Lynas fails to get Malaysian approval for higher processing limit, shares slide

Rare earth production line at Lynas’ plant in Kuantan, Malaysia. (Image taken from Lynas’ presentation.)

Australian rare earths miner Lynas Corp Ltd said on Tuesday it was unsuccessful in securing approval from a Malaysian regulator to increase its lanthanide concentrate processing limit for 2019.

Shares of Lynas fell as much as 5.8% after the announcement, its worst slump since Aug. 23. By 0120 GMT, the shares pared losses to trade at A$2.50, down 3.1%.

As a result of the regulator’s decision, the miner’s total neodymium and praseodymium (NdPr) production for calendar year 2019 will be similar to that of 2018, it said, as previously warned.

Lynas stands to gain from a push by the United States to increase its rare earths capabilities to secure stable supply of the specialised material

The company had mined NdPr at reduced rates during the second half of 2019 at its plant in Kuantan, Malaysia, awaiting approval from the government to raise its processing limit.

NdPr is a key element in rare-earth magnets needed in the motors and generators of electric and hybrid vehicles, and wind turbines.

Andrew White, resources analyst at Curran & Co, believed that while the news was negative, the miner’s profitability may not take a significant hit, given the array of other factors playing a role in Lynas’ fortunes.

Earlier this month, Lynas said it would submit a tender in response to the U.S. Department of Defense’s call for proposals to build a heavy rare earths separation plant in the United States.

Lynas stands to gain from a push by the United States to increase its rare earths capabilities to secure stable supply of the specialised material, amid a trade dispute with China.

Concerns that China, the world’s largest rare earths producer, could use its supplies as a bargaining chip in its trade war with the United States has led to some support in prices of the material.

“It will be interesting to see if China responds in any way to the U.S. military’s efforts in supporting outside-China production. If that happens then you could see some potential movement in commodity prices,” White said.

He also noted that Lynas’ profitability depends heavily on the price of the commodity in the new year, which has improved in recent weeks.

Production plays a slightly smaller role in comparison, he said.

Lynas said the regulator had asked the company for additional information in order to reconsider its application.

The processing limit resets on Jan. 1 each year, and the miner said it intends to reapply for an increase in the next calendar year.

(By Rashmi Ashok and Nikhil Subba; Editing by Maju Samuel and Jacqueline Wong)

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