+++++++++++++++++++++++++ * China's largest producer of tantalum and niobium metal joint ventures into tantalum and niobium sublease sector of overall Lynas deposit
*Chinese partner locks into 100 per cent of tantalum and niobium off-take
*Shared costs provide further infrastructure cost reduction
Lynas Corporation today announced a joint venture (JV) with China's largest producer of tantalum and niobium powder and wire, OTIC (Ningxia Orient Tantalum Industry Co Ltd) which generates $8.5 mln in cash for Lynas. The deal follows the completion this week of the Lynas transaction with Anaconda Nickel Ltd which gives Lynas 100 per cent of all non-phosphate minerals in the Mt Weld project area.
The JV with OTIC is for a specific sublease sector of the Mt Weld deposit and for the tantalum and niobium minerals in it. It is quite distinct from the main Rare Earths deposits at Mt Weld which remain Lynas' overall key project focus. In the JV between Lynas and OTIC, Lynas has sold, subject to relevant Chinese Government and Australian FIRB approvals, a 51 per cent interest in the Crown tantalum/niobium deposit at Mt Weld for $6.5 mln to OTIC.
OTIC has also agreed to a $2 mln equity investment in Lynas. Lynas President and CEO, Mr Nicholas Curtis said that the $2 mln placement by OTIC in Lynas is at 28.5 cents.
Lynas estimates its contribution to complete a bankable feasibility study on the JV tantalum and niobium property is approximately $1 mln. This will leave over $7 mln available to Lynas towards the fast-track development of its Rare Earths project. The JV will complete the feasibility study for mining the niobium/tantalum resource with a view to mine construction starting in late 2003. The project will produce a tantalum niobium concentrate. The study will focus on international and Chinese technology for the concentration process, in line with the work being done by Lynas on the Rare Earths deposit at Mt Weld.
OTIC is a Chinese Government controlled company listed on the Shenzhen Stock Exchange. It is the largest tantalum producer in China, with annual production of 200 tonnes of tantalum powder (18% of the world output), behind H.C. Stark of Germany and Cabot of America and 100 tonnes tantalum wire (40% of the world market and the largest producer in the world). Current customers include Kemet and Vishay, NEC and Hitachi - major producers of capacitors.
Lynas President and CEO Nicholas Curtis today said that under the terms of the sale and creation of the JV, OTIC will be obliged to take 100 per cent of the niobium/tantalum off-take. Lynas will have the right to 100% of the Rare Earths by-product at its option.
"This approach eliminates all the risk associated with tantalum/niobium sales and will give us a guaranteed cash flow from that sublease section alone," Mr Curtis said. "The deal gives us several major benefits for the overall Rare Earths project development:
it frees up $7 mln for the main Rare Earths project development it reduces further the main project infrastructure costs it accelerates further the project fast-tracking "The sublease JV agreement provides for the JV partners to provide 50 per cent of the total Mt Weld site infrastructure costs. There will be one centralised location for the plants and associated infrastructure for all activity on site. This means that the actual infrastructure costs of the Lynas stand-alone Rare Earths activity will be reduced by 26 per cent.
"In addition, OTIC will be providing, through their interest in the JV, $1.9125 mln of our contingent liability to Ashton (being 26 per cent of the $7.5 mln contingent payment due to Ashton).
"The whole thrust of the transaction from Lynas' point of view is that it retains our key focus on the Rare Earths project, while providing us with a diversification into the valuable tantalum and niobium market as a primary supplier to China's largest producer.
"Lynas will manage the tantalum and niobium JV project. "The benefit to OTIC is having access to the world's richest tantalum and niobium deposits which are at Mt Weld. "Initial processed output is anticipated to be around 2,500tpa of niobium. The JV will be looking to expand these production figures." Niobium is used primarily in the production of high strength low alloy structural steels and in natural gas pipelines. Niobium also has potential for major applications in the electronics industry, alongside tantalum.
For further information:
Nick Curtis Doug Macdonald PRESIDENT and CEO CAPITAL FINANCIAL COMMUNICATIONS Lynas Corporation 0408 143 404 02 8259 7100
BACKGROUND INFORMATION FOLLOWS:
OTIC BACKGROUND
Ningxia Orient Tantalum Industry Co Ltd (OTIC) is the largest tantalum and niobium producer in China, with annual production of 200 tonnes of tantalum powder being 18% of the world output, behind HC Stark of Germany and Cabot of America and 100 tonnes tantalum wire being 40% of the world market and the largest producer in the world. More than 80% of the products are for export to 29 countries, especially USA, Europe and Japan. Current customers include Kemet and Vishay, NEC and Hitachi - major producers of capacitors.
According to OTIC's 2001 Annual Report, the financial status as of 31 December 2001 (exchange rate USD/RMB () =8.28 and AUD/USD=0.538):
Sales revenue 1,225,383,888 A$275,367,165 EBITA 294,576,871 A$66,197,049 Net Profit 178,397,581 A$40,089,344 Cash in banks 419,996,471 A$94,381,229
OTIC was listed on the Shenzhen Stock Exchange on 20 January 2000, with 58.18% share owned by the Chinese Government. On 30 April 2002, OTIC's market value is:
No. of shareholders 39,397 Total shares issued 356,400,000 Share price 14.79 A$3.32 Market value 5,271,156,000 A$1,184,529,438
Besides further development of its tantalum technology and capacity, OTIC has recently announced the successful development of new niobium powder with up to 100,000 f.v/g electronic capacity. The large international capacitor producers view this material as a high quality material for possible use in next generation of capacitors.
LYC Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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