By Poonam Behura and Melanie Burton
MELBOURNE (Reuters) -Australia's Lynas Rare Earths Ltd hiked construction cost estimates for its Kalgoorlie rare earths facility by more than a quarter and said it would boost the plant's production capacity to tap growing demand.
Lynas has sped up construction at Kalgoorlie in Western Australia amid worries that a facility in Malaysia may have to be partly wound down after regulators there raised concerns about radiation levels from the process of cracking and leaching.
The biggest producer of rare earths outside of China now expects to incur A$730 million ($470 million) in costs to complete the construction of Kalgoorlie, compared to an earlier estimate of A$575 million. It also estimated an additional A$50 million in operating costs.
"The key for why we are really now looking at a further uplift in cost to complete is really our compressed timeline," CEO Amanda Lacaze told an earnings call on Tuesday.
Australian miners in general have been incurring significant cost increases due to a jump in labour, construction material expenses as well as general inflation.
The increased cost estimates can also be attributed to Lynas lifting its production capacity forecast for the Kalgoorlie plant to 9,000 metric tons per annum (mtpa) from 7,000 mtpa.
But higher supply from top producer China and softer demand in key markets led to weaker pricing for its products for the year just ended and the company's annual profit slumped 43% to A$310.7 million ($200 million), albeit ahead of a Visible Alpha consensus estimate of A$293 million.
Over the year, Lynas sold its products for an average price of A$46.2 per kilogram (kg), down from A$60.3 per kg a year ago.
Shares in Lynas were up 0.3% in afternoon trade.
China accounts for nearly all the production of the world's rare earth magnets used in electric vehicles, windfarms and some defence applications.
As the only significant producer of rare earths outside of China, Lynas's progress in building out new facilities has drawn significant investor attention as the West seeks to develop independent supplies - attention which is unlikely to abate after China restricted exports of strategic metals last month.
Lacaze said the company was actively looking for downstream partners to help it build out its business in the U.S., where it is building facilities in Texas to process heavy and light rare earths.
The company has considered producing magnets since the 1990s, but that business requires a very different skill set to Lynas's current expertise in mining and chemicals production, she added.
Lynas said this month it had updated its contract with the U.S. Department of Defense for the construction of the heavy rare-earths component of its rare-earths processing facility in Texas. The facility, which will also serve commercial customers, is slated to be operational in the 2026 financial year.
Lynas also said it continues to engage with federal and state governments in Malaysia to support the development of its rare-earths facility there.
($1 = 1.5550 Australian dollars)