22 Oct, 2021
Lynas CEO warns on risk of continued COVID-related shipping constraints
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| Lynas Rare Earths' advanced materials plant in Gebeng, Malaysia, whose inputs have been delayed due to shipping constraints impacting rare earths production. |
Rare earths producer Lynas Rare Earths Ltd.'s ASX shares fell nearly 10% on Oct. 22 on weaker quarterly production and revenue, with CEO Amanda Lacaze expressing "cautious optimism" on the mitigation measures for the global shipping crisis that impacted the result.
Lynas' sales revenue fell to A$121.6 million its first quarter of fiscal 2022, from A$185.9 million in the fourth quarter of fiscal 2021, with production of 3,166 tonnes of rare earth oxide, including 1,255 tonnes of NdPr, also down from 3,778 tonnes and 1,393 tonnes, respectively.
The fiscal first quarter was "definitely the most difficult of the pandemic," with daily COVID-19 cases in Malaysia peaking about 22,000 before falling back to around 5,000 towards the end of the period, similar to when the health crisis started, Lacaze told a same-day analyst call.
Lynas' Malaysian team maintained 70% of neodymium and praseodymium, or NdPr, production capacity despite "a partial or full shutdown of the cracking and leaching plant for 11 days due to the unavailability of personnel who were required to isolate due to an increase in COVID-19 case numbers in the Kuantan area," the quarterly said.
"Product finishing of non-NdPr products was also shutdown for 16 days as we prioritized NdPr production with available personnel," Lynas said.
Yet Lynas encountered more challenges on shipments from Australia to Malaysia than virtually all other areas of the business, Lacaze told analysts.
"Availability of some chemical products was affected by COVID-19-related shipment delays and production decreases, especially in China, causing shortages," the quarterly said.
Lynas is keen to increase production rates, and is confident that it can achieve this, "so long as we get all the inputs onsite at the right time, which is one of our major challenges," Lacaze said, referring to shipping issues that were exacerbated by industrial action in Australia.
Lynas ships product from its Mt Weld rare earths project in Western Australia via the Fremantle Port to be processed at its Gebeng advanced materials plant in Malaysia. Lynas has been building additional inventory of a number of key plant inputs onshore to mitigate the logistics risk due to the shipping crisis, which has increased cash costs, Lacaze said.
"At this stage we're cautiously optimistic that we've put sufficient mitigations in place that this should not handicap us. Much as we want to click our heels three times and say 'the pandemic is over,' unfortunately its effects are lingering," the CEO said.
Western Australia's Environmental Protection Authority recommended Lynas' planned Kalgoorlie rare earth processing facility for environmental approval to treat Mt Weld concentrate, subject to conditions, in its Oct. 20 assessment report. The resulting rare earth carbonate from the facility will also be transported through Fremantle Port.