Lynas Rare Earths braces for three months of low or no production at Malaysia plant ahead of appeal

Lynas is staring down the barrel of having no rare earths production at its Malaysian plant for at least three months, as it prepares to meet with the local government next week to fight a potential forced shutdown.

The company on Friday revealed its appeal against conditions on its licence — which ban it from cracking and leaching rare earths at its downstream operations in Kuantan from July 1 — is scheduled to be heard by Malaysian courts next Friday.

The government has expressed concerns about low-level radioactive waste left behind from the cracking and leaching process, demanding Lynas move that process offshore as part of the licence conditions.

Chief executive Amanda Lacaze said Lynas was “very confident” in its grounds for the appeal, highlighting the strong demand for rare earths products outside of China and the economic significance of the plant.

The company’s rare earths materials, which include neodymium and praseodymium, have many applications in the energy transition including in electronics, wind turbines, hybrid and electric vehicles.

“We have four scientific reviews which have consistently found that our operations in Malaysia are safe, they are low risk, they are compliant with all regulations,” Ms Lacaze said on Friday after Lynas posted its production results for the March quarter.

“There is not a single expert review which has ever recommended the closure of any part of the Lynas facility in Malaysia beause simply it is not supported by any scientific evidence.”

Lynas has planned for all outcomes. If its appeal is unsuccessful, the Malaysian facility would be closed in mid-July until it received mixed rare earth carbonate from a new cracking and leaching facility in Kalgoorlie, which would be used as feedstock for downstream processing in Malaysia.

Lynas is racing to finish the $575 million Kalgoorlie facility, targeting first production before the end of June and aiming to ship product to Malaysia around August.

However, it conceded commissioning and ramp up remains “inherently unpredictable”.

“As a result, we are planning for either a complete shutdown or very low production at Lynas Malaysia for at least up to three months, followed by a period of reduced production which will increase as the ramp up to capacity . . . is achieved,” Lynas said.

Ms Lacaze said Lynas planned to run the Malaysia plant until midnight on June 30 “under any scenario”.

She explained the gap between first production in Kalgoorlie and shipping product to Malaysia in August was due to the need to build sufficient stockpiles for shipping.

“We’ve got to have enough material that arrives in Kuantan than when we then start feed on in the receiving area of Kuantan that we have confidence we can continue that,” Ms Lacaze.

“Remember we are operating big chemical plants they do not like to be stopped and started. So we need to have enough inventory before we turn that on for us to be able to confidently continue production.”

She said Lynas had sufficient finished goods inventory in the pipeline to meet the needs of its key customers during the transition.

Lynas finished the March quarter with $1.12 billion in the bank, which Ms Lacaze said gave the company “plenty of firepower” to capture growth opportunities and weather any downside risks.

It reported sales revenue of $237.1 million, down almost 30 per cent from the same time last year, due to an oversupply in the Chinese market which saw a drop in the average selling price.

Lynas averaged $48.30 a kilogram for its products over the period, compared with $64.70/kg last year.

Lynas shares closed 4.75 per cent higher at $6.84.