Lynas (ASX:LYC) share price down 7% despite 'strong' quarterly update

The Lynas Rare Earths Ltd (ASX: LYC) share price is rolling over today despite the company's strong quarterly update. Here's the lowdown.

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Lynas Rare Earths Ltd (ASX: LYC) shares are retreating on Tuesday after the company provided what it called a strong March quarterly update. At the time of writing, the Lynas share price is trading 6.9% lower at $5.94.

Let's take a look at what the company reported.

Lynas share price slumps despite robust demand 

The Lynas share price is on the slide today despite the company reporting that heightened levels of demand for renewable technologies and electric vehicles saw it deliver another robust quarter.

Total rare earth oxide production for Lynas was 4,463 tonnes and total NdPr (Neodymium and Praseodymium) production was 1,359 tonnes for the quarter. This compares to a respective 3,410 tonnes and 1,367 tonnes produced in the second quarter of FY21 (2Q21). 

The company achieved sales revenue of $110 million for the quarter, in part due to the delay in cash collection from revenue generated in the December quarter. Invoiced revenue has continued to face delays due to the impact of COVID-19 on global trade and the blockage of the Suez Canal in March

Rare earth spot prices continue to gain momentum with 3Q21 sales averaging $35.5/kg compared to $29.5/kg in 2Q21 and $19.8/kg in 3Q20.  

In further news that could be dragging on the Lynas share price, the company reports that its Malaysia processing facility is operating at approximately 75% of original nameplate production. Its current focus is on improving cost performance and rare earth recoveries. According to the company, its production rate at this point in time remains sufficient to meet key customer demand while maintaining strict COVID-related health and safety protocols. 

Lynas 2025 foundation projects pushing ahead 

Lynas 2025 represents the company's ambitious growth targets in driving production, diversifying its industrial footprint and becoming the supplier of choice to non-Chinese customers. 

During the quarter, Lynas continued to progress its 2025 foundation projects. 

These include its agreement with the United States Government to jointly fund the construction and development of a commercial Light Rare Earths separation plant in the US. Once operational, the project will secure a critical domestic source of high quality separated rare earth materials. The company is currently working through detailed engineering and design work for the heavy rare earths facility which is expected to be lodged with the US Government in the June Quarter. 

Lynas aims to drive production capability with the expansion of a new processing facility in Kalgoorlie, Western Australia. Today's quarterly update highlighted an approval for the commencement of limited preliminary construction works from WA Government agencies. 

The company also announced that Prime Minister Scott Morrison publicly stated the construction of the Kalgoorlie facility is a "…gold standard example of the cooperation on critical supply chains between Australia and the US."  

Lynas observes that critical mineral supply chains were discussed during the recent 'Quad' leaders meeting between Australia, the US, Japan and India. The company believes this reiterates the importance of its development plans and industry-leading role as the largest rare earth producer outside China. 

Despite a reasonably strong financial and operational update, the Lynas share price is slumping following the release of the update. Notwithstanding today's weakness, the Lynas share price has still surged some 40% year to date and is within 14% of its 52-week high seen early last month. 

Based on the current Lynas share price, the company commands a market capitalisation of around $5.7 billion.

Motley Fool contributor Kerry Sun 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.

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