Western Australian rare earths miner Lynas Corporation has rejected a $1.5 billion takeover offer by Wesfarmers, one day after it was made.
In a statement to the ASX, Lynas said it would not deal with Wesfarmers "on the terms outlined in [its] indicative and highly conditional proposal".
The company did not provide detailed reasons on why it turned down the offer.
Wesfarmers had planned for Lynas to be its first acquisition since spinning off Coles into a separate company and selling Kmart Tyre and Auto and its stake in the Bengalla coal mine in New South Wales last year.
Lynas said it had a "unique position" as the "only significant rare earths miner and processor outside China". It said it considered its Mt Weld ore body in WA to be a "Tier 1, long-life" asset and that it had "substantial in-house capability and intellectual property … created over the past six years".
On Tuesday, the conglomerate issued a "non-binding" cash offer of $2.25 per share — which was a 45 per cent premium on Lynas' closing share price on Monday.
However, Lynas' stock surged 35 per cent to $2.10 after the offer was announced to the market.
Rare earths are used for electronics, energy storage and medical imaging, among other applications.
Lynas processes the materials at its chemical plant in Malaysia, where its operating licence has been put at risk due to environmental restrictions.
"In our view, the attraction of Lynas is its products, which are exposed to increased demand from electric vehicles, wind turbines and other renewable applications," said Morgans analyst Alexander Lu.
"The long-term growth thematic is appealing and while Wesfarmers believes it can add value to Lynas through further capital investment, chemical processing expertise and track record of working with diverse government, we see political risk in Malaysia as a key factor."
Lynas' Malaysian operating licence is up for renewal in September and new conditions pose a regulatory hurdle for the miner.
The country's Atomic Energy Licensing Board has ordered Lynas to remove stockpiles of waste from the Malaysian plant and export them offshore.
When announcing its half-year results last month, Lynas said it was unable to do so in the timeframe mandated by the agency.
The Malaysian plant has been plagued by controversy for a number of years, with residents and environmental groups concerned about radioactive residue.
