Lynas share price rebounds on $200m Japanese Government investment

Female miner in hard hat and safety vest on laptop with mining drill in background.Female miner in hard hat and safety vest on laptop with mining drill in background.

The Lynas Rare Earths Ltd (ASX: LYC) share price is up 1.15% to $7.455 in early trading on Wednesday.

The share price bounce follows news from the rare earths miner posted after the market close yesterday.

The Japanese Government is giving Lynas $200 million in exchange for priority supply until 2038.

In a statement, Lynas said the new deal will “further strengthen the Lynas balance sheet and support funding of capital projects designed to meet accelerating global demand for Rare Earth materials”.

What news has the Lynas share price rebounding today?

Lynas hit a new 52-week low of $7.26 yesterday amid various negative news over the past fortnight.

The big one is the recent revelation from Telsa Inc (NASDAQ: TSLA) that its next-gen electric vehicle (EV) motor won’t use any rare earths.

On top of that, Lynas has problems with its new Malaysian licence, and last week it reported a 4% decline in profit in 1H FY23 and a 32% increase in costs. All kinda depressing for investors.

So, this new $200 million investment is welcome news today for investors in Lynas shares.

Here are the details.

The new agreements are between Lynas and Japan Australia Rare Earths B.V. (JARE).

JARE is a special-purpose company established by the Japanese Government administrative institution, the Japan Organization for Metals and Energy Security (JOGMEC), and Sojitz Corp (TYO: 2768).

Under the new agreements, JARE will give Lynas $200 million and forego the US$11.5 million in interest that Lynas owed but deferred in 2016 under their shared long-term loan facility.

The $200 million will be provided via a subscription for Lynas shares at a price that will be the higher of the 5-day volume-weighted average price (VWAP) immediately before and following the announcement.

Lynas will use the cash to fund current and planned projects to increase production.

Part of the deal involves Lynas giving supply priority to the Japanese market until 2038.

Lynas CEO Amanda Lacaze said:

Lynas has a huge appetite for growth and a large capital investment plan. This $200 million capital investment from the Japanese Government, through JARE, will boost our balance sheet and assist in assuring the delivery of our major growth projects.

JARE has been a valued and strategic partner to Lynas since 2011 and we welcome these new
agreements which better reflect demand forecasts from the Japanese rare earths market.

Today, Lynas is the market leading supplier of NdPr to the Japanese rare earths industry and these new
agreements demonstrate the deep commitment of JARE to the ongoing growth and success of our

Investors watch Lynas performance

The Lynas share price is down 4% in 2023 while the S&P/ASX All Ordinaries Index (ASX: XAO) is up 5%.

Over the past 12 months, Lynas shares have lost 23% in value while All Ords stocks have risen by 3.3%.

The post Lynas share price rebounds on $200m Japanese Government investment appeared first on The Motley Fool Australia.

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More reading

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia

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