The Lynas Rare Earths Ltd (ASX: LYC) share price has dropped around 2% after the ASX mining share revealed challenges with its Kalgoorlie project.
Lynas produces
rare earths that are important for high-tech uses such as smartphones and renewable energy.
Project progress
Lynas said that commissioning is being undertaken in four phases and the final stage four commissioning started in June.
Under stages one to three of commissioning, key production equipment is prepared, tested and certified ready for production. Stage four commissioning involves the introduction of reagents and feedstock, including the first feed of lanthanide concentrate to the kiln and completing the heat-up process cycle for the kiln.
In June, chemical and wet circuits, including neutralisation, filtration and carbonation circuits, will be fed with rare earth carbonate from Lynas Malaysia which will allow completion of stage four commissioning of those circuits.
Major earthworks including ponds required for production and on-site services including power, water and laboratory facilities will be completed during this time and all materials required for production will be received to on-site storage facilities.
Stage four commissioning is on track for completion by 30 June 2023, except for two critical path items – the waste gas treatment plant and on-site gas supply.
Commissioning of other productive equipment will continue unimpeded while these two items are completed. The first production of mixed rare earth carbonate from the Kalgoorlie facility is now expected in August.
Challenges affecting the Lynas share price
Lynas said that both the waste gas treatment plant and on-site gas supply presented early challenges, so the company put in strategies to mitigate the negatives. This included 24-year operation of the site construction team and a trucked liquified natural gas (LNG) onsite gas solution to mitigate timing challenges experienced by its gas supplier associated with the installation of a gas pipeline.
But, despite having come up with those resolutions, there have been further challenges because of a lack of availability of suitably qualified people to fully staff the 24-hour construction activities and late delivery of equipment required for finalisation of commissioning.
Lynas said that it has sourced additional labour, “the full effect of these two items cannot be fully mitigated at this time.”
Final thoughts on the Lynas share price
The delay isn’t ideal, but it’s not as though the project has been permanently delayed, it’ll just take a little longer and perhaps cost a little more. So, the investor reaction may be fair.
It’s not one I’m looking to add to my own portfolio, but I do like that the business is investing for growth with facilities in Australia and the US.
