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Why the Lynas Corp share price is up 8% today

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The Lynas Corp share price has soared 8% today after the company provided an update to the ASX on its NUF residue produced at the Lynas Malaysia plant.

Management announced that after extensive consultation with the Malaysian government and regulators, “there is an agreed pathway for the management of NUF”.

This news clearly got investors excited, with the stock jumping on the updated NUF action plan that includes commercialisation options and a long-term disposal solution for the non-radioactive, non-toxic residue.

Lynas said in its update that it does not expect the process to incur any additional compliance costs, meaning the potential upside gain could be enormous for future earnings.

The company remains in ongoing discussions with the Malaysian government regarding issues related to the other solid residue, Water Leach Purification (WLP), at its Lynas Malaysia plant.

What’s happening to WLP?

The company reported its quarterly activities on 22 January and announced revenue of $79.9 million and record REO sales volume of 5,522 tonnes for the quarter.

Today’s announcement is a big breakthrough for the company which appealed a condition on the renewal of Lynas Malaysia’s operating licence due on 2 September 2019. The new condition imposed by Malaysia regulators required the exportation of Lynas Malaysia’s Water Leach Purification (WLP) residue out of Malaysia before 2 September 2019.

There have been a number of studies on WLP and the potential to reduce its radioactivity level as well as extract and store thorium for future nuclear fuel usage.

The verdict

Lynas has traded strongly this year and is up 14.7% for year-to-date, but this is a far cry from its record price of $24.09 per share back in April 2011. Its involvement in the chemical compound/atomic energy business leaves it exposed to a significant regulatory risk which has plagued the company of late, as well being affected by geopolitical issues in Malaysia.

Overall, the stock is a real long-term growth gamble in my books but there is obvious upside should global or domestic energy pivot towards nuclear options.

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Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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