New loan for Lynas downstream processing

This article first appeared in The Edge Financial Daily, on June 28, 2019.
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KUALA LUMPUR: Rare earths mining company Lynas Corp’s Malaysian unit — Lynas Malaysia Sdn Bhd — said yesterday that the 10-year loan extension agreement that its parent has secured from its Japanese backers will provide funding certainty for further investment in the group’s downstream processing in Malaysia.

According to Datuk Mashal Ahmad, Lynas Malaysia’s managing director and vice-president, the loan facility will also be used for the relocation of the first-stage processing of its rare earths — where the material is separated from the low-level, naturally occurring radioactive material (NORM) it is found with — from Malaysia to Western Australia over the next five years.

“This agreement means we can fund further investments in downstream processing at Lynas Malaysia and relocate our first stage processing to Australia,” he said in a statement.

Once the new cracking and leaching plant is operational, Mashal said the material shipped to Malaysia for processing will not include NORM.

The statement came after Lynas announced earlier in the day that it had signed a 10-year loan extension on easier terms with its long-time Japanese backers, increasing its commitment to supplying rare earths to Japanese customers.

The deal was inked with Japan Australia Rare Earths BV, a special-purpose company established by the Japanese government’s Japan Oil, Gas and Metals National Corp (JOGMEC) and Sojitz Corp, a Japanese trading firm and Lynas’ exclusive distribution partner in Japan.

Under the new agreement, JOGMEC and Sojitz Corp will reduce principal payments due and the interest charged on the loan, according to Reuters. The extension will help Lynas, the only major producer of rare earths beyond China, follow through on its 2025 expansion plans with greater cash flows available from the improved terms, the newswire reported.

Reuters added that Japanese customers stand to benefit from the new agreement, with Lynas promising to prioritise them and supply up to 3,600 tonnes per year until 2025, and up to 7,200 tonnes a year until 2038.

“The biggest achievement for Japan from the latest deal is to secure priority supply rights until 2038 in return for extending the loan and relaxing payment requirements,” it quoted an official at Japan’s Agency for Natural Resources and Energy, an arm of the industry ministry, as saying.

It also noted that last week, Lynas said it was stockpiling neodymium and praseodymium, key ingredients in permanent magnets used in electric vehicles and wind turbines, for “strategic customers”, amid concerns that Beijing may use the minerals as a weapon in its trade war with the US.

Meanwhile, Mashal, in his statement yesterday, acknowledged that Japan “is a very important partner for Lynas”.

“Since 2011, we have developed strong relationships with Japanese customers and the products we make here in Malaysia have supported the development of Japan’s rare earths processing industry.

“Japan recognises the importance of rare earths for its advanced manufacturing industry. Through this agreement, we will continue to work together to develop strong supply chains to meet growing demand.

“Rare earths are also essential to Malaysia’s growing electronics industry in Penang and the Malaysian automotive industry. As the world’s second-largest producer of rare earths products, Lynas can help attract further investment in the downstream supply chain in Malaysia, which can position Malaysia as the manufacturing hub of products made from rare earths,” he said.