Lynas Rare Earths Ltd (ASX: LYC) shares are outperforming the market on Thursday morning.
At the time of writing, the rare earths stock is up a fraction to $6.00.
However, this compares very favourably to a 1.5% decline by the ASX 200 index.
Why are Lynas shares outperforming?
Investors have been buying the company's shares today following the release of an announcement.
According to the release, the Lynas Malaysia business is targeting the first production of two separated heavy rare earths (HRE) products in 2025.
It notes that a new process will produce separated dysprosium (Dy) and terbium (Tb) at Lynas Malaysia for the first time and will complement Lynas' existing light rare earths product range.
This could be a big deal for the company. Management points out that Dy and Tb are both essential to the high-performance rare earth permanent magnets used in electric vehicles and high-tech applications such as micro-capacitors which are essential to all electronic devices.
Currently, Dy, Tb and other HRE oxides from the Mt Weld ore body are sold as a mixed HRE compound known as SEGH.
How is this possible?
Lynas revealed that the reconfiguration of one of Lynas Malaysia's solvent extraction circuits will facilitate the production of Dy and Tb.
The new circuit is designed with capacity to separate up to 1,500 tonnes of SEGH per year.
It notes that front end engineering design (FEED) has been completed and the detailed engineering design is underway. Its commissioning and ramp up is expected in mid-2025.
It will come at a cost of $25 million. However, the capital expenditure for this project will be accommodated within the previously disclosed Lynas Malaysia Industrial Plan.
Lynas also confirmed that it continues to progress pre-construction activities for its planned U.S. Rare Earths Processing Facility. Both Lynas Malaysia and the planned U.S. Rare Earths Processing Facility have been designed to accept third party feedstocks as they come online.
'An exciting development'
Lynas' CEO and managing director, Amanda Lacaze, was pleased with the development. She said:
Lynas' Mt Weld deposit is remarkable for its endowment of Heavy Rare Earth minerals as well as Light Rare Earth Minerals. This circuit reconfiguration at Lynas Malaysia provides a pathway to accelerate our commitment to processing all of the elements in the Mt Weld ore body.
Dy and Tb are important inputs to high performance magnets and electronic devices and we are pleased to enhance our product range to meet current and prospective customers' needs. The initial separation of Heavy Rare Earths at our Malaysian Facility is an exciting development for our Company and the first step towards offering an expanded suite of Heavy Rare Earth products.
Should you invest?
Goldman Sachs thinks Lynas shares are undervalued at current levels.
The broker currently has a conviction buy rating and $7.40 price target on the rare earths share.
