Commodity prices have lifted across the board with both iron ore and copper running to 7-year highs and a strong recovery for oil prices. This has seen ASX mining shares including BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) delivering market leading returns.
However, the Lynas Rare Earths Ltd (ASX: LYC) share price triumphs over its ASX 200 mining peers after soaring more than 30% in November. The Lynas share price is now up 77% year to date and more than 7% in December.
Rare earth prices running to record highs
Rare earth elements are a group of 17 metals, with China holding about 50% of the world's economic resource. Lynas primarily produces the rare earth element, neodymium-praseodymium (NdPr). NdPr prices have soared in recent weeks to an 8-year high of CNY$635,000 (A$130,700) per tonne. The commodity dipped as low as CNY$307,000 (A$63, 200) in 2016 and bounced off a low of CNY$350,000 (A$72,050) in April 2020.
Lynas advises that a full assessment of global rare earths demand will not be possible until the global COVID-19 situation is more stable. However, positive news continues to support the magnet market. The European Union (EU) recently decided to accelerate the decarbonisation of its economy, now targeting a 60% reduction in emissions by 2030 instead of the 40% previously targeted.
With road transportation responsible for more than 20% of CO2 emissions in the EU, this acceleration is expected to translate into a faster penetration of electric and hybrid vehicles, both of which utilise NdPr in their batteries.
Lynas to expand production and footprint
Lynas has selected Kalgoorlie as the location for its new rare earths processing facility. The Western Australia Government awarded the project 'lead agency' status, with a 'major project' status awarded by the Australian Government. The major project status formally recognises the significance of a project to the Australian economy with extra project support and streamlined project state and territory approvals.
As announced on 27 July 2020, Lynas also signed a contract with the United States Department of Defence for Phase 1 work on a proposed US-based heavy rare earth separation facility. The asset is intended to provide an expanded product suite as well as the only source of separated heavy rare earths outside China. The facility will be using material sourced from the Lynas mine in Mt Weld, Western Australia.
At the time of writing, the Lynas share price has increased 1.5% to $4.08 in trading today.
