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PERTH, April 19 AAP

April 19 2013, 5:05PM

Rare earths miner Lynas expects demand for its products to grow over the medium term following a steep fall in prices during the March quarter.

Lynas Corporation's refinery in Malaysia is now producing rare earths products after the Federal Court of Malaysia last month backed earlier lower-court decisions that dismissed a challenge by environmentalists.

But the company could face a fresh challenge if the incumbent government is overturned at the upcoming Malaysian national election on May 5.

Lynas' materials plant has now produced a full suite of rare earths products as it ramps up towards a capacity of 11,000 tonnes per annum by the end of the second quarter of 2013.

"Lynas has projected rare earths demand to grow at above-GDP rates over the medium term driven by increases in demand from key sectors," Lynas said in its quarterly report.

By the end of the decade, Lynas predicts supply shortages in some rare earths element markets such as Neodymium/Praesodymium and Lanthanum.

Sydney-based Lynas said prices fell 13 per cent in the March quarter compared to the previous quarter, achieving an average Mount Weld basket price of US$37.22 per kg.

At the end of the quarter, 15,593 dry tonnes of concentrate containing 5,540 tonnes of rare earths oxides (REO) were bagged ready for export.

Lynas says it's well funded into the generation of sustainable operating cashflow.

Staff numbers at the Malaysia site fell to 1,515 at end of March, down from 2,300 in mid-December 2012 as the project nears completion.

Commercial production from the Malaysian plant in February marked a significant milestone for Lynas, which has battled activists concerned about the project's impact on health and the environment.

IG Markets analyst Evan Lucas said the quarterly result was largely as expected as the company tightened its supply of rare earths to meet demand.

But current pricing showed Lynas was losing out as Malaysia prepared for its closest election on record.

"A new incoming government would probably create a headache for Lynas as the opposition is more sympathetic to the Malaysian side," Mr Lucas said.

Fat Prophets resources analyst David Lennox said he was pleased the company was in production but he said there were still hurdles ahead.

Lynas shares closed 0.5 cents higher at 48.5 cents.

By Kim Christian