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Nicholas Curtis AM Macquarie Australia Conference 2 May 2012 Lynas Corporation Rare Earths – we touch them everyday For personal use only

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Page 1: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

Nicholas Curtis AM Macquarie Australia Conference 2 May 2012

Lynas Corporation Rare Earths – we touch them everyday

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Page 2: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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Disclaimer

This Presentation has been prepared by Lynas Corporation Limited (ABN 27 009 066 648) (Lynas or the Company). This Presentation contains summary information about Lynas and its subsidiaries (Lynas Group) and their activities current as at the date of this Presentation. The information in this Presentation is of general background and does not purport to be complete or to comprise all the information that a shareholder or potential investor in Lynas may require in order to determine whether to deal in Lynas shares. It should be read in conjunction with Lynas Group’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange (ASX), which are available at www.asx.com.au. This document is not a prospectus or a product disclosure statement under the Corporations Act (Cth) 2001 (Corporations Act) and has not been lodged with the Australian Securities and Investments Commission (ASIC). Not investment or financial product advice This Presentation is for information purposes only and is not financial product or investment advice or a recommendation to acquire Lynas shares and has been prepared without taking into account the objectives, financial situation or needs of individuals. Before making an investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial situation and needs and seek financial, legal and taxation advice appropriate to their jurisdiction. Lynas is not licensed to provide financial product advice in respect of Lynas shares. Cooling off rights do not apply to the acquisition of Lynas shares. Financial data All dollar values are in Australian dollars (A$) unless stated otherwise and financial data is presented within the financial year end of 30 June 2010 unless stated otherwise. Any pro forma historical financial information included in this Presentation does not purport to be in compliance with Article 11 of Regulation S-X of the rules and regulations of the US Securities and Exchange Commission. Past performance Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance. Future performance This Presentation contains certain “forward-looking statements”. The words “expect”, “should”, “could”, “may”, “will, “predict”, “plan”, “scenario”, “forecasts”, “anticipates”, “outlook” and other similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future earnings and financial position and performance are also forward-looking statements. Forward-looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Such forward-looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these forward-looking statements. Investment Risk and other risks An investment in Lynas shares is subject to investment and other known and unknown risks, some of which are beyond the control of Lynas Group, including risk factors associated with the industry in which Lynas Group operates, such as: nature of mineral exploration and production; mineral and ore reserves; construction risks; progressing risks; project developments; market price and demand risk; credit and market risks; regulatory, political and environmental risks; tax and other risks generally relating to equity investment. Not an offer This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. Securities in the Company have not been, and will not be, registered under the U.S. Securities Act of 1933 or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold in the United States unless the securities are registered under the Securities Act or pursuant to an exemption from, or in a transaction not subject to, registration.

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Page 3: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

Agenda

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1. SAFETY AND SUSTAINABILITY 2. THE RARE EARTHS MARKET 3. WESTERN AUSTRALIA OPERATIONS 4. MALAYSIA OPERATIONS 5. FINANCIAL UPDATE

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Lynas will offer a source of supply of Rare Earths outside of China

VISION: Be the leader in Rare Earths for a

sustainable future.

EXCHANGES: ASX (code LYC), OTCQX (code LYSDY)

INDICES: ASX 100, MSCI Australia

SHARES: 1,714m on issue (1,885m fully diluted)

MARKET CAP: A$1.9bn as at 30 April 2012

CASH: A$303.5m (incl. restricted cash) as at 31 Mar 2012

DEBT: US$225.0m JOGMEC/Sojitz Phase 2 facility and

US$225m Mt Kellett convertible bond

LYNAS VITALS AT A GLANCE

Mount Weld

Concentration Plant

Lynas Advanced Materials Plant For

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SAFETY AND SUSTAINABILITY

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Page 6: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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Lynas is a safe and sustainable source of Rare Earths supply

Malaysia Operations

Lynas has achieved more than 8,000,000 hours Lost Time Injury (LTI) free on the LAMP construction project

IAEA confirmed compliance of the LAMP design with international standards

Western Australia Operations

Two LTI incidents in the 4-year operational history of the WA operations

Frequency of hazard and near-miss reporting continues to increase, demonstrating a strong safety culture

STRONG SAFETY CULTURE

Gas Treatment

Note: Data as at end of March 2012

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THE RARE EARTHS MARKET

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Page 8: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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Supply and Demand trends

Structural deficit anticipated as demand recovers while supply remains constrained

