Licences have been granted by the Western Australian Department of Mines and Petroleum, and the Western Australian Department of Environment and Conservation.

With the completion of the regulatory requirements, the result is that the first feed of ore into the plant will occur within a week.

The concentrate produced will be shipped and transported to the east coast of Malaysia to the Lynas Advanced Materials Plant, to process the concentrate through to separated rare earths products.

Lynas owns the currently richest known deposit of rare earths in the world at Mount Weld, which is located near Laverton in Western Australia.

The company remains well funded after earlier in the month raising A$20 million through an oversubscribed share purchase plan.

The Minister has appointed an independent panel of international experts to conduct a one-month review of the health, safety and environmental aspects of the Lynas Advanced Material Plant (LAMP).

LAMP is currently under construction in Gebeng Industrial Estate, Kuantan, Malaysia.

Lynas said the company continues to work with the Malaysian authorities, including the Atomic Energy Licensing Board and the Department of Environment, to ensure that the project construction continues to meet all requirements and adheres to international standards.

Lynas added that the company is confident the review will reconfirm that the plant is safe and presents no hazard to the community or Lynas workers.

Lynas believes the review will have no impact on the anticipated completion date of the project.

The company owns the richest known deposit of rare earths, also known as Lanthanides, in the world at Mount Weld, near Laverton in Western Australia.

Lynas will receive a consideration of $20.7 million cash plus an option to acquire up to 7 million ordinary shares in Forge as well as ongoing royalty payments, should Forge successfully develop the Crown deposit or the Swan deposit.

Lynas will have the right to purchase any rare earths that are produced as a by-product from the Crown/Swan deposits at international market prices, with no associated development costs to Lynas, should the deposits be developed.

In the agreement Forge is required use its best endeavours to produce intermediate rare earths by products from any development of the Crown and Swan deposits.

Forge will grant Lynas a right of first refusal to take delivery of any rare earths from any other mineral deposits that any member of the Forge Group acquires.

Also, Forge is required to raise $30 million through a capital raising.

Lynas shareholders will vote on the proposed transaction at an extraordinary general meeting likely to be held in May 2011.

Lynas Shareholders will have the opportunity to subscribe for a marketable parcel of Forge shares with a value of between $2,000 and $5,000, up to an aggregate of $12.5 million for all record date shareholders in the Forge capital raising.

If aggregate subscriptions received from all record date shareholders exceed $12.5 million a pro rata scale back will apply.

Record date shareholders will also have the opportunity to participate in any placement or other non prorata issue of Forge shares for cash consideration that Forge conducts during the 3 year period from 15 March 2011.

Forge and Lynas share a common director in Nicholas Curtis, who is the chairman of Lynas as well as the non-executive chairman of Forge and a Forge shareholder.

Tantalum is mainly used in the manufacture of electronic capacitors whilst the greatest part of world niobium production ends up in high-strength, low-alloy and stainless steels.

Lynas said the commissioning of the plant is "progressing well", despite the heavy rain last month associated with Cyclone Carlos and Cyclone Diana.

What is most important with this first feed, is it effectively sets off a chain of events for Lynas to deliver rare earth products to the market.

At Gebeng in Malaysia, the first feed of concentrate into the kiln at the Lynas Advanced Materials Plant (LAMP) remains on schedule for the third quarter of 2011.

Highlighting the effectiveness of the Lynas operations, both the plant in Western Australia and the LAMP in Malaysia remain within the overall budget.

Lynas has also provided an update on its estimated cash cost of production, assuming a Phase 2 steady state of operations, at A$10 per kilo of rare earths oxide.

In other Lynas news, Eric Noyrez has been appointed as the president and chief operating officer for the company.

Noyrez will lead the operational implementation of the Lynas rare earths project.

You find them in everyday items such as TVs and iPods. Yet they are so sought-after they could conceivably spark a trade war. China has them in abundance, but increasingly refuses to share. Meanwhile the US, Japan and Korea are scrambling to find new supplies. What I’m talking about here are rare earth metals.

China, which produces 95 percent of the world's supplies, has reduced 2010 production levels and slashed export quotas by 72 percent for the second half to 7,976 tons, according to ministry data.

Rare earths, composed of 17 elements, are used in a number of high-tech processes ranging from wind turbines and hybrid cars to missiles.

According to Chao Ning, section chief of foreign trade with the ministry, domestic deposits dropped to 27 million tons by the end of 2009 from 43 million in 1996, representing 30 percent of the world's total explored reserves.

Medium and heavy rare earth, also known as ion-absor bed-type rare earth, is more valuable than the lighter variety and is used in advanced areas such as missiles.

