Australian mining firm Lynas Rare Earths has secured A$200m ($133.17m) in financing from Japan Australia Rare Earths (JARE), a special-purpose vehicle set up by state-owned Japan Organization for Metals and Energy Security (Jogmec) and Sojitz.
Party to a long-term senior loan facility with Lynas, JARE will subscribe for ordinary shares in Lynas at a price higher than the five-day volume-weighted average price (VWAP) in the period immediately after the announcement, as well as the five-day VWAP for the trading period immediately before the announcement.
Furthermore, JARE will waive the $11.5m interest due under the loan facility from January 2016 until the end of December 2016, which the firm earlier postponed.
Lynas said the agreements would bolster its balance sheet and fund its rare earth projects to address the surging global demand for the commodity.
In a press statement, Lynas said: “JARE’s contribution will support Lynas’ ambitious growth agenda, and may include current and planned projects designed to increase production of light rare earth and heavy rare earth materials.”
Lynas will update the loan facility’s current priority supply rights under the new agreements to support growth in the rare earths market in Japan.
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In case of competing demands with other markets, Japan will secure priority supply rights over the growth capacity of Lynas. This will be effective until 2038.
Various factors such as supply term, pricing mechanism and income certainty, including volume and price, will be reviewed to see if there is any opportunity loss for the miner.
Lynas CEO and managing director Amanda Lacaze said: “This $200m capital investment from the Japanese Government, through JARE, will boost our balance sheet and assist in assuring the delivery of our major growth projects.
“Jare has been a valued and strategic partner to Lynas since 2011 and we welcome these new agreements, which better reflect demand forecasts from the Japanese rare earths market. We also thank JARE for agreeing to forgo the historic interest payment of $11.5m from 2016.”