Make Or Break Time For Lynas As Malaysian Elections Draw Near

Make or Break Time for Lynas as Malaysian Elections Draw Near

Lynas Corporation (ASX:LYC), a company focused on creating a fully integrated source of rare earths from mine to market, is facing a moment of truth over its controversial $800-million Malaysia-based processing plant as locals prepare to go to the polls in what is being hailed as the most closely contested election in the country's history. The Malaysian parliament was officially dissolved last week, with the date of the upcoming election set for May 5.

Lynas' facility finally began production last year following lengthy environmental and safety disputes with local residents and the Save Malaysia Stop Lynas protest group. Some analysts believe that a victory for the ruling National Front party, headed by Prime Minister Najib Razak, could potentially end years of uncertainty surrounding the facility, as it was this same government that initially invited the company to relocate to Malaysia.

The National Front, which has run the country for the last 56 years, is still favored to win the elections despite the growing popularity of opposition parties. The Wall Street Journal reported that a recent opinion survey conducted by the University of Malaya shows that 42 percent of respondents support the National Front, with 37 percent supporting the opposition and 21 percent undecided.

Even if the National Front is ousted, Lynas' facility will not necessarily automatically face closure; however, a new government will likely create uncertainty about the project's future. A new Malaysian administration is likely to come under intense pressure from lobbyists and some opposition politicians have promised to review — or even shut down — the plant should they gain power. Recently, Kuantan MP Fuziah Salleh stated that opposition party Pakatan Rakyat will not compromise and will shut down the facility if it comes into power.

Tanzanian project's resource estimate increased

Peak Resources (ASX:PEK), an Australia-based firm, announced a revised mineral resource estimate for its 100-percent-owned Ngualla rare earth project in Tanzania. The new estimate for the project incorporates some 13,600 meters of additional drilling and takes the resource estimate to 21.6 million metric tons (MT) grading 4.54-percent rare earth oxide (REO) for a total of 982,000 MT of contained REO.

The revised estimate is a significant increase over the 8.2 million MT at 4.35-percent REO announced in the company's December 2012 scoping study mine plan, which supports an initial 25-year mining period and a 10,000-MT-per-annum REO production level. Meanwhile, new metallurgical testwork also shows that mineralization outside of the Bastnaesite zone could be processed using other conventional beneficiation and leach processing routes.

The company noted that the increased mineralization; the option to increase the production rate of the Ngualla project; and enhanced beneficiation ability will lower the cash costs of the project and improve its net present value and internal rate of return. It also said that a prefeasibility study and revised economic assessment will likely be completed by the third quarter of this year. The company expects to begin production at Ngualla by the first quarter of 2016.

“The new estimate illustrates the quality of the Ngualla Resource, the economic upside and the options available to Peak to expand production once the initial low cost, low risk operation has been established,” said Richard Beazley, managing director at Peak.

Market round-up

Rare earth prices in China continued to edge lower this week amid weakening downstream demand and a surplus of domestic supply.

China's terbium oxide have prices weakened over the past few days due to a lack of consumer buying, industry sources told Metal-Pages. A source at a southern supplier said most downstream consumers are remaining on the sidelines.

“The downstream florescent powder market is sluggish and consumers are reluctant to replenish terbium oxide,” an official at the company said to Metal-Pages. Traders have confirmed that prices of about $564 per kilogram for terbium oxide are being seen in the market, compared to $596 per kilogram last week.

Praseodymium oxide prices are stable on the back of relatively tight domestic supply. Traders have said that 99-percent praseodymium oxide prices are at $53,186 per MT, similar to prices seen a week ago. A supplier in Southern China said praseodymium oxide supply is tight due to the reduction in domestic output.

Europium oxide prices have softened in the past few days. Prices have fallen to $773 per kilogram, with one source confirming that only small packages are being sold on the spot market.

The yttrium oxide market remains quiet owing to a lack of downstream demand. Buyers can purchase yttrium oxide at about $12,891 per MT. A consumer source in Southern China told Metal-Pages that his company is not planning to replenish its REO supply due to a lack of downstream orders.

Company news

Texas Rare Earth Resources (OTCQX:TRER) has engaged IntelliMet to design the refining process for its Round Top project, which is located in Hudspeth County, Texas.

IntelliMet will conduct bench-scale testing of a purification process that removes impurities (particularly uranium, thorium, aluminum and iron) from Round Top's leach solutions, bringing them down to the levels required for further processing. The company will also provide a best estimate for operating costs and specifications for a full-scale class and element purification process to produce purified rare earth elements using solid-phase extraction technology.

Dan Gorski, CEO of Texas Rare Earths, commented, "[w]e strongly believe that use of IntelliMet's revolutionary ion-exchange technology has the potential to reduce both the capital and operating cost as well as the complexity of the final stage of separating marketable rare earth products from our concentrate. Based on our current cash balance of $4.68 million and working capital of $4.39 million, this project is well within our budget guidelines for the current fiscal year."

Stans Energy (TSXV:HRE) announced that the Kyrgyz State Prosecutor's Office has initiated legal proceedings against the Kyrgyz State Geological and Mineral Resources Agency (SGA). The State Prosecutor's Office has put forward an application to lift the three-year statute of limitations so that it will be able to present its claim of request to nullify the minutes of a 2009 meeting between the SGA and Kutessai Mining, according to a press release from Stans. The meeting awarded mining licenses for the Kutessay II and Kalesay deposits to Kutessai Mining.

Kutessai Mining was a state-owned special purpose entity created to hold mining licenses for the Kutessay II and Kalesay deposits. It was put up for an open and previously advertised government auction in 2009. Stans Energy's local subsidiary, Stans Energy KG, acquired Kutessai Mining through this auction, paying the government $855,000. Stans Energy KG then "re-registered OSC 'Kutessai Mining LTD' as it's fully owned subsidiary 'Kutessai Mining LTD,'" the press release notes.

Stans and its legal representatives are of the position that the claim filed by the State Prosecutor's Office is baseless, with no legal merit, and that the company's 100-percent-owned mining licenses for both properties were obtained lawfully, through a transparent government auction, in 2009.


Securities Disclosure: I, Adam Currie, hold no direct investment interest in any company mentioned in this article.

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Make or Break Time for Lynas as Malaysian Elections Draw Near from Rare Earth Investing News