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Lynas share price surges on U.S. tender news

share price higher

The Lynas Corporation Ltd (ASX: LYC) share price is pushing higher again on Friday and is one of the best performers on the ASX 200.

At the time of writing the rare earths producer’s shares are up 4% to $2.46.

This means Lynas’ shares are now up a sizeable 14.5% over the last two days. Which has stretched its year to date gain to an impressive 60%.

Why is the Lynas share price charging higher?

Lynas’ shares have been on fire this week after the U.S. Army revealed that it is looking to fund the construction of a rare earths plant for weapons development.

According to Reuters, the U.S. Army is intent on making its first financial investment into commercial-scale rare earths production since World War Two.

This appears to be due to China’s dominant position in rare earths and concerns that it will use it as geopolitical leverage. Especially given their use in the production of military weapons and electronics.

Reuters notes that the U.S. military is offering to fund up to two-thirds of a refiner’s cost. Which certainly makes it an attractive opportunity for a rare earths producer such as Lynas.

And given that Lynas is the largest rare earths producer outside China, it is arguably in a strong position to win the government tender if it bids for it.

Lynas response.

This morning Lynas responded to speculation that it will be bidding for the tender.

In a brief statement the company advised: “The tender period has not yet closed. Lynas would expect to submit a compliant tender.”

The tender period is believed to close on December 16, which means Lynas may be working overtime this weekend to get one submitted at the start of next week.

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Returns as of 6th October 2020

Motley Fool contributor James Mickleboro 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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