The Lynas Corporation Ltd (ASX: LYC) share price hit a 16-month high this week and is up more than 15% in October.
Lynas is regarded as the world’s second largest producer of rare earth materials and the only significant producer outside China. The geopolitical tensions about rare earth supply has positioned Lynas as a serious global player.
Quarterly report
Following temporary shutdowns in both Malaysia and its flagship mine, Mt Weld in Western Australia, production has resumed at 75% production rates during the quarter. Total NdPr production during the quarter was 1,342 tonnes, up from 775 tonnes in the previous quarter.
Total rare earth oxide production was 4,110 tonnes, compared to 2,579 tonnes in the previous quarter. Sales revenue was A$87 million in the September quarter, up from A$38 million in the previous quarter. The company remained cash flow positive during the quarter.
Growth initiatives for 2025
Lynas has outlined a number of key projects to secure the runway for future growth and to meet increasing rare earths demand. These initiatives include ramping up production to meet forecast demand growth at Mt Weld and building a new rare earths processing facility in Kalgoorlie. Lynas will also invest in increasing downstream processes at its Malaysia plant and is progressing the planning and design work for its heavy rare earths separation facility in the US.
The company has signed a sub-lease with the City of Kalgoorlie Boulder for the industrial zoned site selected for its Kalgoorlie facility and obtained a general purpose lease under the mining act.
The Phase 1 work on the US-based heavy rare earths separation facility is expected to be completed in the 2021 financial year. Lynas signed a contract for the work on 27 July with the US Department of Defense.
Heighted political focus on rare earths supply
Late in the quarter, US President Donald Trump announced an executive order to build reliable and resilient critical minerals supply chains for the US economy. The European Union also identified the need for a diversified and sustainable supply chain, launching a new strategy to secure access to rare earths and other critical minerals.
In addition, the Australian Government released its Modern Manufacturing Strategy, with resources technology and critical minerals processing identified as one of the six national manufacturing priorities.
Looking ahead for the Lynas share price
The average selling price for NdPr for Q1 FY21 was A$19.4/kg, down from A$20.2/kg in Q4FY20 and A$23.7/kg in Q1FY20. During the September quarter, rare earth prices were volatile. Global demand for magnets appear to still be affected by the COVID-19 situation.
However, positive news continued to support the magnet market as the EU decided to accelerate the decarbonisation of its economy, now targeting a 60% reduction of emissions by 2030, instead of the 40% previously targeted. The acceleration of renewables and electric and hybrid vehicles is likely to increase rare earths demand in the medium to long term.
The Lynas share price is up 2.44% at $2.94 in opening trade today.
More reading
- ASX 200 up 1%: Crown sinks on AUSTRAC news, South32 & CIMIC storm higher
- Why rare earth miners could be the next ASX shares to boom
- ASX 200 rises 1%, Reliance Worldwide (ASX:RWC) climbs 11%
- Lynas (ASX: LYC) share price boosted 5% by PM’s budget plan
- Potential ASX winners from government’s $1.5bn manufacturing blueprint
Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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