China's verified reserves of ion-absorbed-type rare earth stood at 8 million tons in 2008, while reserves of light rare earth totaled 50 to 60 million, according to data from the Ministry of Land and Resources.

"China is not the only country that has these deposits, but it has been dominating the world's supply market for more than a decade, thereby depleting its own resources," Chao said.

He added that strategic, environmental and economic considerations mean that the country can't afford to continue shouldering the burden of supplying the world.

Some developed countries such as the United States, which alone holds 15 percent of the world's reserves, depend almost entirely on Chinese supplies. They ceased domestic production long ago because importation is more cost effective.

Prices in China rose by fractionally more than 20 percent since 1979 to hit an average of $8,500 per ton in 2009. Prices started to pick up in the middle of that year as the government began to reform the industry by cracking down on illegal mining practices and by reducing exports.

Some of the major rare earth oxides, such as neodymium, had rallied to 24,600 yuan a ton by the end of September, a rise of 80 percent from January.

Japan is the main importer of rare earth oxides, accounting for about 17 percent of the market, while China uses 51 percent internally.

A massive surge in the share price of rare earth stocks is anything but rare at the moment. One company that is benefitting from the reduced quotas is Lynas Corporation (ASX: LYC).

Lynas owns the richest known deposit of Rare Earths outside of China at Mount Weld in Western Australia and the company is progressing well with plant construction to be in a position to commence supply in Q3 2011.

Lynas reported a new price high of US$16.56/Kg was reached on 7 June 2010 for the average Mount Weld Rare Earths composition on a FOB China basis.

On July 9, Lynas reported that the total China export quota for 2010 (30,259 tonnes) is 40% less than the total export quota for 2009 (50,145 tonnes).

Currently, only a few facilities process rare earth oxides outside China, accounting for less than 10 percent of the market.

The tightening of supply regulations provides additional opportunity for Lynas to meet the supply deficit outside of China.

The share purchases provide Lynas with a 9.44% stake in Northern Uranium.

Interestingly, on 9 August, 2010 Northern Uranium announced it had signed a binding letter of intent with Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co., Ltd, an affiliate of East China Exploration & Development.

Results achieved to date by Northern Uranium at its heavy rare earths project have been very encouraging.  

Subject to approval from Northern Uranium shareholders, ECE will invest about A$15.7m in Northern Uranium at a share subscription price of A$0.145 per share.

Northern Uranium owns the Browns Range Rare Earths project which previously formed part of the Gardiner-Tanami Project, but since 2009 has become a focus for the company’s rare earth element (REE) exploration program. 

The project consists of two granted exploration licenses and one tenement application. The tenements cover an area of 400 km2 within Western Australia, located adjacent to the WA/NT border approximately 150 km southeast of Halls Creek.
 
A total of 59 rock chip samples were collected from the Browns Range area, with 11 returning assays with TREE+Y greater than 1% and up to a maximum of 7.95% TREE+Y.

REE distribution is dominated by high value Heavy Rare Earth Elements (HREE), with 65-75% of REE’s being Heavy REE for all except one of the anomalous samples.

Based on the results and the latest Rare Earth prices for oxide FOB China, the range of value of the Brown Range xenotime mineralisation from the above table is US$547 per tonne to US$5,727 per tonne. This is largely due to HREE being over ~70% of all REE in samples.

Lynas owns the richest known deposit of Rare Earths, also known as Lanthanides, in the world at Mount Weld, near Laverton in Western Australia.

The international Rare Earths prices are derived from publicly available sources including metal-pages.com and asianmetal.com. The Average Mount Weld Composition price is calculated for the generic composite equivalent to the Rare Earths distribution at Mount Weld.

Development of the mine at Mount Weld is complete. Engineering and construction of the Concentration Plant in Western Australia remains on time and within budget, as at 30 June 2010, for completion in December 2010.

Engineering and construction of the LAMP remains on time and within budget as at 30 June 2010; with the first feed to kiln at the LAMP on target for the third quarter of 2011.

Lynas has received all required approvals to construct both plants and expects production to commence in 2011.

The Lynas share price has been on a tear since early June, increasing by 80% to $0.90.

The average rare earths composition price for Lynas' Mount Weld product has increased to US$21.43 kg/REO on a FOB basis. This is a rise of over 16 per cent in the past week.
 
This follows the recent tightening of the Chinese export quota of rare earths announced by the company on 9 July 2010.  China's rare earths export quota was significantly reduced for the second half of 2010, providing an upward impetus to prices of rare earths. The 2010 regulatory constraints of Rare Earths supply from China, which supplies over 90% of Rare Earths to the world, is a significant reduction in product available for export.

