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A method for producing powder particles having an outer coated region comprising atomising a first material, cooling droplets of the atomised material 5 in a cooling tower 3, and introducing a second material into the cooling tower to create a fluid volume containing the second material through which the cooled droplets pass such that powder particles are produced, coated by the second material or a material derived therefrom. Preferably the first, core material is a metal or alloy and the second, coating material is a rare earth metal. Droplets of the core material may be produced by introducing molten metal or alloy from a crucible 2 through a nozzle 4 into the tower under the influence of a gas stream (7, fig. 1b). The coating material is preferably introduced via injection nozzles 9 in the form of a liquid precursor which comes into contact with the heated substrate and reacts or decomposes to form a solid phase deposited thereon. Further materials may be introduced into the cooling tower at different temperature locations therein, to create powder particles with a series of discrete coating layers, either continuous or partial. An apparatus for producing coated powder particles is also claimed.