And on other news big rare earth minerals company Lynas had a bit of a blow today, reporting a major costs blow out at its Kalgoorlie processing plant adding an extra $155m to the original $575m budget.
Our METs division - specifically DIAB engineering was awarded the contract to build the Filter Building in July 2022
“DIAB has been awarded a contract for a key component of the facility in Kalgoorlie, being the construction of the Filter Building used to process and further concentrate the rare earth.
The works to be performed include the supply, fabrication and erection of the Filter Building, the installation of associated equipment and piping, and electrical and instrumentation installation.
DIAB will carry out all of the circa 1500 tonne fabrication works for the Filter Building at its state-of-the-art fabrication facilities in Geraldton utilising approximately 80 local Midwest team members.
A construction workforce of 60-80 will then be mobilized to site progressively over the coming months…”
Daniel NewellThe West Australian
Tue, 29 August 2023 8:58AM
Progress wok on Lynas Rare Earths’ Kalgoorlie cracking and leaching plant. Credit: Lynas Rare Earths/Supplied/TheWest
Lynas Rare Earths has revealed a massive cost blowout for its new Kalgoorlie critical minerals processing plant.
Original estimates had put the price tag for the cracking and leaching facility at $575 million.
But Lynas managing director Amanda Lacaze on Tuesday warned a detailed review was likely to show a cost overrun of $155m, plus an extra $50m in pre-commissioning and commissioning costs before first production.
Lynas has been racing to compete the plant ahead of a deadline imposed by the Malaysian government to shut its plant in Kuantan from January 1 next year. After that time, it will be prohibited from import and processing lanthanide concentrate sourced from its Mt Weld project in the northern Goldfields.
The government has expressed concerns about low-level radioactive waste left behind from the cracking and leaching process, demanding Lynas move that process offshore as part of the licence conditions.
Lynas is still seeking a judicial review of the ban.
Ms Lacaze said the Kalgoorlie plant had been built amid an environment of high inflation and critical labour shortages.
“Decisions related to accelerating activity to meet the external deadline created by the Malaysian operating licence conditions have incurred significant additional costs,” she said.
“The project budget forecast has been updated to approximately $730m. In addition, we estimate approximately $50m of pre-commissioning and commissioning costs incurred prior to first production will be capitalised.”
Lynas said the new forecast includes costs associated with additional resources deployed to accelerate construction activities and contractor management challenges due to the accelerated schedule.
Key areas where significant cost increases had been incurred included structural, mechanical, piping and electrical work, along with concrete and dam earthworks.
The company — the biggest producer of rare earth minerals outside of China — revealed in June that skilled labour shortages had already delayed the start of first production, initially targeted for the end of the financial year, as it waited on construction of a waste gas treatment plant and on-site gas supply.
The costs shock comes as Lynas reported profit nosedived more than 40 per cent last financial year after prices for its critical minerals came off record highs.
The miner last month warned softer Japanese and Chinese demand for neodymium-powered magnets used in industrial magnets, electric vehicles and defence technology, plus a general oversupply had trimmed sales.
Releasing its full-year results on Tuesday, Lynas said revenue was down almost 20 per cent to $739.3 million. Earnings before interest, tax, depreciation and amortisation was down 37.2 per cent to $$377.7m.
Profit dropped from $540.8m a year earlier to $310.7m.
Ms Lacaze said Lynas’ operational performance was strong in the year, with record concentrate production and record neodymium and praseodymium production achieved in the second half.
But overall results were lower than fiscal 2022 when market prices were at record highs.
Ms Lacaze said Lynas remained confident that the rare earths market would grow in value and demand but it would continue to hold any additional supply it produces in hopes an improvement in China’s domestic economy will support a return to higher prices.
Lynas also said the expansion of Mt Weld remained on track, with earthworks nearing completion, concrete works well progressed, and fabricated steel modules being delivered to site.
It is already in partnership with the US Department of Defence to built a plant in Texas and said it continued to engage with other governments on rare earths supply chain resilience initiatives.
At the Rottnest conference last March it looks as though DIAB was due to be finished about now : [ref]
But maybe that work has been delayed a bit?
Regardless it’s good to be reminded that increased inflationary and labour costs are mostly being met by the client as per Jules’ comment in the annual results conference call recently .
cheers
NWH Price at posting:
$2.73 Sentiment: Hold Disclosure: Held
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