EDITOR: | May 7th, 2021 | 5 Comments

With the largest single rare earths processing plant in the world, Lynas stock price has risen 224% in the past year

| May 07, 2021 | 5 Comments
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With the recent doubling of NdPr prices, global leading rare earths miner Lynas Rare Earths Limited (ASX: LYC (“Lynas”) stock price has risen 224% (3.4x) over the past year. The question for investors right now is, can Lynas keep moving higher from here.

And the answer?

Well, that depends on your view of NdPr prices going forward and on Lynas’ expansion plans.

Lynas Rare Earths Limited 1 year stock price

Source

NdPr demand & supply and pricing forecast

A March 2021 Adamas Intelligence report forecast:

  • Annual NdPr oxide shortages of 16,000 tonnes expected by 2030: Constrained by a lack of new primary and secondary supply sources from 2022 onward, Adamas Intelligence forecasts that global shortages of neodymium, praseodymium and didymium oxide (or oxide equivalent) will collectively rise to 16,000 tonnes in 2030, an amount equal to roughly three-times Lynas Corporation’s annual output, or three-times MP Materials’ annual output, of neodymium and praseodymium oxide (or oxide equivalents).
  • Market for magnet rare earth oxides to increase five-fold by 2030: With total magnet rare earth oxide demand forecasted to increase at a CAGR of 9.7% and prices projected to increase at CAGR of 5.6% to 9.9% over the same period, Adamas Intelligence forecasts that the value of global magnet rare earth oxide consumption will rise five-fold by 2030, from US $2.98 billion this year to US $15.65 billion at the end of the decade.”

A five-fold demand increase this decade with constrained supply suggests we will most probably see strong long term prices for magnet rare earth oxides (includes NdPr oxide). Given the massive startup CapEx and environmental issues with rare earths mining that should also prove to be a strong barrier for entry for new start-ups.

Lynas’ current operation and an update on their expansion plans

Lynas currently extracts their rare earth ores from their Mt Weld Mine in Western Australia, does initial processing at the Mt Weld concentration plant, then sends the concentrate to Malaysia for final processing into high quality rare earth materials. Lynas’ rare earths deposit in Mt Weld is acknowledged as one of the highest grade rare earths mines in the world. The Malaysia rare earths processing plant is the world’s largest single rare earths processing plant.

Lynas Rare Earths Limited has a strong track record of producing rare earths with a falling cost of production

Source: Lynas Rare Earths corporate presentation

Lynas’ 2025 projects

Lynas has a 2025 plan to grow their processing capabilities. This includes two key parts:

  • A planned rare earths processing facility in Kalgoorlie, Western Australia.
  • A commercial light rare earths separation plant in the U.S. This may also include processing of heavy rare earths and specialty materials.

The proposed Kalgoorlie facility has commenced site preliminary works and is fully funded and progressing to schedule. It is targeted to begin operations by July 2023. You can read more details here.

The proposed U.S light rare earths separation plant has recently achieved a signed agreement with the U.S. Government with initial contracts for financial support signed with U.S. DoD. Lynas stated:

This project is scheduled to be completed in accordance with the Department of Defense timetable and as part of our Lynas 2025 plan. Detailed costings are still being finalized; we expect Department of Defense funding to be capped at approximately US$30 million. Lynas will also be expected to contribute approximately US$30 million under the agreement. The plant is expected to be located in Texas. Once operational, the plant is expected to produce approximately 5,000 tonnes per annum of Rare Earths products, including approximately 1,250 tonnes per annum of NdPr. The plant will be able to receive material directly from the cracking & leaching plant that Lynas is developing in Kalgoorlie, Western Australia.”

By 2025 Lynas plans to have a production capacity of at least 10,500 tonnes pa of NdPr (last quarter production was 1,359 tonnes) and their Kalgoorlie facility to be able to feed to downstream operations in the U.S. and Malaysia.

