UPDATE 3-Sojitz and Lynas in rare earth supply deal

* Sojitz, JOGMEC to invest combined $250 mln under pact

* Sojitz, Lynas to ship over 9,000 tonnes/year from 2013

* Australia promised to be long-term supplier to Japan

* Sojitz shares surge 9 pct, trading volume spikes
(Recasts with Sojitz news conference)

By Yuko Inoue

TOKYO, Nov 24 (BestGrowthStock) – Japanese trading house Sojitz Corp
(2768.T: ) said it has forged a rare earth procurement deal with
Australian miner Lynas Corp (LYC.AX: ), marking the latest move by
Japan to reduce its reliance on China for the crucial minerals.

News of the deal comes one day after Australia promised to be
a future long-tem supplier of rare earths to Japan, after
shipments from China to Japan had stalled amid a spat over
disputed islands in the East China Sea. [ID:nSGE6AM0II]

Shares of Sojitz surged 9 percent on the news, with volume
spiking to more than 8 times the daily average of the past 3
months.

Under the agreement, the two aim to start shipments of 1,000
to 3,000 tonnes of rare earth in the final quarter of 2011, and
boost shipments to more than 9,000 tonnes per year by early 2013,
Sojitz said.

Sojitz and the state-run Japan Oil, Gas and Metals National
Corp (JOGMEC) will together invest up to $250 million to finance
a Lynas expansion project, Sojitz said, adding that buying a
stake in Lynas in the future was an option.

China has a virtual monopoly on world supplies of rare
earths, used in everything from flat screens to defence
equipment, and its moves to curb exports have prompted consumer
nations to look for alternative supply sources and suppliers to
expand business opportunities.

Lynas, which plans to begin production next year, has already
signed about half a dozen supply contracts including a new
long-term deal with a European consumer announced earlier this
month. [ID:nSGE6A80B5]

While China accounts for about 97 percent of world’s total
production, rare earths reserves are available in other regions.

China has the largest reserves, accounting for 36.4 percent
of total, followed by 19.2 percent in the Commonwealth of
Independent States, 13.1 percent in the United States and 5.5
percent in Australia, according to USGS Mineral Commodity
Summaries.

Japan’s trade minister Akihiro Ohata said on Wednesday that
Japan-bound rare earth shipments have left China, confirming the
end of a de-facto suspension by Beijing on exports of the
minerals since late September. [ID:nTKG006962]

Japan has been stepping up efforts to diversify its sources
of supplies of the strategic minerals, agreeing with Mongolia
last week to cooperate on developing mineral resources, including
rare earths. [ID:nTOE6AI00]

Last month, Tokyo agreed with India to cooperate in
developing and recycling rare earth minerals and rare metals, as
well as with Vietnam to mine rare earths in the southeast Asian
nation. [ID:nSGE69U00S] [ID:nTOE69O087]

Demand for rare earths is forecast to grow by between 7
percent and 9 percent a year over the next five years against a 5
percent increase in supply, according to Resource Capital
Research analyst Trent Allen.

“This could create severe undersupply of some elements,
especially the scarce middle and heavy rare earths,” Allen said.
(Additional reporting by James Regan in Sydney and Chikako Mogi;
Editing by Chris Gallagher and Nathan Layne)
([email protected]; +81-3-6441-1855; Reuters
Messaging: [email protected]))

UPDATE 3-Sojitz and Lynas in rare earth supply deal