Lynas share price sinks 9% despite major US deal

Lynas has signed a major deal with the US government…

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Key points

  • Lynas shares have been sold off on Tuesday
  • Investors have been selling the company's shares after a market selloff offset some very good news
  • Lynas has been awarded a US$120 million contract from the US government 

The Lynas Rare Earths Ltd (ASX: LYC) share price is sinking with the market on Tuesday.

In morning trade, the rare earths producer’s shares are down 9% to $7.81.

What’s going on with the Lynas share price?

Investors have been selling down the Lynas share price on Tuesday amid a broad market selloff which has offset the announcement of a major US deal.

According to the release, the company has signed a contract for approximately US$120 million with the U.S. Department of Defense (DoD).

This contract will see Lynas establish a first of its kind commercial Heavy Rare Earths separation facility in the United States.

The release notes that this mutually beneficial contract supports Lynas ambitions of establishing an operating footprint in the United States, including the production of separated heavy rare earth products to complement its light rare earth product suite.

Furthermore, the company highlights that the separation facility will give US industry access to domestically produced heavy rare earths which cannot be sourced today and are essential to the development of a robust supply chain for future facing industries. These include electric vehicles, wind turbines, and electronics.

Following a detailed site selection process, the facility is expected to be located within an existing industrial area on the Gulf Coast of the State of Texas. Lynas is aiming for it to be operational in financial year 2025.

Management commentary

Lynas’ CEO and Managing Director, Amanda Lacaze, commented:

The development of a U.S. Heavy Rare Earths separation facility is an important part of our accelerated growth plan and we look forward to not only meeting the rare earth needs of the U.S. Government but also reinvigorating the local Rare Earths market. This includes working to develop the Rare Earths supply chain and value added activities.

The U.S. Government’s selection of Lynas for this strategic contract reflects our proven track record in Rare Earths production. The DoD’s decision to fully fund the construction of the Heavy Rare Earths facility demonstrates the priority that the U.S. Government is placing on ensuring that supply chains for these critical materials are resilient and environmentally responsible, and as importantly, their confidence in Lynas’ ability to execute, including access to quality feedstock and processing expertise.

Motley Fool contributor James Mickleboro 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 Scott Phillips.

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