KEY POINTS
- Lynas plans new rare earth supply deals with projects worldwide.
- Annual profit jumped to A$222.4 million, but missed market forecasts.
- The company is supporting US efforts to develop a rare earth magnet supply chain.
Lynas Rare Earths is planning to expand its global supply network as Western countries accelerate efforts to secure alternative sources of rare earths outside China.
The Australian rare earths producer is in discussions with project developers around the world over potential new supplies, while also exploring opportunities to support the development of a US-based magnet-making supply chain.
Lynas, the largest producer of rare earths outside China, said it is holding talks with developers of ionic clay deposits in different parts of the world.
Interim CEO Pol Le Roux said the company expects to announce new supply agreements soon, although he did not specify whether Lynas would purchase material from the projects or consider acquiring some of the businesses involved.
The move forms part of the company’s broader strategy to strengthen its access to rare earth feedstock and expand its position in the global market.
Lynas is also involved in early-stage discussions aimed at supporting the development of a magnet-making supply chain in the United States. The company clarified that it is supporting the development of such a supply chain rather than establishing a new magnet-making facility itself.
Western countries seek alternatives to China
The expansion comes as the United States, Europe and their allies seek to reduce their reliance on China for rare earth materials.
China currently accounts for roughly 90% of global production of rare earth products, including the magnets that are essential to industries such as aerospace, automobiles and defence.
The push to develop alternative supply chains has gained urgency following China’s restrictions on exports of several medium and heavy rare earth products.
A one-year suspension of some of those export controls is scheduled to expire in November, adding pressure on companies and governments to develop more secure sources of supply. Lynas reported a sharp increase in annual profit for the financial year ended June 30.
The company recorded a net profit after tax of A$222.4 million, compared with just A$8 million in the previous year. However, the result fell short of the A$242.5 million consensus estimate compiled by Visible Alpha.
Despite the strong profit growth, Lynas shares fell as much as 8% following the results as investors focused on the earnings miss and operational challenges.
The company’s improved financial performance was supported by stronger rare earth prices and increased demand.
Lynas’ average selling price increased by 59% to A$80.7 per kilogram. The increase was helped by stronger pricing for neodymium-praseodymium, an important material used in rare earth magnets.
The company also benefited from a greater proportion of heavy rare earth sales and agreements with some customers whose prices are not directly linked to market indices.
Lynas said floor-price agreements with Japanese and US customers helped reduce price volatility and provided greater stability to its earnings.