‘Rare Earths’ is the term given to fifteen metallic elements known as the lanthanide series, plus yttrium. They play a key role in green environmental products, from energy efficient compact fluorescent light bulbs (CFLs) to hybrid cars, automotive catalytic converters and wind turbine generators.

They are also essential in the development and manufacturing of many modern technological products, from hard disc drives to flat panel displays, iPods and magnetic resonance imaging (MRI) scans.

Lynas is aiming for production to commence in 2011.

ASX Code: LYC
Market Cap: A$0.91bn
Initiation: Overweight
Price: A$0.55
Price Target: A$0.91

Key Points

JP Morgan has initiated coverage on Lynas Corporation (ASX: LYC) with an overweight rating and a $0.91 Jun 11 price target. LYC is a development-phase company in the rare earths industry.

The Group is progressing an integrated rare earths project with a mining operation and concentration plant at Mt Weld in Western Australia servicing an Advanced Materials Plant in Malaysia.

Following a recent capital raising, the Group is now fully funded for Phase 1 of the project (11Ktpa rare earths oxide by FY12E) and has signed a number of customer offtake agreements.

From there, LYC hopes to develop Phase 2 which would double production.

JP Morgan believes the fundamental outlook for rare earths is positive. Demand is supported by consumer electronics, hybrid vehicle technology and other environmental protection applications.

The use of rare earths in neo-magnets and industrial applications in these industries is expected to drive global demand higher. Despite this expected growth in demand, the supply of rare earths remains scarce and is heavily skewed towards China.

Recent Chinese government initiatives to limit marginal, unsafe supply and the level of exports are also adding to current market tightness.

JP Morgan expects these market dynamics to support prices over the medium term, especially since the near-term global supply response appears to be very limited.

With LYC’s integrated project the most advanced rare earths project outside China, JP Morgan believes the Group possesses a strong first mover advantage and is in an excellent position to leverage these trends.

Key investment risks include unexpected project delays and cost inflation, the proposed RSPT in Australia, geotechnical issues at Mt Weld, a sharp downturn in global rare earths prices and a stronger A$.

JP Morgan's NPV valuation today is $0.91 using its base case assumptions. Importantly, they do not believe the current share price fully reflects the potential valuation upside associated with the successful delivery of the expanded integrated rare earths project.

JP Morgan maintains a high degree of confidence that the project will succeed, and as such, they think now is the time for investors to consider an Overweight position in LYC.

In doing so, they believe investors are well placed to leverage positive rare earths industry dynamics over the medium term. Positive near-term catalysts include the execution of further offtake agreements and the completion of the concentration plant at Mt Weld.

Lynas owns the richest known deposit of rare earths, also known as Lanthanides, in the world at Mount Weld, near Laverton in Western Australia.

The primary benefit of establishing the ADR program is to create a broader secondary market for Lynas, particularly in North America, thereby providing better access for American investors to deal in Lynas securities.

Development of the Mount Weld mine is complete and in November 2009 Lynas completed an A$450million capital raising to enable the completion of construction of the Concentration Plant at Mount Weld and an Advanced Materials Plant to process the Mount Weld concentrate through to final Rare Earths oxides in the Gebeng Industrial Estate, Kuantan, Pahang, Malaysia.

The ADRs will be tradable via licensed U.S. brokers in the ordinary course of trading in the Over-The-Counter (OTC) Market in the U.S.

Lynas has appointed the Bank of New York Mellon as its authorised U.S. representative and Depositary Bank to establish the ADR facility. This will now consolidate all Lynas ADR trading in the U.S. under the BNYM facility.

Particulars for the U.S. sponsored ADR program are as follows:

U.S. Exchange: OTC
CUSIP Number: 551073208
ISIN Number: US5510732085
ADR Ticker Symbol: LYSDY
ADR to Ordinary Share Ratio: 1:10

Lynas owns the richest known deposit of Rare Earths, also known as Lanthanides, in the world at Mount Weld, near Laverton in Western Australia.

Since the restart of its rare earths project in November 2009, the company has worked with United Group to confirm costings for the project.

Estimated capital cost to complete Phase 1 of the concentration plant in Western Australia and the advanced materials plant in Malaysia is A$339 million (previously A$302.7 million).

The major variation is due to a significantly higher Engineering, Procurement and Construction Management fee than in the previous estimate (previously A$100m which has increased to A$136.4).

