MELBOURNE (Reuters) - Australian miner Lynas Corp (LYC.AX) is talking to customers about the risks of relying too heavily on China for rare earth supplies in the wake of disruptions from the new coronavirus outbreak, the company’s CEO said on Friday.
There has so far been little direct impact on the market for the metals used in everything from electric vehicles to military equipment, given current levels of oversupply, Lynas Chief Executive Amanda Lacaze told an analyst briefing.
However, she said logistics issues in China, which dominates the rare earths market, presented an opportunity.
“The conversation which [Lynas is] having with end-user customers is a conversation about the risk that they introduce into their supply chain by not having a diversified supply,” she said, pointing to both political and geographical risk.
Lynas, the world’s largest rare earths producer outside China, earlier posted a nearly 80% plunge in half-year profits, hurt by a weak market, a security bond payment at its Malaysian processing facility and higher operational expenses.
Net profit slumped to just A$3.9 million ($2.57 million) for the six months ended Dec. 31, while revenue rose slightly to A$180.1 million.
Its shares fell 5.8 percent, outpacing a virus-related risk selloff in Australian sharemarkets. The ASX 200 fell 3.3 percent.
Lynas has been a target of investor focus amid concerns that China’s dominant position in rare earths could have played a part in the Sino-U.S. trade war, while the company has faced an environmental row over its operations in Malaysia.
On Thursday, Malaysia approved a new three-year license, that allows Lynas to continue processing rare earths at its Kuantan plant, subject to meeting several conditions that the miner expects to meet.
As part of the process, the company said it deposited A$11.6 million with Malaysia’s Atomic Energy Licensing Board for operating its $800 million plant in Kuantan.
Lynas said the production of Neodymium and Praseodymium, used in magnets, fell more than 10% for the half-year to 2,512 tonnes, while Rare Earth Oxide production dropped over 22% to 7,518 tonnes.
While it has received a permit to import more concentrate to Malaysia, Lynas will now turn its focus to getting a permit to process the extra material, an issue that has constrained production for the past few years, Lacaze said.
Reporting by Melanie Burton in Melbourne and Aby Jose Koilparambil in Bengaluru; Editing by Shailesh Kuber and Richard Pullin