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As nations clamor for ex-China rare earths supplies, Lynas urges cash support

A Lynas Corp. Ltd. executive said state and federal governments need to put up "cold, hard cash" for the company's A$500 million processing plant in Kalgoorlie, Western Australia, amid broader concerns around proposed foreign investment reforms and a greater focus on ex-China supply chains.

SNL Image
Lynas Corp. Ltd. Vice President of Upstream Kam Leung.
Source: Bill Stokes/Diggers and Dealers

During an Oct. 14 Diggers and Dealers Mining Forum presentation in Kalgoorlie, Western Australia, Lynas Vice President of Upstream Kam Leung laid out the "challenges" of developing downstream processing in the state, including higher input costs and higher capital costs, particularly linked to labor, and the "tyranny of distance" of vast trucking expanses.

Leung said government funding was needed for often complex and high-cost downstream processing to be globally competitive, given what he cited in his presentation as an "increasing focus on resilient critical minerals supply chains" among Australia, Europe, India, the U.S. and Japan.

Leung later told media that Lynas had increased product sales into the U.S. in the past two years on the back of increased interest in rare earths due to geopolitics.

While a key lesson from COVID-19 has been the importance of having homegrown manufacturing and value-adding, "the problem in battery minerals is that real policy change and commitments haven't really emerged," Association of Mining and Exploration Companies CEO Warren Pearce told S&P Global Market Intelligence on the conference sidelines.

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Pearce welcomed resources technology and critical minerals processing being included in the "national manufacturing priorities" within the Australian government's A$1.5 billion investment announced Oct. 6 as part of the fiscal 2021 budget.

Australia's government needs to work with state governments to "put some money into attracting investment, then the states can work through the facilitation of approvals, sort out the land issues and just clear the path for it to happen," Pearce said.

"We need to realize that if we want to attract the processing industry in any real way beyond small or medium-sized facilities, it's actually going to take an investment or co-investment role from state and federal governments," Pearce said.

That investment needs to be "much greater" than the A$13.2 million committed by Western Australia's government in August to attract a global cathode active materials manufacturer to establish a production facility in the state, Pearce said.

Such investment was particularly needed, given proposed reforms strengthening the Foreign Investment Review Board's ability to approve "sensitive national security business," which has prompted concern from China.

"If you're going to say no to foreign investment from China, you'd better be clear where the investment is coming from, and China has been a leader in the battery minerals space because they've been prepared to get involved early," while other governments in the critical minerals supply chains have not, Pearce said.

Cost comparisons

Leung said approval times in Australia can also be lengthy, though having projects granted "lead agency status" or "major project status" helps with approvals.

While there is strong capability within Western Australia's resources industry, Leung told delegates that experience and capability in downstream processing is lacking.

Leung later told media that labor costs in Western Australia are up to four times higher than some other countries, and even with the "relatively low-cost" water that Kalgoorlie's local council is providing, it will still cost up to 10 times more than in Malaysia.

As part of Kalgoorlie's commitment to co-invest in the plant, Leung said the council also provided road upgrades and services to the project gate. Leung said Lynas was very thankful, and the company "would certainly welcome the same from the state and federal governments."

Leung suggested governments could build a renewable power station to generate cheap power. Western Australian Minister for Mines and Petroleum Bill Johnston told media on the conference sidelines that his government is "working hard to keep electricity prices down" and cited a "whole-of-system plan" launched Oct. 12.

This could potentially halve the cost of electricity for industrial users, Johnston said. The government's plan revolves around renewable power generation, which modeling suggests will triple by 2040.

Other countries in which Leung has worked have built the roads for remote sites, Leung said, while certain jurisdictions "co-invest and actually set up all the infrastructure for you," and others provide rebates on inputs and tax holidays.

As an example, Leung said Lynas is on a shortlist of two as the U.S. Defense Department is providing funding for the company to complete detailed engineering studies for a planned heavy rare earth separation facility at long-term U.S. customer Blue Line Corp.'s Texas base.

In the context of co-investment, Leung said the Department of Defense's contribution would "potentially ... be a grant, so that's going to be cold, hard cash."

Johnston said his government is "very keen" to work with Lynas and other critical minerals companies developing projects in the state to access available federal government incentives.

"We are always afraid that the [federal] government incentives are concentrated on the east coast and they forget the needs of the Western Australian resources industry," Johnston said.