News: LYC UPDATE 2-Lynas Rare Earths' production disruption concerns persist

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Australia's Lynas Rare Earths Ltd (LYC) said it will focus on getting its Kalgoorlie plant operational amid concerns its Malaysian facility will have to be partly wound down, as it posted a 4% drop in first-half profit on Monday.

The world's biggest producer of rare earths metals outside China faces the prospect that its Malaysian cracking and leaching plant may have to shut after regulators halted it from importing and processing rare earths concentrate after July 1.

Lynas has appealed that decision. But it has raised the prospect of an interruption to supply of neodymium and praseodymium (NdPr), used in magnets for industrial applications in sectors from electrified transport to defence.

Lynas is building a processing plant in Australia's Kalgoorlie, which is needed to replace its Malaysian facility, in the event Lynas is not successful in its appeal.

"We are growing to meet the accelerated market demand," said Lynas Chief Executive Amanda Lacaze on an investor call.

"We have proven ourselves to be competent at bringing on new facilities. I think we have reasonable data on which to create our various models. But I won't tell you a percentage confidence other than to say I think we have reasonable track record."

Half year results were in line with analyst expectations as disruption in the supply of water to a plant in Malaysia, a rise in costs of sales due to high chemical prices, and increasing wages crimped profits.

A complete outage of water supply at the plant in Malaysia, resulted in 16 days of lost production during the quarter ended Sept. 30. That, coupled with rising costs and weak realised prices, dented the miner's bottom line.

"We and market have been fearful that there is a delay to Kalgoorlie being complete and therefore a potential production gap," said Barrenjoey analysts in a note.

Lynas has suggested that its Kalgoorlie plant will be taking feed in the June quarter, ahead of previous expectations for a July ramp up, Barrenjoey noted.

"Now it’s still possible to have a gap, but will come down to how quickly Kalgoorlie ramps up, and ships product to Malaysia for finishing. Any gap is looking more likely to be modest."

Still, a portfolio manager at Lynas's top shareholder Argo Investments, said the company needed to provide more information.

"No real update on Malaysia licence or contingency plan, Kalgoorlie progress and no guidance," he said.

Shares of the rare-earths producer were down 2.8% at A$8.26 as at 2316 GMT.

For the six months ended Dec. 31, Lynas reported net profit after tax of A$150.1 million ($100.93 million), compared with A$156.9 million a year ago.

However, it was a modest beat to a Visible Alpha consensus estimate of A$146 million, according to Goldman Sachs.

Lynas logged sales volume of 7,050 rare earth oxide tonnes (REOt) for the first half, 8.8% below last year, while cost of sales spiked nearly 32% to A$185.0 million.

($1 = 1.4872 Australian dollars)