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Main ForumSojitz and Lynas sign Strategic Alliance Agreement to secure additional Rare Earths supply for Japan

  • Sojitz and Lynas sign Strategic Alliance Agreement to secure additional Rare Earths supply for Japan

    Lynas Corporation Limited (“Lynas”) (ASX:LYC, OTC:LYSDY) has today signed a Strategic Alliance Agreement with Sojitz Corporation (“Sojitz”) to secure additional supply of Rare Earths products for the Japanese market by accelerating the expansion of the Lynas Rare Earths project.

    The objective of the Agreement is to provide a stable and long term source of supply for the Japanese market by providing a framework for Lynas and Sojitz to agree off-take, distribution and financing arrangements during 2011 which would enable the acceleration of Phase 2 of Lynas’ Rare Earths mine and Concentration Plant at Mount Weld in Western Australia and the Lynas Advanced Materials Plant (LAMP) in Malaysia. Phase 1 operations are scheduled to begin in the third quarter of 2011, with an initial capacity of 11,000 tonnes REO (Rare Earths Oxide) per annum. Lynas Executive Chairman Mr Nick Curtis said: “This landmark agreement will enable Lynas to accelerate marketing to Japanese customers. If implemented, it will enable Phase 2 construction to be committed in April 2011 and be online in 2012, expanding the capacity of the LAMP to 22,000 tonnes REO per annum”.

    The key terms of the Agreement include that Lynas and Sojitz will use commercially reasonably endeavours to:

    • Seek a funding package of up to $US250 million to cover the cost of accelerating the expansion of the Lynas Rare Earths project to 22,000 tonnes per annum. Sojitz will request financial support from the Japan Oil, Gas and Metals National Corporation (JOGMEC) for the expansion of the project.
    • Allocate a minimum of 8,500 tonnes ± 500 tonnes per annum to the Japanese market over the next ten years, upon securing this funding.
    • Jointly market Rare Earths products in Japan in order to secure end customers in Japan for 8,500 tonnes ± 500 tonnes of Rare Earths products per year over the next 10 years to meet the requirements of the customers in Japan.

      If successful this transaction will allow Sojitz, a leading Japanese trading firm and the largest supplier of Rare Earths into Japan, to be the exclusive distribution company for Lynas product into Japan.

    This agreement will result in more than 70% of the Lynas 22,000 tonne capacity being allocated.

    So now only 30% of LYC's REE production is not tied up.

    My bet is that Alkane, Arufura and GGG are having a lot of scrutiny by increasingly desperate ex-China and Ex-Japan REE dependent companies aimed at them.

    Will it be South Korea or the USA that bites next? And for the investor which company will get taken out either by an Australian major or an overseas player?

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