Is it time to buy Lynas?

Operational and environmental problems are subsiding.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Lynas Corporation's (ASX: LYC) processing plant in Malaysia has been a constant source of delay and controversy for the Australian rare earth miner. The processing plant, known as the Lynas Advanced Materials Plant (LAMP), has faced ongoing opposition from residents and environmentalists, as well as ongoing operational problems over the past three years.

Lynas mines rare earth from its Mount Weld mine in Western Australia, concentrates it on site and ships the concentrate to the LAMP near Kuantan in Pahang, Malaysia. The state-of-the-art plant has received limit approval thus far, with the stage 2 approval to increase production to 22,000 tonnes per year expected later this year.

Rare earth metals are a group of 17 elements found in the ground. Despite actually being relatively plentiful, the elements are not often found in commercially viable concentrations, making Lynas' mine in Western Australia all that much more significant. It's widely regarded as one of the richest rare earth deposits and is expected to be the biggest deposit outside of China.

With production on the way after the two-year delay between construction and first production, the company appears to be slowly turning it around. After losing more than $107 million last financial year, the plant is hitting its straps, increasing production by 76% in the three months to September 30, to 253 tonnes.

As an aside to the operational problems, Lynas' relatively new chief executive of seven months, Eric Noyrez, has been attempting to change the local population's perceptions of the plant. In the 11 months since it started operating, six international bodies for radiation and pollution levels have audited the plant. All six have come back clear, with the plant operating within local and international standards. Additionally, Lynas recently ran a tour for 80 health officials aimed at improving the public perception of the plant. It seems to have worked, with numerous local officials making public statements proclaiming its safety.

Foolish takeaway

Lynas shares are currently trading at near 24-month lows, at 34 cents. The share price reached an all time high of $2.70 in early 2011 as optimism about the Malaysian facility pushed the price up rapidly from 50 cents. It has steadily declined in recent years as delay after delay to the plant pushed the company to consecutive losses. With the plant finally operational and many of the local health officials now on its side, it appears that the worst may be over. Investors willing to accept greater risk might consider Lynas and a medium to long-term investment.

Motley Fool contributor Andrew Mudie does not own shares in any of the companies mentioned.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »