http://www.yourindustrynews.com/news...

Lynas soars on China’s $500 million cash for project

Monday, May 04, 2009

WA’s biggest rare earths mine is expected to begin production by the end of next year after Lynas Corp yesterday struck a deal to swap control of its stalled Mt Weld project for a $500 million Chinese lifeline.

Subject to approvals, the agreement provides state-owned China Nonferrous Metal Mining Group (CNMC) with its debut investment in WA’s mining sector and will see it take majority ownership of Lynas and its $390 million project near Laverton.

The deal stands to resurrect Mt Weld, where construction was suspended in February after a dispute with bondholders scuppered an existing financing arrangement.

It will also strengthen China’s already dominant hold over global rare earths supply.

Lynas executive chairman Nick Curtis said the collapse of its earlier deal had made the company determined to choose its funding partner carefully.

“What I learned from the failure of the bond market structure was really that you need to align yourself with capital markets that have a long-term view … and are not just in it for a short-term gain,” he said.

“This group (CNMC) has a 10-year risk profile for the project.”

Under the terms of the tie-up, CNMC will inject $252 million into Lynas via a share placement for a 51.6 per cent stake in the group and four seats on an expanded eight-person board. It will also guarantee a senior Chinese bank loan of up to $US184 million ($252 million).

Lynas will receive $US15 million of the cash within two weeks to allow it to restart work at Mt Weld while it awaits approvals.

Shares in Lynas jumped 14¢ to 43.5¢ on the news.

Analysts said the deal was probably a good one for the company, given it would otherwise struggle to raise the cash it needed.

Demand for rare earths — which are used in hybrid car batteries and computer manufacturing — has risen steadily over the past few years, partly because of restrictions by China on its exports.

Lynas’ project includes a $69 million on-site concentration plant and a $US214 million processing plant in Malaysia to handle the concentrate.

Mr Curtis said he was “reasonably confident” the Foreign Investment Review Board would approve the deal, given CNMC was not a buyer for its product and the fact Lynas was a company in “relative distress”.

CNMC has assets in Zambia, Burma and Mongolia but its Australian interests are limited to a stake in Sydney-based explorer Ord River Resources.

It is the second time Lynas has tried to strike a deal with a state-owned Chinese group after its failed bid in 2003 to reach agreement with China Iron and Steel Industry Trade Group Corporation over its Channar mine in the Pilbara.