Rare earths explorer Lynas Corporation Ltd (ASX: LYC) announced on Wednesday that it has struck a deal with a major Japanese firm for supply of rare minerals with pricing wholly based on the China free-on-board (FOB) market price during the delivery time.

Lynas executive chairman Nicholas Curtis added that the deal would also call for additional delivery costs on the part of the Japanese company once the rare earths have been delivered.

Mr Curtis said that the new agreement is covered by a contract "with one of the leading companies in their specific market," as he stressed that further details on the deal would be furnished by Lynas over the few months to come.

Lynas also revealed that its agreement with the Japanese firm contains an evergreen clause, which ensures that extension of the deal would be a possibility with the mutual consent of both parties.

Rare earths yields from the company's Lynas Advance Materials Plant in Kuantan, Malaysia would be the main source of the delivery, which is expected to commence production by the third quarter of 2011 and projected to achieve maximum output of 11,000 tonnes of rare earth oxide per annum in initial stage.

Lynas also maintains a rare earths mining site at Mount Weld in Western Australia while a plan is underway to construct a concentration plant within the region, where rare earths concentrates would be shipped to the Malaysian processing site.

The company said that present rare earth deposits under its control would not only serve the needs of its new Japanese customer but also the requirements of Lynas potential clients from Europe, the United States and more companies from Japan.

Lynas said that Western Australia presently hosts the richest known reservoir of rare earths which is being widely utilised for industrial purposes such as the manufacture of glass, batteries, automotive engines and mobile phones.

As of 1241 AEST on Wednesday, Lynas Corporation share were trading at $1.35, gaining values by up to 2.5 cents or 1.89 percent from previous trading sessions.