When you think of S&P/ASX 200 Index (ASX: XJO) rare earths mining shares, Lynas Rare Earths Ltd (ASX: LYC) may be the first to spring to mind. It's certainly dominant in the field with a market cap of $8 billion.
But in Perennial Partners' August 2022 report, the ASX 200 rare earths miner under the spotlight isn't Lynas. It's the somewhat smaller Iluka Resources Ltd (ASX: ILU) which has a market cap of $4.3 billion.
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This ASX 200 miner fits the bill
Perennial expects to see more merger and acquisition (M&A) activity in the resources sector "as people scramble to secure supply of critical minerals, with particular focus on those located in stable, well-regulated and geopolitically friendly regions".
Perennial said ASX 200 miner Iluka, one of its holdings, "fits this bill".
According to Perennial:
Iluka, which delivered a strong result on the back of high mineral sands prices, is currently developing a rare earths refining facility in Western Australia. The facility, which is predominantly funded by a $1 billion non-recourse loan from the Australian Government's Critical Minerals Facility, will process rare earths for Iluka and other miners.
Rare earths are strategically important, being used in a range of advanced electronics applications as well as being critical to electrification, where they are used to produce very strong magnets.
Perennial added, "Currently, the majority of the world's supply of rare earths come from China, which presents obvious risks."
Below is quick recap of how the ASX 200 rare earths miner has been performing.
Iluka performance snapshot
The Iluka share price has outperformed in what's broadly been a difficult year in the markets, gaining 4% in 2022 compared to the 8.7% loss posted by the ASX 200.
As the Perennial report mentioned, Iluka has benefited from high mineral sands prices. This saw a 186% increase in its net profit after tax (NPAT) in H122 to $369 million. The miner also more than doubled its interim fully franked dividend to 25 cents per share.
At the current share price, the ASX 200 rare earths miner pays a 3.7% trailing dividend yield.
