LA Private

Lynas (ASX:LYC) facing possible delay

Lynas Rare Earths (ASX:LYC) is facing a possible interruption to the start up of its $575m Kalgoorlie Rare Earths Processing Facility in WA’s goldfields.

Lynas told the ASX in a surprise update on Monday that while the feed-in of key materials will begin as planned before the end of June, delays to two key parts of the infrastructure could see a slower start.

“The first production of Mixed Rare Earth Carbonate (MREC) from the Kalgoorlie Facility is now expected in August,“ Lynas said on Monday.

The original target was this month and the company said the “this timing is within the range of ramp up scenarios considered for the Kalgoorlie Facility.”

The news saw Lynas shares dip 1.5 per cent in yesterday’s upbeat market to end the day at $7.24.

The company said on Monday it is facing the late delivery of a key gas supply pipeline and a shortage of workers, which is making for a slow finish to the project and the start up phase.

The company said that the commissioning process instead is being undertaken in four phases, and the final stage 4 commissioning commenced in June.

“Under Stage 1 to 3 commissioning, key production equipment is prepared, tested and certified ready for production. Stage 4 commissioning involves the introduction of reagents and feedstock, including the first feed of lanthanide concentrate to the kiln and completing the heat up process cycle for the kiln.

“In June chemical and wet circuits, including neutralisation, filtration and carbonation circuits, will be fed with Rare Earth carbonate from Lynas Malaysia which will allow completion of Stage 4 commissioning of those circuits.

“Major earthworks including ponds required for production and on-site services including power, water and laboratory facilities will be completed during this time and all materials (concentrate and chemicals) required for production will be received to on-site storage facilities.

“And while the Stage 4 process commissioning is on track for completion by June 30, two critical path items – the waste gas treatment plant and on site gas supply – will not be on time.

“Commissioning of other productive equipment will continue unimpeded while these two items are completed.

“Both the waste gas treatment plant and the on site gas supply presented early challenges and mitigation strategies were implemented. This included 24 hour operation of the site construction team and implementation of a trucked liquified natural gas (LNG) onsite gas solution to mitigate timing challenges experienced by our gas supplier associated with the installation of a gas pipeline.

“Further challenges have presented to the completion of these two items including lack of availability of suitably qualified people to fully staff 24 hour construction activities and late delivery of equipment required for finalisation of commissioning.

“Whilst Lynas has sourced additional labour, the full effect of these 2 items cannot be fully mitigated at this time.” 

Some investors reckon this comment from Lynas is a quiet warning that the August target could blow out if the labour shortage is not resolved.