Lynas (ASX:LYC) share price falls 7% on news of COVID-induced shutdown

Malaysia's third wave of infections made for a tough quarter for Lynas Rare Earths

| More on:
ASX 200 mining shares downgrade Female worker with hard hat puts head in hands

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Lynas Rare Earths Ltd (ASX: LYC) share price is plunging as the company reported its operations were hit with a COVID-19-induced shutdown over the quarter just been.

The company released its quarterly activities report for the first quarter of financial year 2022 this morning. It detailed a tough quarter for Lynas, during which the company faced several pandemic-related challenges.

However, the company has high hopes for the rest of FY 2022. It expects demand for its materials to increase in the new year.

At the time of writing, the Lynas share price is $6.94, 6.72% lower than its previous close.

Let's take a look at what the 3 months ended 30 September looked like for Lynas Rare Earths.

Lynas share price falls on COVID-19 struggles

Over the quarter just been, Lynas generated $121.6 million of revenue. That's the second-highest quarterly result on record for the company but is down from the $184.9 million it saw in the previous quarter. Sales receipts also dropped by $100 million to $92 million.

According to Lynas, global demand for rare earth materials is very strong, particularly in the magnet market. The company's customers told it they expect demand to continue heating up in 2022.

Over the September quarter, the average China domestic price for neodymium-praseodymium was US$80.1 per kilogram.

The Lynas share price could also be reacting to news the company's production was hit with COVID-19-induced restrictions during the period, as Malaysia experienced a third wave of cases, peaking at around 20,000 a day.

Despite over 99% of those working at Lynas' Malaysian cracking and leaching plant being fully vaccinated as of 13 October, the plant was shut down for 11 days of the quarter due to staff unavailability. The company used the shutdown to complete maintenance.

Additionally, Lynas shut down the finishing of non-neodymium-praseodymium products for 16 days. It instead used its available staff for neodymium-praseodymium production.

The September quarter saw 70% of its neodymium-praseodymium production capacity achieved. Production of neodymium-praseodymium came to 1,255 tonnes, 138 tonnes less than the previous period.

Lynas' total production of rare earth oxide came to 3,166 tonnes for the first quarter of financial year 2022. Though, that was down from 3,778 tonnes in the previous quarter.

Lynas also battled shipping delays during the quarter just been. However, the company said its close relationship with its longstanding customers meant it could minimise the supply chain disruption.

Finally, the quarter saw Lynas continuing to work on its Lynas 2025 foundation projects. The company also commenced its Mining Campaign 4-1 at Mt Weld.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. 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.

More on Resources Shares

Miner looking at a tablet.
Resources Shares

Buying BHP shares? You'll want to read this

BHP has come under pressure in 2024 amid a sharp fall in iron ore prices.

Read more »

Two miners standing together with a smile on their faces.
Resources Shares

Broker names 2 of the best ASX mining shares to buy (with 40% to 50% upside)

Bell Potter rates these miners as top buys.

Read more »

Three miners wearing hard hats and high vis vests take a break on site at a mine as the Fortescue share price drops in FY22
Opinions

3 ASX 200 mining shares to buy now with less than $1,000

I think all three of these ASX shares could enjoy an unexpected rebound in 2024.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Resources Shares

Fortescue shares retreat to fresh 2024 low as iron ore breaks below US$100 per tonne

It's been an awful start to the week for Fortescue stock.

Read more »

mining hat on lumps of coal representing mineral resources share price
Resources Shares

Where will Fortescue shares be in 3 years?

Is the next three years going to be exciting for Fortescue?

Read more »

Female miner standing next to a haul truck in a large mining operation.
Resources Shares

3 ASX 200 shares at risk from the slowdown in China

We dig into what's happening in the faltering Chinese economy and its property market.

Read more »

A smiling miner wearing a high vis vest and yellow hardhat and working for Superior Resources does the thumbs up in front of an open pit copper mine, indicating positive news for the company's share price today following a significant copper discovery
Resources Shares

Why are ASX copper shares having such a bumper day?

ASX copper shares are making investors very happy indeed this Thursday.

Read more »

Miner looking at a tablet.
Resources Shares

Is the BHP share price now cheap enough to buy after falling 15% in 2024?

Is the mining giant an opportunity to dig into?

Read more »