Wesfarmers sticks with Lynas plan after Malaysia move

By Darren Gray

May 31, 2019 — 5.02pm

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Conglomerate Wesfarmers insists it is still interested in acquiring Lynas Corp, and says the rare earths miner is still facing regulatory uncertainty around its operating licence in Malaysia.

Shares in Lynas, an Australian-headquartered company which operates a controversial processing plant in Malaysia, surged to their highest level in almost five-and-a-half years on Friday, after Malaysian Prime Minister Mahathir Mohamad said the company was likely to be given approval to keep operating in the country.

Malaysian Prime Minister Mahathir Mohamad has pretty much given Lynas the greenlight to keep operating.CREDIT:YAM G-JUN

Lynas closed up 11.3 per cent at $3.05, far above Wesfarmers' $2.25 per share conditional cash offer made in March. The jump added $206 million to Lynas' market cap in a session.

In a statement on Friday, Wesfarmers, which owns Bunnings, Kmart and Officeworks, indicated its proposal to acquire Lynas was still live.

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"At this time, our interest in Lynas is unchanged. However there are many uncertainties remaining in the situation and we will review our position once there is regulatory certainty around Lynas' operating licence and the conditions around that," Wesfarmers said in a statement to The Age andSydney Morning Herald.

Lynas is the biggest producer of rare earths outside of China, so occupies a unique place in the global industry. The rare earths are important metals used in a wide range of modern technologies including mobile phones and computers.

Lynas has faced much uncertainty in the past 12 months over its future in Malaysia, because of opposition in the country to the low-level radioactive waste created by its processing plant there. It is estimated to have about 450,000 tonnes of low-level radioactive waste in Malaysia, and there is still uncertainty about the requirements for its removal.

But during a visit to Japan this week Dr Mahathir issued his strongest sign yet that Lynas will be allowed to keep operating in the country.

"We will allow Lynas to carry on, because otherwise we will lose a big investment from Australia," he said in Tokyo.

Lynas's shares surged this week over reports China was ready to restrict rare earths exports to the US in its trade war with US President Donald Trump.

Between 2014 and 2017 China supplied the vast majority of the rare earths imported into the US.

In a statement on Thursday night, Lynas said: "We welcome the Prime Minister's comments acknowledging the importance of the continuation of the Lynas operations in Malaysia. We will update the market as we receive further clarification from the Malaysian government."