UPDATE 1-Lynas rare earth output nearly halves on virus-linked plant halts

* NdPr output down 48.5% y/y in fourth quarter

* Malaysian plant operates at 75% capacity

* Rare earths demand hit by COVID-19 - Lynas (Adds restart details, Pentagon funding response, and details of demand)

July 22 (Reuters) - Rare earths producer Lynas Corp Ltd said on Wednesday output nearly halved in the fourth quarter, hit by coronavirus-triggered halts at its Malaysian processing plant and flagship mine in Australia.

The pandemic also hit demand for rare earths, a group of 17 minerals used in everything from ventilators to iPhones to military weapons, the world’s largest producer of rare earths outside China said.

Production at the company’s Mt Weld mine in Western Australia restarted in mid-June after a two-month hiatus, while the Malaysian plant reopened in early May having been shuttered for more than a month under government orders.

Despite the restart, Lynas said its Malaysian plant was operating at only 75% capacity and production at Mt Weld was aligned to the rates in the southeast Asia nation.

The automotive industry was especially hard-hit, Lynas said, as global lockdowns hurt demand for the sought-after minerals.

Production of neodymium and praseodymium (NdPr) fell to 775 tonnes in the quarter ended June 30, from 1,505 tonnes a year earlier, missing a UBS estimate of 900 tonnes. Output was also 43% lower than the third quarter.

According to documents seen by Reuters, the U.S. Department of Defense resumed funding for the company’s heavy rare earths separation facility in Texas, though Lynas did not confirm the report.

It instead said it was “continuing to work with all relevant stakeholders to address outstanding issues.”

The funding forms part of Washington’s bid to shore up domestic reserves of the strategic minerals and cut down its reliance on Beijing. (Reporting by Nikhil Kurian Nainan and Arpit Nayak in Bengaluru; Editing by Anil D’Silva and Subhranshu Sahu)