Why Lynas shares and one other ASX 200 rare earths miner are in this expert's 'core basket'

Rare earths stocks have been getting attention as demand continues to soar for the group of metals.

| More on:
Two mining workers in orange high vis vests walk and talk at a mining site

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

Key points

  • Rare earths shares have been a talking point lately 
  • Global demand and supply trends have seen the sector catch a bid lately amid talk of moving dominant global production away from China
  • Here are two ASX shares with strong exposure to rare earths, according to one well-known boutique investment advisory company 

Rare earths have been getting a lot of mentions lately as demand continues to soar for the group of metals.

This has seen an uptick in demand for rare earths stocks, but not so much for the underlying metals themselves.

Curiously, rare earths actually aren't all that rare.

They are, however, absolutely critical in the production and manufacture of a broad array of products. These products span segments ranging from defence to convection heating and of course, electric vehicles. Primarily, rare earths are used in magnets for each application.

It should come as no surprise, therefore, to see the boutique and well-known investment advisory firm Jevons Global (JG) laying out its investment thesis on the "rare earths complex" in a recent report.

Rare earths to flourish

In the analysis from JG, Dr Kingsley Jones provides a deeper insight into the functions of rare earths. He describes their critical nature to society, and of course, the value proposition at hand.

Dr Jones notes that whilst China is the number one global producer of rare earths, Australia sits in sixth spot "but ranked as the leading reserve nation amongst the developed world mining jurisdictions".

As part of the report, JG has developed a core basket of active producers, advanced development projects, and exposure to "promising downstream ventures".

JG chose companies based on their current production status, on the quality of feasibility studies, and how close they are to a final investment decision.

Within that group, five stocks are listed, and immediately two names stand out.

Why this advisory backs Lynas shares

First is Lynas Rare Earths Ltd (ASX: LYC).

Perhaps one of Australia's better known rare earths miners, Lynas shares have caught a bid lately following recent company updates.

Last week Lynas announced a $500 million expansion at its Mt Weld operations in Western Australia. Just prior to this, it posted its Q4 FY22 earnings report.

Both updates were received positively by the market.

Meanwhile, JG also names Iluka Resources Limited (ASX: ILU) in its core rare earths basket. Iluka has a unique exposure to the rare earths segment.

It is a major exporter of mineral sands. This is a class of minerals that contains a number of essential ingredients for the manufacture of industrial metals and goods.

It also mines monazie and xenotime, both of which fall under the rare earths umbrella.

"Lynas Rare Earths and Iluka Resources enjoy very strong positions as anchor firms for an integrated mines to metals strategy," Dr Jones writes in the report.

"Whilst the dominance of these 2 players may distract investor attention from worthy new entrants, we consider the health of the industry will depend on a portfolio approach to investment," he added.

Lynas and Iluka shares are up 61% and 6% over the past 12 months of trade respectively, as seen below.

TradingView Chart

Motley Fool contributor Zach Bristow 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.

More on Resources Shares

a sad looking engineer or miner wearing a high visibility jacket and a hard hat stands alone with his head bowed and hand to his forehead as he speaks on a mobile telephone out front of what appears to be an on site work shed.
Resources Shares

Down 14% in 2024, why is the BHP share price sliding again today?

ASX 200 investors are bidding down the BHP share price on Wednesday.

Read more »

A mining employee in a white hard hat cheers with fists pumped as the Hot Chili share price rises higher today
Resources Shares

These ASX 200 mining stocks could rise 40% to 50%

Analysts think these miners are dirt cheap at current levels.

Read more »

Image from either construction, mining or the oil industry of a friendly worker.
Resources Shares

Fortescue share price leaps 5% as electric machinery makes a milestone

Fortescue is charging ahead with its electric mining ambitions.

Read more »

rising mining asx share price represented by happy woman miner in hard hat
Resources Shares

Why the BHP share price crushed the benchmark this week

BHP shareholders enjoyed a rewarding week.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Dividend Investing

Here is the profit forecast to 2026 for BHP shares

Let’s unearth how much profit this miner could make.

Read more »

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

Is the worst of the selling now over for ASX iron ore shares?

ASX iron ore giants like BHP, Rio Tinto and Fortescue rebounded this week after falling hard in 2024.

Read more »

Three satisfied miners with their arms crossed looking at the camera proudly
Resources Shares

Why are ASX 200 mining shares smashing the benchmark on Wednesday?

Rio Tinto, BHP and Fortescue shares are all charging higher today.

Read more »

Two miners standing together.
Resources Shares

Why is the South32 share price getting battered today?

ASX 200 investors are bidding down South32 shares today.

Read more »