0

20000

40000

60000

80000

100000

120000

140000

160000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F

tonn

es R

EO

Demand China Supply Other Supply Lynas supply

Forecast

Sources: Industry resources and Lynas research

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Page 9: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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Key demand drivers and growth outlook

Sector Segment Sub Segments Growth rate over GDP Rare Earths used

Conventional Energy Fuel Cracking

Emissions control Nuclear

FCC Catalysts Material

+ 2% La Ce Gd

Renewable Energy Storage Wind turbines

NiMH Batteries Magnets

+10-15% +25-30%

La, Nd NdPr

Auto / Transportation Emissions Control

e-Mobility

Autocat Oxygen Sensors

Magnets Batteries

+6-8% 0%

+20-25% +20-25%

Ce Y

NdPr, Dy La, Nd

Lighting TC Lamps LEDs Phosphors +5% Eu, Tb, Y, Ce, La

Metallurgy Special Alloys RE Silicides +10-15% CeLa

Electronics

GHD Cameras Displays

Capacitors & chips

Polishing Materials

Phosphors

+2-5% +5-10%

0% 0%

CeLa La

Eu, Tb, Y, Ce, La Dy, Nd, Ce

Medical MRI

PET Scans Medicines

Magnets Crystals Material

+5-10% +10-15% +10-15%

Gd, NdPr Lu La

Miscellaneous Defense

Decorative Ceramics Agriculture

Niches NdPr, Dy, La

Ce, Pr Ce

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Page 10: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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Factors influencing the demand outlook

Factors accelerating demand growth: •Environmental protection:

• Wind turbines • e-mobility • emissions control

•Rare Earths as technology enablers: • Digitisation • Miniaturisation

• Energy efficiency: • Fuel cracking catalysts • Lighting

Factors slowing down demand growth: • Constrained availability of certain Rare Earths, especially HREEs

• Productivity improvements: • Optimisation of RE consumption • On-site recycling

• Price disconnect inside and outside China • Rare Earths vs alternative technology • Competitiveness of non-China users

Rare Earths demand should continue to increase at above-GDP growth rates

Societal trends should continue to drive strong secular growth in Rare Earths demand For

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Recent developments in Rare Earths prices

Both China domestic and FOB prices returning

to levels that promote long term demand growth in key applications.

Recent price retracement reflects an end of excessive speculative trading in rare earths and the demand effects from manufacturing recycling process changes.

China domestic prices likely to be supported by domestic production controls, higher marginal costs to comply with stricter environmental standards and a return to long term demand growth rates.

The China FOB-domestic price spread is likely to close further as new non-Chinese supply comes on-stream.

Prices returning to sustainable levels that support long term industry growth

Mount Weld basket price history

Source: Metal Pages

0

50

100

150

200

250

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12

USD

/REO

kg

China domestic China FOBFor

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Page 12: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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Sales & Marketing

Lynas’ philosophy is to establish a Rare Earths supply chain based on environmentally sustainable practices. Our Rare Earths Direct (RED) brand epitomises this philosophy.

Lynas’ key objectives are to:

Stabilise recent industry volatility and provide better supply visibility to customers

Promote the use of rare earths and where necessary provide price certainty

Offer an integrated supply solution to customers

Lynas has entered into binding offtake agreements in each market segment and each type of product. We are majority contracted for Phase 1 products.

Lynas continues to be engaged in a number of additional negotiations with key customers in Europe, Japan and the US concerning potential supply agreements.

Key points

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Page 13: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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WESTERN AUSTRALIA OPERATIONS

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Page 14: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

The mine is within the Central Lanthanide Deposit (CLD), a Resource of 15.0 million tonnes at 9.8% for 1.5 million tonnes of contained REO

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DUNCAN DEPOSIT (DD)

8%

13% 17%

26% 15%

13%

20%

21% Conc.

Plant 1.5km

773,000t on stockpiles

MOUNT WELD STOCKPILES WITH RARE EARTH OXIDE PERCENTAGES

DD CLD DEPOSIT

DD For

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The Concentration Plant commenced feed of ore in May 2011

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OVERHEAD VIEW OF THE CONCENTRATION PLANT

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Concentration Plant continues to perform well – this part of the production process is now significantly de-risked

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Flotation cells with initial feed

MOUNT WELD CONCENTRATION PLANT

Concentrate cake discharging from filter press

Plant throughput rates will be synchronised with the ramp-up of the Lynas Advanced Materials Plant in Malaysia.

