Lynas Rare Earths powers to record quarter on back of improving market dynamics
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ASX200 listed Lynas is the bellwether stock for Australia’s rare earths industry and news of its renewed success provides positive market indicators for juniors in the space.
Of particular note was positive commentary from Lynas on strong demand and pricing out of China for neodymium-praeseodymium, its highest value product and a key component in high performance magnets used in the automotive market and wind turbines.
A strong indicator of the manufacturing sector’s recovery from the initial impacts of the Covid-19 pandemic, Lynas received an average selling price of $39.1/kg for 4758t of total rare earths oxides.
That was up from $35.5/kg in the March Quarter and almost double the $20.2/kg customers paid in the same quarter in 2020.
Lynas sold just 1878t back then, with sales receipts of just $42 million and revenue of $38m.
While that rose steadily, as the world opened up, to receipts and revenue of $133m and $110m in March, in June 2021 Lynas reported 44% and 69% increases on the prior quarter to records of $185.9m and $192m.
Prices for NdPr averaged US$69.9/kg despite a dip towards the end of the quarter, with Lynas saying it remains a strong market despite the impacts of the global semiconductor shortage on demand.
Lynas increased NdPr production from 1359t in the March Quarter to 1393t in June and operated around 75% of normal production rates at its Malaysian processing operations, despite coronavirus restrictions limiting staff to 40% of its total workforce and water supply shortages at the Gebeng Industrial Estate.
“Despite the global shortage of semiconductors which affects all industries and in particular, the automotive industry, the NdFeB market is experiencing very strong growth, supporting the demand for NdPr and the HRE produced by Lynas,” the company said.
“At the same time, the demand for catalyst from the automotive and the FCC sectors is back to its pre-COVID levels.
“While prices experienced some decrease through the quarter, we perceive this as a normal correction after the sharp and speculative increases seen in the previous months. Prices have strengthened again in July.”
A sharp rise in sales and prices over the course of the year has seen Lynas’ cash balance move to a position of strength, rising from $101.7m at the start of the financial year to $580.8m as of June 30.
Add in term deposits and Lynas has $680.8m on hand.
It leaves the $6 billion capped company, which owns the largest rare earths mine outside China at Mt Weld in WA, well positioned to pursue its major growth projects including its rare earths refineries in Kalgoorlie and the USA.
Investors responded well to the news, sending Lynas stock soaring 9% to over $7 in early trade.
Shares in the company are up almost 195% over the past 12 months.