COVID-19 Forces Closure of Lynas’ Malaysian Rare Earths Plant

The company’s Mt Weld mine and concentration plant in Western Australia continued to operate as of Monday.

Australia-listed Lynas (ASX:LYC,OTC Pink:LYSCF) is the latest mining company to at least partially call it quits due to the COVID-19 outbreak.

The company announced on Monday (March 23) that it has suspended production at its Lynas Advanced Materials Plant (LAMP) in Malaysia as cases and deaths in the country increase.

As of that day, the nation had reported 1,518 cases, 14 deaths and 159 recoveries; 212 new cases were announced on Monday, the highest increase in one day seen so far in Malaysia.

The move from Lynas comes after the government put a Movement Control Order in place that will run from last Wednesday (March 18) until next Tuesday (March 31).

The order prevents Malaysians from leaving the country and stops outsiders from entering. It also allows only essential businesses to remain open and encourages the public to stay home.

“As a responsible business, Lynas has taken steps to ensure the health and safety of our people and our communities and we support the government’s actions to control the outbreak,” the company said.

“Accordingly, we have initiated a safe temporary shutdown of our plant into care and maintenance mode,” Lynas continues in Monday’s release.

According to Lynas, it has retained some work-in-progress inventory and will be able to ramp up quickly once the LAMP is able to come back online again.

Monday’s release doesn’t indicate how the LAMP shutdown could impact Lynas’ operations, and the company, which is known for being one of the few stable rare earths sources outside of top producer China, does not comment on the future of the Australian parts of its business amid COVID-19.

Before sending material to the LAMP, vertically integrated Lynas mines rare earths at its Mt Weld deposit in Western Australia. It processes them at a nearby concentration plant and then transports them to the LAMP in Malaysia for refining and concentration.

Mt Weld remains open at this time, but Australia closed off entry to most non-Australians last Friday (March 20), and states in the country are also locking down their borders. Western Australia was still open on Monday, but will reportedly close its borders on Tuesday (March 24).

There will be exemptions for essential personnel like health and police workers, but entries via road, air and sea will be restricted.

Other measures, such as business restrictions, are also in place in the state. As of Monday, Western Australia had 140 cases and one death. In total, Australia had 1,709 cases and seven deaths.

As mentioned, the vast majority of rare earths are produced in China, a situation that has caused supply chain problems in the past — most recently during the US/China trade war, when concerns were rife that China would restrict exports to the US.

The COVID-19 pandemic, which began in Wuhan, China, has heightened worries about rare earths supply, although a recent note from Roskill largely dispels those worries.

According to David Merriman, manager of the firm’s battery and electric vehicle materials division, rare earths processing facilities in China are already beginning to come back online, and suppliers’ ability to meet demand has seen little impact.

Lynas’ latest results are for the half-year period ended on December 31, 2019, and they show that the company produced 7,518 tonnes of total rare earth oxide during that time; NdPr (neodymium and praseodymium) output came in at 2,512 tonnes.

Sales revenue was AU$180.1 million and the company’s cash balance was AU$111.8 million.

As of 11:22 a.m. PDT on Monday, Lynas’ share price was down 12.89 percent at AU$1.12. Globally there were over 370,000 COVID-19 cases, plus more than 16,000 deaths and over 101,000 recoveries.

Don’t forget to follow us @INN_Australia for real-time updates!

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

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