May 20, 2019 / 11:42 PM / a month ago

UPDATE 4-Australia's Lynas bets growth plan will smooth license issues, fend off rival

* Lynas unveils A$500 mln spending plan

* Spending plan may help renewal of Malaysian plant’s license

* Lynas’s plan also includes a U.S. heavy metals separation plant (Recasts, adds CEO, analyst comments)

By Melanie Burton

MELBOURNE, May 21 (Reuters) - Rare earths producer Lynas Corp on Tuesday unveiled detailed expansion spending plans for A$500 million ($346 million) to boost production, placate Malaysian regulators and fend off a takeover attempt.

Lynas laid out a strategic growth plan to 2025 that included building an initial ore processing plant in Western Australia that would help it overcome political headwinds in Malaysia where the operating licence for its processing plant, due for renewal in September, is under threat on concerns over waste disposal.

The plan hinges on Lynas, which is the world’s only proven producer of rare earths outside of China, getting the Malaysian license renewed and comes after Lynas in March rebuffed a $1.1 billion takeover offer from Australian conglomerate Wesfarmers Ltd.

It also follows mounting concerns that supplies of rare earths, used in everything from consumer electronics to military equipment, could be impacted by the Sino-U.S. trade dispute.

Shares in Lynas surged as much as 16% to a six-month high on the Australian Securities Exchange. Chinese rare earths companies also rose after Chinese President Xi Jinping visited some rare earth companies, leading to speculation that China may disrupt shipments to retaliate in the trade war.

Lynas mines rare earth minerals in Western Australia and processes them at the Malaysian facility.

In December, the country’s environment minister said that Lynas must remove its waste stockpiles before its licence could be renewed. Lynas has maintained that it would not be possible for it to remove the waste within such a short time frame.

“Having our operating licence renewed in Malaysia — It’s a must have. We need a transition period and that’s the conversation that we need to resolve,” Chief Executive Amanda Lacase told Reuters in an interview.

Lacase told an investor briefing that Lynas had a “great deal” of confidence the Malaysian government wanted Lynas to continue to operate, noting support from its prime minister as well as the Australian, Japanese, and U.S. governments given the strategic importance of rare earths.

China produces about three-quarters of the world’s neodymium and praseodymium (NdPr), used in magnets for electric motors.

“The geopolitics is highlighting the value of Lynas’ reliable supply,” said Matthew Ryland at Greencape Capital, the company’s second-biggest shareholder.

Dato Mashal Ahmad, vice president of Lynas’s Malaysian operations, said during the briefing that Lynas had complied with its licence requirements to either find an end use for its waste or a permanent disposal facility and that it had done both.

Lynas will invest in the Malaysian plant and also build out a heavy metals separation facility in the United States with Texas-based Blue Line Corp as part of its strategy.

In the briefing materials, Lynas noted that the A$500 million will be self-funded through the support of Japan Australia Rare Earths B.V., a joint venture of state-owned Japan Oil, Gas and Metals National Corp and trading house Sojitz Corp.

“They key is that it’s self-funding and (Japan) will step in which is a strong indication of its strategic value,” said one analyst who declined to be named.

$1 = 1.4472 Australian dollars Reporting by Melanie Burton; additional reporting by Aditya Soni in BENGALURU; editing by Richard Pullin and Christian Schmollinger

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