How rare earth shocks lifted an upstart Australian mining company

Sprawled across a spent volcano on the remote edge of the Great Victoria Desert in Western Australia, the Mount Weld mine seems a world away from the US-China trade war.

But the dispute has been a lucrative one for Lynas Corp , Mount Weld’s Australian owner. The mine boasts one of the world’s richest deposits of rare earths, crucial components of everything from iPhones to weapons systems.

Hints this year by China that it could cut off rare earths exports to the United States as a trade war raged between the two countries sparked a US scramble for new supplies and sent Lynas shares soaring.

As the only non-Chinese company thriving in the rare earths sector, Lynas shares have gained 53 percent this year. The shares jumped 19 percent last week on news that the company may submit a tender for a US plan to build rare earths processing facilities in the United States.

Rare earths are crucial for producing electric vehicles, and are found in the magnets that run motors for wind turbines, as well as in computers and other consumer products. Some are essential in military equipment such as jet engines, missile guidance systems, satellites and lasers.

Lynas’ rare earths bonanza this year has been driven by US fears over Chinese control over the sector. But the foundations for that boom were established almost a decade ago, when another country - Japan - experienced its own rare-earths shock.

In 2010, China restricted export quotas of rare earths to Japan following a territorial dispute between the two countries, although Beijing said the curbs were based on environmental concerns.

Fearing that its high-tech industries were vulnerable, Japan decided to invest in Mount Weld - which Lynas acquired from Rio Tinto in 2001 - in order to secure supplies.

Backed by funding from Japan’s government, a Japanese trading company, Sojitz, signed a $250 million supply deal for rare earths mined at the site.

“The Chinese government did us a favour,” said Nick Curtis, who was executive chairman at Lynas at the time.

The deal also helped fund the building of a processing plant that Lynas was planning in Kuantan, Malaysia.

Those investments helped Japan cut its rare earths reliance on China by a third, according to Michio Daito, who oversees rare earths and other mineral resources at Japan’s Ministry of Economy, Trade and Industry.

The deals also set the foundations for Lynas’ business. The investments allowed Lynas to develop its mine and get a processing facility in Malaysia with water and power supplies that were in short supply at Mount Weld. The arrangement has been lucrative for Lynas.