Lynas spending big on Mt Weld upgrade

Lynas (ASX:LYC) is to spend upwards of half a billion dollars expanding the capacity of its Mt Weld mine and processing operations in WA as it ramps up to meet growing demand for its suite of rare earths products.

The expansion is a key part of the company’s May 2019 five-year expansion plan and will take the total amount of current and planned investment in the WA goldfields by Lynas to around $1 billion.

The company said the expansion has been fully costed and will be financed out of cash flows from the rising revenues from existing sales and expansion at Mount Weld and the company’s growing number of processing plants in Malaysia, WA and the US (Texas).

The fact that Lynas says it can finance the expansion without resorting to debt or a new capital raising tells us a lot about the growing returns from rare earths without the controlling hand of China.

Was that why Lynas shares jumped more than 7% to $9.55, a two-month high yesterday?

The 2019 expansion plan targeted a 50% increase in NdPr production to 10,500 tonnes a year by 2025, including significant development of the Mt Weld ore body and beneficiation circuit. (NdPr is Neodymium-Praseodymium, a key rare earth used especially in magnets which are in turn at the heart of the renewables and electrification revolutions.)

“To meet Lynas’ ambition to grow with the market, this previously announced growth plan must be accelerated and increased.” the company told the ASX on Wednesday

“Global demand for rare earth materials and NdFeB magnets continues to accelerate. NdFeB magnet demand forecast to grow from 130,000 tonnes of NdFeB magnets consumed in 2020 to 265,000 tonnes in 2030, driven by growth in electric vehicles and wind energy.

“Investment in capacity expansion will be required at every production stage. This starts with increasing feedstock availability and Lynas is today announcing project to substantially expand Mt Weld feedstock capacity, which builds on the previously announced Lynas 2025 growth plan for Mt Weld.

Lynas said the expansion at Mt Weld will target feedstock production capacity of 12,000 tonnes a year (NdPr equivalent) in 2024.

“Further capacity expansion in existing upstream and downstream production together with growth options for 2025 and beyond are being developed. This includes two additional stages at Mt Weld which offer a pathway to an additional 2,400 tonnes NdPr equivalent per annum each.

Lynas said the initial expansion to 12,000 tonnes a year of NdPr equivalent “has been fully scoped and the approximately $500m investment for this stage of the project is fully funded from cash flow. “

“This project is based on known technology. It includes upscaled processing equipment, efficiency improvements, enhanced sustainability and will provide a platform for further capacity increases.”

Subject to relevant regulatory and stakeholder approvals, construction activities are expected to commence in early 2023, with full operation planned for 2024. Some infrastructure will be brought online in stages to accelerate production growth prior to the completion date

Lynas said the expansion of Mount Weld “is a brownfields project that will be carried out on the existing Mt Weld tenure.”

“Comprehensive environmental flora and fauna and cultural heritage surveys have already been completed on the Mt Weld site and will support the environmental approval process.”

In addition to the expansion at Mount Weld, Lynas says it will spend the next two years progressing the mining exploration and characterisation program established following the results of the 1,020 metre deep exploration hole (announced March this year).

Lynas said on Wednesday the Mt Weld expansion project is expected to create up to 300 jobs during the construction phase and over 100 ongoing operational jobs in the Goldfields region of Western Australia.

“This substantial investment in the regional Western Australia complements the company’s $500 million investment in the new Kalgoorlie Rare Earths Processing Facility which is expected to create over 209 positions during construction and up to 128 new ongoing jobs,” the company said.