Lynas Corporation, the publicly-listed Australia rare-earths miner that is the only producer of these strategically important metals outside of China, is in the money this week. The company has announced a fully underwritten AUD $425 million equity raise, of which $211.6 million will be issued for institutional placement and the remaining $213.7 million through an entitlement offer at $2.30 per share.

The proceeds of the capital raise will be put toward a planned $500 million expansion of Lynas’ Kalgoorlie rare earths processing facility. Lynas hopes to boost the plant’s production capacity of neodymium and praseodymium—manufacturing components in the permanent magnets used in defense, aerospace and electronics equipment—by 50% by 2025.

Kalgoorlie

Kalgoorlie-Boulder is located in Australia’s mineral-rich Goldfields-Esperance region, site of the Super Pit open cut mine, which has long been a major center for gold and nickel mining operations. The town is also becoming increasingly touted as a key site for the processing of rare earths mined from the Mount Weld Central Lanthanide Deposit (CLD) in Western Australia, site of one of the highest-grade deposits of rare-earth metals in the world, which Lynas acquired from Rio Tinto in 2001, and expanded with strategic help in 2011 from Tokyo-based sōgō shōsha, Sojitz Corporation.

In December 2019, Lynas announced that its new cracking and leaching plant for rare earth materials processing would be located in Kalgoorlie, due to its proximity to the mining hubs, as well as to Fremantle Port, which handles container trade between Western Australia and Asia-Pacific markets including Malaysia, where Lynas owns and operates a separation plant near Kuantan.

While these development measures are aimed at hedging geopolitical risk by diversifying supply chains and cutting reliance on China, some industry analysts who spoke with Nikkei Asian Review this week say that going all-in with Lynas is not without complications.

Like what?

The big one is cost. Lynas-owned mines reportedly produce ores containing lower concentrations of rare-earth metals than those mined in China. More raw materials must be mined from a Lynas pit in order to isolate the same amount of desired earth metals, adding to extraction costs.

“It’s not profitable,” Yutaka Kawasaki of metals trading firm Samwood Co. Ltd told Nikkei Asian Review.

Pentagon Deal

News of Lynas’s latest equity raise comes after the July 27 signing of a contract between Lynas and the U.S. Department of Defense, along with its U.S. partner, specialty chemicals manufacturer Blue Line Corporation, for Phase I work on a Heavy Rare Earth separation facility in Texas. This week’s equity raise in Australia will not be used to fund the expansion of the Texas facility.

Last summer, Lynas CEO and Managing Director Amanda Lacaze said that the company’s U.S. operations would prioritize the needs of U.S. defense.

Upon formally signing the DoD contract earlier this summer, Lacaze comment: “We are very pleased to have signed a contract with the DoD for this Phase I work. 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. We look forward to working with the DoD to progress this project.”

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