PERTH (miningweekly.com) – Rare earth miner Lynas has announced a cost blowout at its Kalgoorlie rare earths processing facility, while falling revenue and inflation pressures have eaten into profits for the year ending June.

Lynas CEO and MD Amanda Lacaze said on Tuesday that an updated project budget for the Kalgoorlie rare earths processing facility had now estimated the capital cost at A$730-million, instead of the original price tag of A$500-million, and higher than the A$575-million estimated last year.

“In addition we estimate approximately A$50-million of pre-commissioning and commissioning costs will be capitalised. The updated project budget includes costs incurred to date, confirmed commitments, forecast final completion costs and estimated variation claims from contractors,” Lacaze said.

“Cost inflation associated with projects of this type is prevalent in Western Australia. With respect to the Kalgoorlie project, this has been exacerbated by the compressed timeline under which the project needed to progress. The new forecast includes costs associated with additional resources mobilised to accelerate construction activities and contractor management challenges due to the accelerated schedule.”

Lynas in October last year announced upgrades to certain equipment and infrastructure at the Kalgoorlie operation to allow for future capacity expansion.

The facility was originally intended to deliver a nameplate processing capacity of mixed rare earth carbonate (MREC) feedstock to produce approximately 7 000 t/y neodymium and praseodymium (NdPr) finished product. With the previously announced upgrades, the facility is now expected to be able to deliver a nameplate processing capacity of MREC feedstock to produce approximately 9 000 t/y NdPr finished product.

Meanwhile, Lynas on Tuesday reported a net profit after tax of A$310.7-million for the full year ended June, down from the A$540.8-million reported in the previous financial year. Revenue for the full year declined from A$920-million to A$739.3-million, despite sales volumes increasing by 5% to 16 014 t of rare earth concentrates.

This was as a result of the average sales price falling by 23% during the year under review, while the cost of sales increased by 15%.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) declined from A$601.2-million to A$377.7-million.

“Revenue of A$739.3-million remained strong. Ebitda, at A$377.7-million, was 51% of revenue with net profits after tax at 42% of revenue. Whilst strong, these results were lower than those in FY22 when market prices were at record highs,” Lacaze said.

“During the year, we invested A$595-million in capital projects and completed the year with a cash balance of A$1-billion, providing funding certainty for completion of our key growth projects.”

Lacaze said that at Lynas Malaysia, works to receive MREC feedstock from the Kalgoorlie facility were nearing completion, with equipment fabricated and delivered for the receiving facilities and tie-in works undertaken to integrate the new facilities with downstream processes.

The A$500-million Mt Weld capacity expansion project was announced in August last year and early works have progressed following minor and preliminary works approval in March 2023.

The project remains on track, with earthworks nearing completion, concrete works well progressed, and fabricated steel modules being delivered to site.

In August this year, Lynas signed a follow-on contract with the US Department of Defense for the construction of the heavy rare earths component of the Lynas US rare earths processing facility in Texas. The updated contract is an expenditure-based contract under which all of Lynas’ properly allocable construction costs will be reimbursed. A contribution by the US government of approximately $258-million is currently allocated to the project.

Lynas has purchased a 149-acre greenfield site in an existing industrial zone in Seadrift, Texas for the integrated US rare earths processing facility. The site was selected for its proximity to a skilled workforce, potential customers, infrastructure and logistics and is large enough to accommodate potential future growth opportunities such as downstream processing and recycling to create a circular mine to magnet supply chain.

“Lynas remains confident that the rare earths market will continue to grow in value and demand. Our extensive capital investment programme will support capacity growth to meet that demand. Our excellent operational performance, and continued focus on operational cost control and efficiency improvements, has ensured that we are well positioned to supply our strategic customers whilst holding inventory to benefit from improved rare earths prices in the future,” Lacaze said.