Lynas Corp. (LYC), the Australian company developing the world’s largest rare-earth refinery in Malaysia, fell the most in more than a year after a court ruling further delayed production.
The stock fell 15 percent to 73 cents at the close in Sydney, its biggest drop since Sept. 26, 2011, after the Kuantan High Court adjourned until Nov. 8 an application by a protest group to dismiss government approval for the plant.
The decision is the latest setback for Lynas, whose plant has been held up by protests and legal delays amid community concern over radiation risks. Deutsche Bank AG cut its rating on the stock to sell from hold after the ruling, saying the delay will place pressure on the company’s funding.
“Lynas will need additional funds to get it through to first cash flows,” estimated in March, Deutsche Bank analysts led by Chris Terry said yesterday in a report. The company may need to raise A$40 million in equity to meet a shortfall of about A$80 million, said the analysts. They also lowered the 12- month price target on the stock to 65 cents from 82 cents.
Lynas has been waiting to start processing since winning government approval for production in February. The first phase of the plant, capable of processing 11,000 metric tons a year, was completed last month. Even so, Lynas has been unable to transport thousands of tons of raw materials at its Mount Weld mine in Western Australia due to the delays.
“Arising from the delay that these proceedings have caused to Lynas, the target first feed to kiln date will be delayed to a date later than the previously advised date of October 2012,” the company said yesterday in a statement.
Protests against the project in Malaysia have included a march on parliament, court challenges and social media campaigns. A Kuala Lumpur high court in April rejected a request by a similar group to review the government’s approval. That case is pending an appeal at the Federal Court. In June, Maximus Johnity Ongkili, Malaysia’s minister of science, technology and innovation, also denied an appeal to cancel Lynas’s permit approval.
Lynas agreed last month to export any waste material from the plant to ease community concerns.
“A month of extended suspension of the temporary operating license is another month of temporary relief for the Stop Lynas campaign,” Tan Bun Teet, a spokesman for Save Malaysia Stop Lynas, said in an e-mailed statement. The group will consider an appeal should the judicial review be rejected, he said by phone today.
Rare earths, 17 chemically similar elements, are used in Apple Inc.’s iPod music players, flat-screen televisions, magnets and hybrid cars. The materials are also used to make goods such as Boeing Co. (BA:US) helicopter blades, Nokia Oyj (NOK1V) mobile phones and Toyota Motor Corp. wind turbines.
Work on the second phase that would double capacity should start in the second quarter of next year and be completed before the end of 2013, Chief Executive Officer Nicholas Curtis said last month.
The hold up has had repercussions for customers, with some reversing plans to open factories near the refinery, Curtis said June 29. Instead they’ve set up facilities in China, which supplies 90 percent of the world’s rare earths, he said at the time.
The temporary operating permit, valid for two years through to Sept. 2, 2014, will enable Lynas to conduct trial processing in stages and in limited quantities under surveillance by the authorities, according to the licensing board’s website.
The agency will monitor operations and safety standards and a permanent license may be granted during the next two years should standards be met, it said.
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