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Main ForumJapanese company to pay $US 300m for the right to buy REEs from Lynas

  • So despite the recent opinions* expressed in The Australian and in (who should have known better) the Rare Earth sector is alive and well and there is a looming supply deficit that will see a couple of Australian REE companies prosper.

    The supply deficit will be felt over the next few years and may impact some countries quite heavily. Especially the countries that produce hybrid cars, wind turbines, flat screens, mobile phones etc for a living. The shortfall by 2012 will be probably around 30,000 - 40,000t per annum if there isn't a marked ramp up in hybrid cars and wind turbines etc. ( If there is a shift towards the electron economy then adequate supply may not be achievable for almost a decade.)

    So where does Lynas Corp fit into this?

    Put simply Lynas Corp will be the world's first non-China supplier of refined rare earths metals and concentrated oxides off the blocks with supplies reaching the market in late 2011 or early 2012. In effect Lynas Corp will be the world's swing producer. Lynas has the world's richest deposit of REEs at Mt Weld W.A.!

    Following Lynas Corp the USA's Molycorp may be able to produce refined REE metals in 2012-13. Australia also has a couple of emerging producers including Alkane Resources (ASX: ALK) who have one of the world's richest heavy rare earth deposits at Dubbo, a working pilot plant and a DFS. Arufura (ASX: ARU) are also in the race.

    So today's announcement by Japanese public broadcaster NHK on its website that Sojitz had agreed to pay about $US300 million for the right to buy about 8500 tonnes of rare earth metals annually from Lynas for 10 years is very significant and is at the least an indication of the degree of worry that Japanese companies are experiencing.

    That Lynas will be producing only around 20,000 t per year by 2012 shows how very tight the market is and the urgency for other Australian companies to get into production.

    It seems unlikely, but perhaps our Australian Govt. could encourage investment into Australian Rare Earth companies in order to help them build mines, concentration and refining plants on a scale to meet the world's rapidly emerging needs. But to date our Australian government has shied away from the concept of helping our Australian companies build vertically integrated supply chains..... Perhaps the time has come, but even though Australia controls a very large portion of the world's economic rare earth resources (Known-REEs-resources-reserves) and may even have moral obligation to expedite supply, I wouldn't hold your breath waiting for our Australian government to come to the party.

    I hold LYC, ALK and GGG.

    Use the search tool on the right of this page to see what I have said about these companies in the past... has been designed to give an over-view of the Australian rare earth investment opportunities and the issues surrounding the rare earths in general... if you don't know anything about the geo-political framework or the world's supplies of rare earths then a visit to the Current Issues page will bring you up to speed rapidly.

    * Not so rare after all by Robin Bromby

  • The above post Nov 2010 talked about this and pleasingly it all seems to have come together for us the LYNAS shareholders....

    As announced today: Emerging rare earths miner Lynas Corporation Ltd has signed a sales agreement with Japanese trading house Sojitz Corporation that includes the basis of a $US325 million ($A316.35 million) financing package.

    Lynas said in a statement that it had executed binding financing, distribution and agency, and availability agreements with Sojitz.

    The agreements provide for a $US225 million ($A219.01 million) loan facility to be provided by a special purpose company (SPC) established by Sojitz and Japan Oil, Gas and Metals National Corporation.

    The SPC will subscribe for $US25 million ($A24.33 million) worth of new shares in Lynas at $2.12 per share.

    The agreements also include the allocation of a minimum of 8,500 tonnes per annum of rare earths products to the Japanese market over ten years, and the joint marketing and distribution of these products.

    Of the $US325 million to be raised, $US250 million will be used to accelerate the expansion of Lynas' rare earths project in Western Australia to phase two.

    "The availability and distribution agreements with Sojitz secure additional supply of rare earths products for the Japanese market," Lynas said.

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