Sojitz Jumps After Reaching Rare-Earths Agreement With Australia's Lynas

Sojitz Corp. and Lynas Corp. shares jumped after Japan’s biggest rare earth importer reached a deal with the Australian mining company, securing an additional source of supply after China slashed exports.

Sojitz climbed 9.1 percent to 168 yen at 1:47 p.m. in Tokyo, making it the best performer in the MSCI Asia Pacific Index. Sojitz will hold a press conference today, according to an announcement. Sydney-based Lynas, which said separately it was in talks to increase output and supply to Japan with an unspecified company, climbed 9 percent to A$1.51 after NHK reported that Sojitz agreed to pay Lynas $300 million to supply 8,500 metric tons of rare earth metals over 10 years.

Japan is seeking long-term secure supplies of rare earths after China, the largest exporter, slashed exports in September. Foreign Minister Seiji Maehara said Japan wanted to collaborate with Australia on rare earth supply at joint press conference yesterday with Australian Foreign Minister Kevin Rudd in Canberra.

“This looks, if indeed confirmed, like a win-win for both companies - the Japanese would love to get secure non-Chinese supply of rare earths and for Lynas it sounds like they have the funding secured for their expansion,” said Ben Potter, a Melbourne-based research analyst at IG Markets Ltd.

Michael Vaughan of FD Third Person, who is acting as a spokesman for Lynas, couldn’t immediately comment.

Lynas is “in advanced stages of discussion to secure additional supply of rare earths products for the Japanese market by accelerating the expansion of the Lynas rare earths project,” the company said in the statement.

Exports Decline

Rare-earth exports from China, the biggest supplier, declined 77 percent in October from a month earlier after the government reduced shipment quotas for the second half. Two ships carrying rare earths left China for Japan, the Associated Press said, citing Trade and Industry minister Akihiro Ohata.

Lynas’s A$550 million ($539 million) Mt. Weld project is due to start in the second half of 2011.

“We will be looking to collaborate on the area of rare earths,” Maehara said yesterday. “We are very pleased that Australia is also able to give us a long-term commitment to rare earths.”

The price of lanthanum oxide, used in hybrid batteries, has risen more than sevenfold since the second quarter to $58 a kilogram, according to Lynas’s website. Vehicles like the Toyota Motor Corp.’s Prius contain about 10 kilograms of rare earths.

Prices to Rise

Prices for rare earths will probably keep rising as new supplies won’t appear any time soon, Commerzbank AG said in a Nov. 11 report. While China may “mitigate its position in the face of strong international pressure, supplies of rare earths are likely to decline further, with delays in the startup of envisaged projects,” the bank said.

China won’t “dramatically” cut rare-earth export quotas next year, Vice Commerce Minister Chen Jian said on Nov. 1. Yao Jian, a spokesman for the commerce ministry, told a Nov. 16 briefing that China also wants other countries to exploit their own rare-earth resources to ensure global supplies.

To contact the reporter on this story: Elisabeth Behrmann in Sydney at ebehrmann1@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net

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