Gina Rinehart-backed Lynas to buy rare earths miner Meteoric

Australia’s Lynas Rare Earths Ltd will acquire Meteoric Resources Ltd in an all-share deal worth about A$968 million (US$670 million), giving it access to an emerging supplier of critical minerals in Brazil.

Lynas is the largest rare earths producer outside of China, which dominates mining and processing of the materials.

The miner is seeking to diversify its resources through the acquisition, the company said in a statement.

It will offer 0.0207 shares in Lynas for every one in Meteoric.

Shares in Lynas closed nearly 9% lower in Australia on Wednesday, while those in much smaller Meteoric soared 47%, giving it a market capitalisation of around A$727 million.

The new asset should provide a “solid complement” to the Australian firm’s existing operations, analysts at William Blair & Co said in an emailed note.

“However, further work will be needed to integrate the asset and begin production with the newer project, which the market has some concerns about,” William Blair & Co said

Backed by Australia’s richest person, Gina Rinehart, Lynas currently mines rare earths — used in permanent magnets for everything from military applications to smartphones — in Australia and processes the material in Malaysia. 

Brazil has long been touted as a major upcoming source of rare earths — especially the most scarce varieties — as the US spearheads a global effort to build supply chains outside China

More Options

Lynas plans initially to send Brazilian feed to its separation plants in Malaysia.

However, it will also explore building downstream facilities in Brazil in the longer term, potentially to feed markets outside of Asia.

The company will “obviously look at feeding the Western Hemisphere market from Brazil and our existing supply chains from existing facilities in Malaysia,” Daniel Havas, vice-president strategy, investor and government relations at Lynas, said on a conference call.

Perth-headquartered Meteoric has been working to develop its Caldeira project in Brazil, which is one of the largest deposits of rare earths in the world and geologically easier to mine than Lynas’ current operations in Western Australia.

Lynas said it expected development of the Caldeira project would cost more than US$500 million.

The project’s output could ultimately include 127 tonnes a year of dysprosium and terbium — two “heavy” rare earths that are in particular demand.

“That compares with an existing 400-tonnes market outside China,” Havas said.

Government approval

The proposed transaction comes just after Brazil’s president Luiz Inacio Lula da Silva approved a bill to expand government oversight of mining transactions and push for more domestic processing as developed nations eye the country’s resources. There’s also a looming presidential election in the country. 

“We will need change-of-control approval from the Brazilian government,” Havas said.

“Given there is an election there at the moment, that will take a little bit of time, but we have allowed for that in the process,” he added.

Either Lynas or Meteoric can terminate the acquisition if Brazilian authorities reject the change of control, according to company filings. 

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