February 26, 2020 / 10:40 PM / a month ago

UPDATE 2-Malaysia approves 3-year licence for Lynas' rare earths plant, shares jump

(Adds analyst comment, share price movement and background)

MELBOURNE, Feb 27 (Reuters) - Lynas Corp Ltd said on Thursday Malaysia has approved a new three-year licence that allows the Australian miner to operate the only major rare earths processing plant outside of China, sending its shares up 11%.

The licence will allow Lynas to continue processing rare earths at its $800 million plant in Kuantan, Malaysia, but is subject to the company meeting several conditions that it expects to meet.

The renewal removes a key risk for the company, which has been trading “like a distressed business,” and is likely to be a catalyst for higher prices, according to analyst Dylan Kelly of Ord Minnett.

The broker has a “buy” recommendation on the stock for a valuation of A$4.80. Shares rallied as much as 11% on the news before trading at $1.98 by 0043 GMT, up by 4.5%.

As part of the licence, Lynas will have to build a cracking and leaching facility outside Malaysia before July 2023, after which the company will not be allowed to import raw materials containing naturally occurring radioactive material.

The company would also have to develop a permanent disposal facility for waste from rare-earths processing within the first year from the date of approval of the licence. The disposal of low-level radioactive waste has been a contentious issue, with a number of Malaysians protesting against the plant citing health concerns.

The miner recently said the Malaysian state of Pahang had approved a permanent disposal site for waste treatment, a big step towards fulfilling one of the key conditions.

Lynas is scheduled to report its first-half results on Friday. (Reporting by Rashmi Ashok in Bengaluru and Melanie Burton in Melbourne; Editing by Arun Koyyur and Sherry Jacob-Phillips)

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