecting its other growth plans, which include a big expansion of the Mt Weld mine, securing new mines to boost its capacity to produce heavy rare earths and a major downstream processing plant being built in Texas with $US258 million in backing from the US Department of Defence.

Lynas has purchased a 60 hectare site in an existing industrial zone in Seadrift, Texas, where it sees potential to co-operate with near neighbour Dow Chemicals on reagents and infrastructure.

Lynas is on the hunt for a new mine or large tailings stockpiles that are high in heavy rare earths. One of the requirements of the Pentagon is that it can supply heavy rare earths as well as the light rare earth prevalent in its Mt Weld mine.

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