Lynas forced to defend disclosure on US military funding

Lynas Corporation’s bid to secure funding from the US military for a heavy rare earths processing plant has taken another twist with the ASX asking questions about its market disclosures.

The ASX listing-compliance team raised queries with Lynas after it emerged in media reports that the US Department of Defence (DoD) had delayed awarding Phase 1 contracts for a heavy rare earths separation plant.

The ASX queries centred on when Lynas first knew the process was on hold, something the company first alerted the market to on May 22.

In its response, Lynas said it first became aware the process was on hold on April 29 when it received an email from the DoD.

The email said the DoD was investigating objections believed to relate to the claims of US-based rare earths projects and a backlash against Lynas from a powerful group of Republican senators.

Lynas announced to the market on April 22 it had received advice from the DoD of “intent to award a Phase 1 contract” to the company.

“Successful completion of Phase 1 milestones may lead to further contracts for commercial scale production and operation of a US heavy rare earth separation facility, however, this is not guaranteed," it said in the April 22 announcement.

In an announcement after the close of trading on May 22 and more than three weeks after receiving the DoD's "on hold" email, Lynas said it had "seen media reports" on the political debate on the merits of non-US rare earths supply chains.

"Lynas remains one of the two companies selected for phase 1 of the project. However, Lynas understands that the US government's progress on phase 1 is currently on hold while those political issues are addressed," it said.

The ASX query referenced a sharp rise in the Lynas share price from a close of $1.395 on April 22 when it made the Phase 1 announcement to an intra-day high of $1.685 on April 23.

In defending its disclosures, Amanda Lacaze-led Lynas said the Phase 1 work taking in planning and design would cost, at most, a "couple of million Australian dollars".

"The description of this activity is sufficient for a reasonable person to understand that the Phase 1 funding amount was not material," it told the ASX compliance team.

"Therefore, in accordance with the definitions in your letter, Lynas does not consider the Phase 1 funding information to be information that a reasonable person would expect to have a material effect on the price or value of its securities."