Lynas’ current and planned global rare earths operations

Source: Lynas Rare Earths corporate presentation

After a loss in 2020, Lynas is forecast to have a net income of A$137 million in 2021, A$266 million in 2022, and A$349 million in 2023. This equates to Lynas having forecast PE ratios of 37 in 2021, to 21 in 2022, and 15 in 2023. This compares favorably with MP Materials as I discussed recently here.

As of March 31, 2021, Lynas had a closing cash balance of A$568.5 million.

Closing remarks

Lynas Rare Earths Limited has had a great past year helped by strongly rising rare earths prices. Looking ahead Lynas has the 2025 growth plan that has the potential to raise Lynas to the next level. Lynas looks to be in great shape and is well worth consideration for investors that are bullish on the outlook for rare earths, notably NdPr.

Disclosure: The author is long Lynas Rare Earths Limited (ASX: LYC) and MP Materials (NYSE: MP).


Editor:

Matthew Bohlsen is a Senior Editor for InvestorIntel.com. With a Graduate Diploma in Applied Finance and Investment, and a Graduate Diploma in Financial Planning. He ... <Read more about Matthew Bohlsen>


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Comments

  • Rare Earths Investor

    Thanks for writing. Agree that Lynas looks to be a good RE investment for the future (I also hold). IMHO, I particularly like that it no longer feels (as with the past decade) that the company is predominantly a Japanese strategic investment, rather than as now a shareholder-friendly investment.

    I also like that moat company feel with support from 3 countries (I think Malaysia is onboard). Now with plans to process in up to 3 countries with mining and cleaning in AUS and also the possibility of processing third party product. Then as you say throw in RE pricing, supply demand projections and the financial strength of Lynas.

    Based on present news and analysis Lynas looks like a strong potential RE investment.

    GLTA – DyoDD

    May 7, 2021 - 12:18 PM

  • Jack Lifton

    Be careful what you wish for. Lynas/Blue line will not be able to extract rare earths from monazite ore concentrates in Texas as it will not get licensed to recover and sell uranium or store thorium. The only third party material Lynas could process in Malaysia or in Texas would be clean ( of radionucleides ) mixed carbonates. Any other source than monazite of those carbonates would require stand alone batch processing, which only makes economic sense if the profits from very long term commitments can justify the expense of the required chemical engineering and equipment modifications for each ore type. I really doubt that any Lynas operation in Texas could be profitable just considering the costs of transportation from Oz to Texas.

    May 7, 2021 - 12:40 PM

    • Rare Earths Investor

      Thanks for adding.

      IMO, you hit the nail on the head, re., the upcoming battle with the US Democrat left being anti anything to do with new mining and/or processing (regardless of science). This means lookout Energy Fuels, MP, REEMF and Lynas/BL, etc., re., future US RE moves.

      However, factor in the promises of the Biden Admin’ to produce all those new energy jobs within borders, requiring access to all the stages (particularly end line) of the chain in their first term. Leaving the most valuable chain aspects mid and end line in China won’t’ cut it (read jobs = politics/reelection chances, which again, IMHO, will drive much of the admin’ movement in US critical metals).
      We will see in the next 2-3 years. Thanks.

      May 7, 2021 - 1:09 PM

    • jjBeswick

      Lynas won’t be processing any materials containing Th or U in the US and I doubt they’d want to.
      The cracking & leaching first stage (add acid and bake) is where the Th and U are removed to the WLP residue and that will all happen in Kalgoolie (currently at the LAMP in Malaysia).
      There’s plenty of good monazite feedstock in Australia should they wish to go down that path: Iluka and Hastings are good sources for a start.
      Or maybe they’ll just stick to their own 25+ year deposit at Mt Weld.

      May 7, 2021 - 8:23 PM

    • Alexander Nosovskiy

      I belive Blue will process SEG which Lynas can not process at Malaysia only

      May 7, 2021 - 10:45 PM

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