Australia’s Lynas Receives $225M Financial Backing to Complete Malaysian Rare Earths Plant

By Esther Tanquintic-Misa,

Shutterstock photo

Beleaguered Australian rare earths miner Lynas Corp., whose controversial LAMP advanced materials refinery plant continues to face hurdles among the locals in Malaysia, triggering a $40 million blowout in related construction costs and yet another start-up delay, has received a much needed financial boost of $US225 million ($215 million) from investors Mount Kellett Capital Management.

Mount Kellett Capital Management, a US-based investment firm set up by former Goldman Sachs bankers, reportedly approached Lynas Corp. to provide the much needed funds through an unsecured convertible bond issue, according to Reuters. Mount Kellett Capital Management, which specialises in snapping up shares of distressed companies or those in unusual financial obligations or situations, is expected to immediately infuse $US50 million into Lynas Corp. The balance, or $US175 million, will be given once the investment firm completes due diligence, expected next month.

On Tuesday, Lynas Corp. revealed assuming it wins the temporary operating licence it has lodged before the Malaysian Atomic Energy Licensing Board (AELB), plant production could possibly start only in the second quarter of 2012, five months later than earlier scheduled. Lynas Corp.'s application for a temporary operating licence is scheduled for deliberation, and hopefully approval, by the AELB on Jan. 30.

Lynas Corp. said interruptions in procurement acquisitions, extra engineering completion requirements and the monsoon triggered the setbacks for the plant's construction. Forecast cost for the first phase of its rare earths project had jumped 7 per cent to A$640 million ($672 million), the company added.

"We are delighted Lynas accepted our offer to become a significant investor and look forward to participating in the development of the world's first reliable, sustainable supply chain for rare earth elements outside of China," Mount Kellett co-founder Jason Maynard said in a statement.

Lynas Corp. plans to process ore from its West Australian mine at its advanced material plant, already about 85 per cent complete, in Kuantan, Malaysia.

The Mount Weld Rare Earth Project near Leonora in WA is one of Lynas Corp.'s asset base. The other is the LAMP plant in Malaysia. Under Phase 1, combined output from the two projects is expected to reach 11,000 tonnes of rare earth metals annually.

Mount Weld is already operational, with buyers already lined-up to purchase its yield. The final stumbling stock that remains is Malaysia's approval on the LAMP plant. Once approval is secured, Lynas Corp. is touted to become one of the world's biggest rare earths producers that could possibly give China a run for its money and rare earths produce, a group of 17 elements essential to make high-tech electronics, magnets and batteries as well as renewable energy products such as hybrid cars. 

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Commodities
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