Lynas on track in the US despite Department of Defence delays

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Lynas on track in the US despite Department of Defence delays

By Colin Kruger

Rare earths group Lynas Corp said its plans for expansion in the US are well advanced and remain unaffected by a political debate, which has held up potential project funding from the US Department of Defence (DoD).

Lynas chief executive Amanda Lacaze said work on its planned rare earths processing joint venture in Texas had continued despite the coronavirus pandemic and the project didn't explicitly need the funding from the department.

"We are very well progressed," she said, adding that Lynas has never been reliant on the timing of the US DoD's decision.

US expansion plans are well advanced, says Lynas CEO Amanda Lacaze.

US expansion plans are well advanced, says Lynas CEO Amanda Lacaze. Credit: Christopher Pearce

"We are very confident that we have the resource, and we have the skills and knowledge to do this. And we’re also pretty confident we are the only ones who can put our hands up and say that.”

Lynas announced its expansion plans in May last year, well before the department announced it will start funding projects as a way of securing the US supply chain of rare earths, which are used extensively in smartphones, electric vehicles and medical equipment.

Heavy rare earths are more specialised and tend to be used in military applications and some US politicians, led by US Republican Senator and former presidential candidate Ted Cruz, are agitating to ensure that the entire supply chain for rare earths remains in US hands.

However, Ms Lacaze said Lynas' offered the DoD the only viable non-Chinese supply chain alternative for the material.

“Our market position at present is as the only non-Chinese separator of light rare earths, and certainly it has always been part of our growth path to be the only non-Chinese separator of heavy rare earths as well,” she said.

On Friday, Lynas said it "remains one of two companies selected for Phase 1 of the project, however, Lynas understands that the US government’s progress on Phase 1 is currently on hold until political issues are addressed."

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Reuters later reported that the DoD- also known as the Pentagon - informed Lynas and another successful applicant for rare earth funding, MP Materials, that the decision had been "put on hold until further research can be conducted."

The news has barely affected Lynas' share price. It jumped more than 20 per cent last week to a high of $2.11 as three brokers initiated coverage of the stock. Another broker, Ords Minnett, upgraded its price target to $4.90.

Canaccord Genuity was one of the 3 brokers initiating coverage. Canaccord's $3.80 price target with a macro view that a post-COVID-19 world could see a recovery in industries reliant on rare earth ores. This could could lead to a shortage by 2023 and trigger an uplift in prices.

Lynas shares ended the session on Tuesday 1.4 per cent weaker at $2.07.

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