Lynas expands non-China supply chain in Vietnam deal

Australia’s Lynas Rare Earths (ASX: LYC; US-OTC: LYSDY) is moving deeper into Asia’s non-Chinese production sector as it advances a deal with South Korea’s LS Eco Energy that includes about A$60 million ($41.5 million) in mutual investment.

The partnership calls for Lynas-sourced heavy and light rare earth oxides to be made into metals at a plant LS will build in Vietnam, according to a statement dated Thursday. The companies will also invest about A$30 million into each other through convertible securities that could later be converted into shares.

LS aims through the deal to use the metals to manufacture permanent magnets in the United States, with the Vietnam plant expected to start operations in this year’s fourth quarter, BMO Capital Markets analyst Helen Amos said in a note on Thursday.

Lynas’ March streak

The deal follows a string of developments for Lynas this month, after it announced on Monday that its Malaysian processing plant produced samarium. That made Lynas the only non-Chinese producer of samarium, a heavy rare earth used in magnets, electronics and aerospace applications.

Lynas, which had already reached the milestone last May of being the first producer of separated heavy rare earth oxides outside China, also earlier this month signed a purchase deal with Japan’s JARE for 5,000 tonnes of light rare earths annually at a $110-per-kg floor until 2038. The offtake agreement helps insulate Lynas from China’s influence on rare earth pricing.

“Secure access to metallization is critical to support a robust rare earths industry,” Lynas CEO Amanda Lacaze said in Thursday’s release. Being part of the metal making supply chain is key to the company’s Towards 2030 growth initiative to become a more vertically integrated player outside China, she added.

Samarium production first

The metal making circuits at the factory in Vietnam will be staged, with samarium metal production given priority.

The new Vietnam factory will enable Lynas to supply more metallized neodymium-praseodymium and the heavy rare earths samarium, dysprosium and terbium through a processing framework with LS, subject to future agreements.

Lynas shares were little changed at A$20 apiece on Thursday in Sydney, valuing the company at A$20.1 billion. The stock has traded in a 12-month range of A$6.77 to A$21.96. Lynas mines rare earths at its Mount Weld site in Western Australia and processes and separates the concentrate at its facility in eastern Malaysia.