Lynas may invest US$1b in second Malaysian plant

By Sharen Kaur
Published: 2009/07/27

The Australian mineral sands mining firm may invest may partner China Nonferrous Metal Mining (Group) Co to build the plant that will produce metals such as niobium
Australia's Lynas Corp Ltd, a mineral sands mining firm, may invest at least US$1 billion (RM3.54 billion) in another plant in Malaysia, its vice-president for technical development Mike Vaisey said.

It may partner its new shareholder China Nonferrous Metal Mining (Group) Co Ltd (CNMC) to build the plant that would produce metals such as niobium.CNMC owns a world-class niobium facility in China and its expertise would ensure the success of the plant operation.

Niobium is used to strengthen alloys, which is a metal that's made by fusing two or more metals. It is often used to make high-grade steel that goes into the making of gas pipelines, jet engines and magnetic scanners, among others.

The market for niobium is enormous, Vaisey said."CNMC is keen on building the plant and has offered to put in US$250 million (RM885 million) in debt and a similar amount in equity. CNMC would also guarantee us a loan from a Chinese bank," Vaisey told Business Times in an interview in Kuala Lumpur recently.

Vaisey added that it will take 3-5 years to develop the plant, including a year for feasibility study which it would start in early 2010."The plant could be set up anywhere in the world but there is high possibility that Malaysia would be the location as we are already investing here," he said.

Lynas is set to re-start construction on its RM1.2 billion lanthanide processing plant in Gebeng, Pahang, thanks to investments by CNMC.Works on the plant were suspended in February following a dispute with bondholders.Lynas had lined up US$95 million (RM336 million) from a convertible debt sale in 2007 but the bondholders in Europe did not release the funds.It spent the next few months looking for fresh money and the state-owned CNMC agreed to pay A$252 million (RM723 million) in cash for a 51.6 per cent stake in Lynas.

CNMC will provide a bank guarantee to enable a Chinese bank to lend Lynas US$104 million to help fund the first phase of the plant.The plant will produce 10,500 tonnes annually of rare earths oxide, used in energy-saving light bulbs, wind turbines, glass polishing and ceramics, disk drives, iPods, MP3 players and in automotive catalytic converters.

Rare earths oxide is also used in technologies that enable weight reduction in cars, higher yields from oil refineries and in diesel additives.The investment is also to develop the Mt Weld mine in Australia and ship lanthanide concentrate to the Gebeng plant via the Kuantan Port.

Lynas executive chairman Nicholas Curtis said at a briefing in Kuala Lumpur recently that it had spent RM200 million for initial works on the Gebeng plant since December 2007, and A$150 million (RM431 million) to mine in Australia.

"The first phase is expected to be completed by end of 2010 for RM900 million and after that, we will spend RM300 million more to double the capacity to 21,000 tonnes by the end of 2011," Curtis said.

He said despite the plant suspension, Lynas was lucky as the costs to build it had not escalated.The plant will be built by Lynas Malaysia Sdn Bhd, a unit of Lynas and it will hire up to 400 people during construction, which will start from October.