Over 11,000 tonnes of dry bagged Rare Earths concentrate stockpiled on site

Concentration Plant Performance

March 2012

March ramp- up plan

Final concentrate grade 36.0% 36.0%

Recovery 70.6% 67.0%

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The Duncan deposit is complementary to the current operations at the Central Lanthanide Deposit

Comparison of REE distribution

Category

Tonnes Mt

Grade %REO

Tonnes (kt) REO

CLD 14.95 9.8 1,465

Duncan 8.99 4.8 432

Total 23.94 7.9 1,891

Current reserves are 2.08Mt @ 15.5% REO Reserve statement expected to be updated in

2012 ahead of Phase 2 mining campaign Proven floatable process for the CLD Metallurgical test work underway for Duncan

CLD & Duncan Mineral Resource (2.5% REO cut-off)

CENTRAL LANTHANIDE DEPOSIT AND DUNCAN DEPOSIT RESOURCES

REO CLD

(Secondary Monazite) Duncan

(Crandalite) Lanthanum Oxide 23.88% 24.87%

Cerium Oxide 47.55% 39.38% Praseodymium Oxide 5.16% 4.75%

Neodymium Oxide 18.13% 17.89% Samarium Oxide 2.44% 2.83% Europium Oxide 0.53% 0.77%

Gadolinium Oxide 1.09% 1.99% Terbium Oxide 0.09% 0.26%

Dysprosium Oxide 0.25% 1.27% Holmium Oxide 0.03% 0.19% Erbium Oxide 0.06% 0.41% Thulium Oxide 0.01% 0.04%

Ytterbium Oxide 0.03% 0.18% Lutetium Oxide 0.00% 0.02% Yttrium Oxide 0.76% 5.17%

Total 100.00% 100.00% For

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Duncan is a highly prospective deposit that could provide a new source of HREEs

Total Mount Weld resources

Duncan Deposit Outline

Central Lanthanide Deposit

Potential extension to Duncan Deposit

Potential extension to Duncan Deposit

Duncan is a shallow deposit that could be

easily exploited using open cut mining

Duncan is open to the east and southwest (see chart) with a high likelihood that further drilling would increase the size of the deposit

Preliminary metallurgical test work has begun to determine if the rare earths, in particular the heavy rare earths, can be economically extracted from the mineralisation

Scoping study commenced in 1H 2012

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Page 19: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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MALAYSIA OPERATIONS

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Current status of the LAMP

LAMP construction: 98% complete (end of March)

Ready-for-Start-Up program (operational preparedness): >94% complete

Malaysia headcount: 251 (now at 90% of total expected workforce)

Pre-commissioning test packs: >85% complete

Temporary Operating Licence for the LAMP approved

Phase 2 funding secured in April 2011 and construction permits received in Sept 2011

Customer contracts signed in each market segment and for each type of product

MAJOR MILESTONES TO DATE

Lynas is on track for first feed to kiln in Q2 2012 For

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LAMP Temporary Operating Licence

Appeal to the Minister of Science, Technology & Innovation was heard in April 2012.

Lynas respects the regulatory approvals process in Malaysia.

Lynas has intensified its community consultation and engagement following the IAEA review. We intend to maintain this commitment to all stakeholders in the future.

Lynas recognises its responsibility to the community to operate the LAMP in a safe and sustainable manner.

Lynas expects to meet all the conditions associated with the Temporary Operating Licence.

Licence approved in February 2012

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Page 22: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

Schematic - Lynas Advanced Materials Plant core process, which uses mature industry technology

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The Lynas Advanced Materials Plant (LAMP) is 0.8km wide (N-S) and 1.4 km long (E-W)

OVERVIEW OF UP AND DOWNSTREAM SEPARATION AND PRODUCT FINISHING WORKSHOPS

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LAMP construction is more than 98% complete

Secondary Leaching

Gas Treatment Cracking (Rotary Kiln)

Primary Leaching

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Page 25: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

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LAMP construction is more than 98% complete

Upstream Extraction Downstream Extraction

Post Treatment Tunnel Furnaces

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Page 26: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

The path to operating cash flow

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Key steps to first cash flow

Construction completion

Commissioning & first feed to

kiln

Commence plant ramp-

up First

production Customer

qualification Commercial shipments

First cash flow from

sales

Current operational focus is construction completion and pre-commissioning and

commissioning activities

First feed to kiln expected in Q2 2012

After a period of customer qualification, commercial shipments will commence with full plant ramp-up occurring later in 2012 F

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The products are set for Phase 1; Lynas has product flexibility in Phase 2

