MELBOURNE (Reuters) – Australian miner Lynas on Wednesday reported a drop in third-quarter sales revenue and missed analysts’ expectations due to a drop in rare earth prices, while it flagged higher costs for a project in Western Australia .
Rare earth prices were fairly weak in the third quarter as increased production in China, the largest producer, and a slower-than-expected recovery in demand growth continued to be a drag.
“The market remains less than friendly to us or anyone else in the rare earths sector,” CEO Amanda Lacaze told analysts on a quarterly call, noting a “slight price improvement, but not at a significantly accelerated pace.” “
“There is a general consensus that the current price is below cost for many Chinese producers. There is also a general consensus that the Chinese economy is starting to regain strength,” she said.
Given the low prices, Lynas will not accelerate production in its Malaysian operations and will hold inventories pending an improvement in prices, she said.
The company’s quarterly revenue fell to A$101.2 million ($65.64 million) in the three months to March 31, compared with A$242.8 million a year earlier. It missed a Visible Alpha consensus estimate of A$146.3 million, according to Morgan Stanley. Lynas shares fell 1.2%.
Lynas increased the budget for its Kalgoorlie facility in Western Australia to A$800 million from A$730 million in October.
Cost control is an important point of attention, according to Lacaze.
The company said the Mt Weld Expansion Project in Western Australia is on schedule and construction activities are progressing as planned during the quarter.
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It expects to start groundwork at a U.S. processing plant in Texas by the end of the year, as the world’s largest economy looks to reduce its dependence on China.
“I don’t think anyone would be surprised that the US government is very focused on ensuring that this project moves forward as quickly as possible,” Lacaze said.
($1 = 1.5418 Australian dollars)
