Lynas Starts to Shift the REE Balance

Lynas Corp has no doubt been one of the headline leaders in February. After a protracted legal ordeal to confront environmental activists, at the end of February, Lynas started producing rare earth products at its LAMP processing plant in Malaysia. Lynas is expected to ramp up production by the second quarter of 2013 at a rate of 11,000 tons per year. The start of production and the preparations for the first official shipment have shifted have officially shifted Lynas’ mode from development to production. This shift is reflected in CEO Nick Curtis’ decision to step down from his chief executive role to remain as Chairman. He will be replaced by Eric Noyrez at the end of March and whereas the news may appear as a bombshell, the change at the executive floor reflects a planned transition and Lynas’ official switch from development to production. Indeed, Mr. Curtis, who will remain at Lynas as non-executive Chairman and who has led the company through a particularly challenging period, will leave on a high note in the wake of the start of production announcement. Eric Noyrez, , has extensive experience in chemical processing companies having held executive positions at Rhodia Group and Shell. Many will recall that Rhodia owns a rare earth processing facility in La Rochelle, France.

Lynas completed its initial commercial product samples, en route to nominal Phase 1 capacity (which is expected before Q3 2013).  Lynas also announced that it would receive an AUD$15.2 million rebate payment from the Australian Taxation Office (for R&D expenditures generated in 2012) in March. Nevertheless, rare earths prices continued to suffer in February, reflecting the trend from January. Nevertheless, the scenario is more complex.  Lower prices were seen in praseodymium oxide, yttrium, neodymium oxide, terbium oxide, rare earth carbonate, dysprosium oxide and europium oxide.  The remaining metals in the index actually managed to post gains for the month with neodymium, lanthanum oxide, and praseodymium neodymium leading the list of gainers.

                 

A combination of new supply and weaker domestic demand out of China is being viewed as the reason for the falling Rare Earths prices but it is important to look at individual examples in the metals index because these negative moves are not seen in all areas.  Export numbers for Chinese rare earth products have been the subject of debate (as different sources have reported different figures and Hong Po’s recent articles have highlighted some recent numbers), but all of the available data suggests that increased on-stream supply continues.

Chinese producer Rare Earths Global (LSE:REG) released a statement saying it is unlikely 2012 profit forecasts will be met, and that “normalized” losses will be seen on broader downside price changes in the rare earths market.  The company cited rapid industry changes and governmental uncertainties (the election of a new Chinese leadership body, changing statements from the Ministry of Commerce, and a recent white paper on rare earths).  Rare Earths Global said the added uncertainty is creating major delays for the reception of its production quota (an export quota was not received in 2012).

These factors are seen inhibiting operations in the company’s trading divisions and separation plant.  Rare Earths Global explained it is open to the possibility of joint ventures and believes demand for rare earths oxides will rise along with increased regulation and control of production. Meanwhile, Great Western Minerals (TSXV: GWG | OTCQX: GWMGF) entered its commercial production phase at its Less Common Metals subsidiary, with confirmation that specialty alloys have been sold to three existing clients.  The program is set to ramp up production with its second strip casting furnace before the end of the current quarter.   Tasman Metals (TSXV:TSM | NYSE MKT: TAS) released information relating to its Olserum heavy rare earth project in Sweden, saying the resource comes in at 4.5 million tonnes grading 0.6% TREO, with an inferred resource of 3.3 million tonnes grading 0.63% TREO (both with a 0.4% TREO cut-off).


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