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US political heat puts Lynas defense contract on ice

The date of: 2020-05-25
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source:The Sydney Morning Herald

Rare earths group Lynas Corp has received a setback to its expansion plans after warning the US Department of Defense contract it was awarded last month may be on hold while the political debate heats up on whether the country should source its rare earths onshore.

In a statement to the ASX on Friday evening, Lynas confirmed media reports in the US - debating the merits of sourcing rare earths locally versus from allies or other sources - have impacted on the contract that could help fund its plants to set up a processing plant in Texas.

'Lynas remains one of two companies selected for Phase 1 of the project, however Lynas understands that the US government’s progress on Phase 1 is currently on hold those political issues are addressed,' the company said.

According to Reuters, the Department of Defense - also known as the Pentagon - informed Lynas and another successful applicant for rare earth funding, MP Materials, that the decision had been 'put on hold until further research can be conducted.'

This was after US Republican Senator Ted Cruz, a former presidential candidate, and other senators sent a letter to the Pentagon urging it to only fund US rare earth projects.

The term rare earth refers to 17 elements crucial to the manufacture of many hi-tech products such as mobile phones, electric cars and wind turbines and rare earth also has military uses.

Lynas is the only significant producer and processor of rare earths outside of China.

Lynas sources its rare earths from a mine in Western Australia and currently processes the ore in Malaysia. The relationship has been blighted by Malaysian protests over the toxic waste generated by the rare earths processing which has lead to plans for the company to set up separate processing operations in Western Australia to side-step the issue.

Last month the company and its US venture partner Blue Line Corp were awarded Phase 1 funding by the US Defense Department for the planning and design of its proposed rare earths processing operations in Texas for the heavy rare earths used in military applications.

In a statement announcing the win last month Lynas said it “may lead to further contracts for commercial-scale production and operation” of a processing facility however this is not guaranteed.

“Today’s announcement creates the foundation for a facility in the US that will assist the US to avoid the supply chain vulnerability that has been exposed over the past year,” Chief executive Amanda Lacaze said.

On Friday, Lynas said it is committed to continuing work on designing the plant.

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