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Lynas to advance US rare earths plan on Pentagon funding deal

[SYDNEY] Lynas, the key source of rare earths outside China, will aim to complete planning work on a rare earths processing plant in Texas by mid-2021 after it won funding from the US Department of Defense. The producer's shares surged to a six-month high.

The contract will allow Lynas and partner Blue Line to carry out studies and finalise designs for the planned heavy rare earths separation facility, the Kuantan, Malaysia-based company said on Monday in a statement. Lynas shares advanced as much as 12 per cent in Sydney trading.

"Lynas has the feedstock, intellectual property and track record to deliver a heavy rare earths facility in a timely and low risk manner," chief executive officer Amanda Lacaze said in the statement.

The firm didn't specify the amount of funding involved in the Pentagon contract. An initial phase of design and planning is likely to cost about US$30 million, BloombergNEF said in a May report.

The US government's funding push follows US President Donald Trump's order in 2017 to reduce dependency on imports of critical minerals needed for products including missile systems, electric vehicles and consumer technology. China supplies about 80 per cent of America's rare earths imports, according to the US Geological Survey.

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Trade tensions and the impact of the coronavirus pandemic on supply chains have elevated concerns about China's grip on the market, Ms Lacaze said in an interview last week.

Currently, there are no rare earths processing plants in the US, and development of three new projects - including the Lynas plant - would add about 10,000 tonnes of processing capacity, according to Sydney-based BNEF analyst Sophie Lu. That's less than the nation's total demand, but sufficient to meet military needs, she said.

Lynas will aim to complete in preparatory work on the plant this fiscal year, the company said in its statement.

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