Since the restart of the Lynas Rare Earths Project in November 2009, after a nine month suspension, a major focus of the company has been to review, and progress where necessary, the project engineering with United Group (UGL) to reach a point where the Company could confirm a revised baseline capital cost estimate and schedule.

This work has now been completed by the UGL – Lynas Alliance Team. The estimated capital cost to complete Phase 1 of both the Concentration Plant in Western Australia and the Advanced Materials Plant in Malaysia is A$339.19 million.

The increase in the EPCM fee has resulted from a necessary revision of all engineering estimates, the undertaking of significant value engineering to keep original plant capital costs within previous projections, and a revision of construction management costs for the Advanced Material Plant in Malaysia.

Mobilization to site in Western Australia occurred in April 2010. Importantly, the target date of First Ore Feed in December 2010 also remains on track as previously announced.

Mobilization to site in Malaysia is scheduled to commence this month. The first construction contractors to mobilize to site will advance the civil works package by commencement of pile capping in preparation for concrete pouring. A detailed review of the schedule anticipates first concentrate feed to the kiln early in the third quarter of 2011 (previously Q2 2011).

Estimated operating costs during the period of construction have been reduced significantly since the previous estimate. In Western Australia, the majority of the decrease is due to a reduction of work shifts at the Concentration Plant until the Advanced Materials Plant in Malaysia is fully commissioned. It has also been possible to reduce working capital in Malaysia and the Corporate
Office.

As at 31 March 2010 the forecast total cash requirements to start of production of Phase 1 of the Lynas Rare Earths project is A$407.32 million. Total cash at bank as at 31 March 2010 was approximately A$417million.

Dependent on the final capital costs, use of the contingency facility included within the capital estimate, and the revenue generated during the commissioning and ramp-up of the Advanced Materials Plant there may be a potential requirement for a working capital facility in the amount of approximately A$25million during ramp-up of the plant.

Lynas has estimated the value of the award to be approximately AUD$30 million, subject to finalization.

The Malaysian Advanced Materials Plant will be used by Lynas to process concentrate from its Mount Weld Rare Earths plant, located in Western Australia.

UGL has an established relationship with Lynas, having undertaken a high level engineering review of the Advanced Materials Plant project earlier this financial year.

Building on its extensive construction experience and engineering design capability, UGL Resources will utilize fully integrated 3D multi-disciplined engineering and materials management systems to deliver the project.

Lynas Executive Chairman Nicholas Curtis said the company was very pleased to be partnering with UGL in the delivery of the Advanced Materials Plant in Malaysia.

"UGL brings extensive construction experience and engineering design capability in South East Asia to this project," Mr Curtis said.

"We are constructing world class production facilities which are designed to meet the strict environmental requirements of Australia and Malaysia.

"The UGL contract is an Alliance style project where both client and contractor jointly manage the schedule of works on an open book basis to better manage risk."

Lynas owns the richest known deposit of Rare Earths, also known as Lanthanides, in the world at Mount Weld, near Laverton in Western Australia.

This deposit underpins Lynas’ strategy to create a reliable, fully integrated source of Rare Earths supply from the mine through to customers in the global Rare Earths industry.

Development of the mine is complete and in November 2009 Lynas completed an A$450million capital raising to enable the completion of construction of the Concentration Plant at Mount Weld and an Advanced Materials Plant to process the Mount Weld concentrate through to final Rare Earths oxides in the Gebeng Industrial Estate, Kuantan, Pahang, Malaysia. Lynas has received all required approvals to construct both plants.

Rare Earths is the term given to fifteen metallic elements known as the lanthanide series, plus yttrium. They play a key role in green environmental products, from energy efficient compact fluorescent light bulbs (CFLs) to hybrid cars, automotive catalytic converters and wind turbine generators. They are also essential in the development and manufacturing of many modern technological products, from hard disc drives to flat panel displays, iPods and magnetic resonance imaging scans.

With senior management and board level experience in major multinational industrial and chemical companies, Noyrez has extensive industrial and rare earths experience.

He has nine years with the Rhodia group of companies, a France-headquartered multinational chemical group with annual turnover of approximately $A8 billion. Rhodia’s Silcea division is a leading global supplier of products utilizing rare earths and rare earths technologies and as such, Rhodia Silcea is a major consumer of rare earths.

Lynas owns the richest known deposit of Rare Earths, also known as Lanthanides, in the world at Mount Weld, near Laverton in Western Australia.

Lynas completed an A$450million capital raising in November to kick-start construction of the Lynas Rare Earths project.

All environmental approvals have been received to build a concentration plant at Mount Weld and an advanced materials plant to process the Mount Weld concentrate through to final rare earths oxides in Pahang, Malaysia.