PHASE 1 ─ 11,000t REO PRODUCTS ANTICIPATED VOLUMES (tpa)

Ce carbonate 2,600

La carbonate 1,350

Ce / La carbonate 4,000

Nd / Pr oxide 2,700

SEG + Heavy Rare Earths 480

PHASE 2 ─ ADDITIONAL 11,000t REO PRODUCTS. Phase 2 will provide additional flexibility, with capacity to produce up to the following approximate volumes:

Ce carbonate, oxide 5,200

La carbonate, oxide 2,700

Nd oxide and Pr oxide 2,700

Separated SEG + Heavy Rare Earths 480 For

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The Strategic Alliance with Sojitz shall provide a stable and long term source of supply for the Japanese market

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LYNAS, SOJITZ AND JOGMEC HAVE EXECUTED DEFINITIVE AGREEMENTS

Sojitz – Lynas Strategic Alliance

Financing Agreement

• Funding for Phase 2 expansion to 22,000t • US$225M loan from JOGMEC and Sojitz • 6 year loan at LIBOR plus 2.75%, principal

repayments begin in year 4 • US$25M subscription for new fully paid

ordinary shares in Lynas at a price of A$2.12 per share

• Funds drawn in May 2011

Availability Agreement

• Minimum 8,500t (+/-500t) per annum

• Allocated to Japanese Customers

• 10 year allocation

Distribution & Agency Agreement

• Joint marketing by Sojitz and Lynas

• Customer commitment will determine Phase 2 products suite

• Professional organisation, speed, understanding of requirements, transparent communications F

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Page 29: Lynas Corporation Rare Earths – we touch them everyday … · Lynas Corporation For personal use ... An investment in Lynas shares is subject to investment and other known and unknown

Letter of Intent signed with Siemens to establish a JV company for the sustainable production of neodymium-based Rare Earths magnets

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LYNAS AND SIEMENS INTEND TO FORM A JOINT VENTURE FOR MAGNET PRODUCTION

LYNAS SIEMENS

The partnership between Lynas and Siemens will secure a long-term and sustainable end-to-end supply chain from mine to magnet to end application

Long term supply contract for Nd/Pr metal

Magnet technology and manufacturing capabilities

Supply of Nd-based rare earth magnets to Siemens (and third parties)

JV COMPANY

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FINANCIAL UPDATE

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Summary of Phase 1 construction costs

PHASE 1 ESTIMATED CONSTRUCTION AND OTHER CAPITAL COSTS

TOTAL A$m

SPEND TO 31/3/12 A$m

FUTURE SPEND A$m

Mount Weld Concentration Plant 75.4 75.4 0.0

Lynas Advanced Materials Plant, Malaysia 349.1 288.4 60.7

Engineering and Project Management Costs 157.0 147.3 9.7

Other Capex including Land in Malaysia 61.9 61.9 0.0

Contingency 5.4 - 5.4

Total $648.8 $573.0 $75.8

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US$225m Convertible Bond issue to Mount Kellett was completed in February 2012

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In January 2012, Lynas executed binding documentation with Mount Kellett

Sources of funds Estimated uses of funds • US$50m Tranche 1 • US$175m Tranche 2 • On 28 February, the parties agreed to roll Tranche 1 into Tranche 2 by redeeming Tranche 1 convertible bonds early and increasing the number of bonds in Tranche 2

• ~$172m for working capital (includes retiring unutilised $125m J.P. Morgan / Sumitomo working capital facility) • ~$42m for additional capital costs at the LAMP

Key terms • Term: 4.5 years • Coupon: 2.75% p.a. • No conversion for the first 6 months • Initial conversion price: $1.25 per share

Summary of cash balance A$m

Cash on Hand and at Call 182.7

Funds for Phase 2 construction (restricted cash) 120.8

Closing cash balances 31 March 2012 303.5 For

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Lynas – online in 2012, delivering Rare Earths globally

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• Our vision is to be the leader in Rare Earths for a sustainable future.

• We are close to realising this vision. • Our supply of Rare Earths will be based on

environmentally sustainable practices. • Lynas will be online in 2012, delivering

Rare Earths globally. • The LAMP is scheduled to come online with

a Phase 1 production capacity of 11,000tpa REO.

• Work for Phase 2 is underway for an additional 11,000tpa REO. F

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NOTE

The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Brendan Shand, who is a member of The Australasian Institute of Mining and Metallurgy. Brendan Shand is an employee of Lynas Corporation Limited. Brendan Shand has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Brendan Shand consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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