Motley Fool Australia

Here’s why the Lynas (ASX:LYC) share price jumped 7% higher today

shares higher
Image source: Getty Images

The Lynas Rare Earths Ltd (ASX: LYC) share price is on course to end the week on a very positive note.

At the time of writing, the rare earths producer’s shares are up 7% to a multi-year high of $5.25.

Why is the Lynas share price jumping higher?

The catalyst for this strong gain has been an announcement this morning in relation to its activities in the United States.

According to the release, the company has entered into an agreement with the United States Government to build a commercial Light Rare Earths separation plant in Texas.

This project is in collaboration with the U.S. Department of Defense and is scheduled to be completed in accordance with the department’s timetable and as part of the Lynas 2025 plan.

While the cost of the project is still being finalised, Lynas expects Department of Defense funding to be capped at approximately US$30 million. The company will also be expected to contribute approximately US$30 million under the agreement.

Once operational, the plant is expected to produce approximately 5,000 tonnes per annum of rare earths products. This includes approximately 1,250 tonnes per annum of neodymium-praseodymium (NdPr). It will also be able to receive material directly from the cracking and leaching plant that Lynas is developing in Kalgoorlie, Western Australia.

What’s next?

In the middle of last year, the company signed another contract with the U.S. Department of Defense for Phase I work on a U.S. based Heavy Rare Earth separation facility.

Should that contract proceed to the next phase, the Texas facility would house both Heavy Rare Earths and Light Rare Earths processing facilities.

These facilities would serve both the Defense Industrial Base (DIB) and the growing commercial market. The latter includes electric vehicles and green technologies made in the U.S. and global markets.

Management commentary

Lynas CEO, Amanda Lacaze, commented: “As the only non-Chinese commercial producer of separated Rare Earths products to the global marketplace, Lynas is delighted by the opportunity to develop a Light Rare Earth separation facility in the United States.”

“Rare Earth materials are critical inputs to many industrial supply chains, including electric vehicles, electronics and several defence applications. While demand for Rare Earth materials continues to grow, COVID-19 has exposed the risks within global supply chains of the single sourcing of critical materials.”

“This agreement is consistent with the U.S. Government’s commitment to rebuild the domestic industrial base, while working effectively with partner nations. The Texas plant will ensure the U.S. has a secure domestic source of high quality separated Rare Earth materials. This secure supply will provide the essential foundation for the renewal of downstream specialty metal making and permanent magnet manufacturing in North America,” Ms. Lacaze concluded.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

*Returns as of February 15th 2021

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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Related Articles…

Latest posts by James Mickleboro (see all)