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Is the “rollercoaster over” for Lynas Rare Earths (ASX:LYC)?

Orocobre share price recovery from downgradeasx share price rollercoaster represented by rollercoaster on share chart
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The Lynas Rare Earths Ltd (ASX: LYC) share price has been a rags to riches story, from a company on the verge of collapse due to plummeting rare earth prices back in 2018 to taking leadership in the sector as the world’s second largest producer outside of China.

The Lynas share price surged ~80% last year on the back of higher rare earth prices and mounting interest for renewables-related investments. As more players aim to take part in rare earth production, could this pose a new threat to rare earth prices? 

Favourable market settings for Lynas Rare Earths 

In the company’s half-year results presentation, it highlighted the apparent effect of global megatrends in renewable energy and electric vehicles (EVs) to underpin continued confidence in rare earth prices. 

Lynas pointed to accelerated demand for EVs with the International Energy Agency (IEA) estimating 40% growth in global sales of EVs in 2020 vs 2019. Other areas highlighted as supporting the demand for rare earths included the increasing use of wind energy, a growing consumer electronics market and emerging global smart homes market. 

When the Sydney Morning Herald questioned Lynas CEO Amanda Lacaze about the boom and bust nature of rare earth prices, her message was simple, “the rollercoaster is over”. 

Lynas Rare Earths 2025 growth vision 

Lynas has its sights set on improving its operational delivery and ramping up production in the near term. The company successfully completed a ~$425 million capital raising back in August 2020 to support a number of initiatives. 

The company’s flagship site, Mt Weld, is a tier 1 rare earths deposit. Proceeds from the capital raising will be used to complete the construction of a new rare earths processing facility next door in Kalgoorlie, Western Australia. The facility will be used to process rare earth concentrate from Mt Weld to produce mixed rare earth carbonate that will undergo further processing at the Lynas Malaysia Plant. Lynas is targeting the new site to be operational by July 2023. 

Lynas has also partnered with the United States Government to build a light rare earths plant and undertake detail work for a heavy rare earth separation facility. Once operational, the plant is expected to produce approximately 5,000 tones of rare earths products per annum, including approximately 1,250 tonnes per annum of NdPr. The NdPr material will be directly sourced from the company’s new plant in Kalgoorlie. 

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Motley Fool contributor Kerry Sun owns shares of Lynas Limited. 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.

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