The tides recently changed for the Lynas Rare Earths Ltd (ASX: LYC) share price. Two weeks ago, the rare-earths mining company was down ~18% from its May run-up. Now the $6.5 billion biz is only a few percent shy of its highest price in 2024.
This week alone, Lynas shares have trekked 11% higher without a pinch of price-sensitive news. To put the move into perspective, the S&P/ASX 200 Index (ASX: XJO) is up an inferior 1% compared to Friday's closing level.
If we do a little detective work, you'll notice that the bulk of this week's rally began yesterday. Yet, not a peep came from Lynas on Wednesday, which suggests the catalyst may have cropped up elsewhere.
But where might this 'elsewhere' be?
Government squabble may restrict supply
Nothing can be said with complete certainty. However, a fellow ASX-listed miner polished and presented its half-year results to the market yesterday, which may have contained some illuminating information for the Lynas share price and its shareholders.
While not specifically a rare-earths mining company, Iluka Resources Ltd (ASX: ILU) is working on spinning up a refinery to process the rare earths contained in its mineral sands. But, the path to get there is proving difficult.
Iluka Resources noted a 'continuation of Eneabba refinery development contingent on risk-sharing with the Australian Government' in its address. The issue is that the costs of building the refinery have blown out to between $1.7 billion and $1.8 billion, prompting the government to pump the brakes on further funding.
At the same time, Iluka isn't interested in tipping in more cash to complete the refinery. Hence, the project will be on indefinite hiatus unless the government finds a few extra money bags to throw towards the Eneabba refinery.
How does this have any influence over the Lynas share price?
Well, Lynas shareholders might view it as a positive for rare earth prices. Ultimately, it comes down to supply and demand. If Iluka Resources could process its million-tonne stockpile, it would inject more supply into the market, potentially weighing on the commodity's price.
Efforts are being made to release China's vice-like grip on downstream processing of rare earths. However, if it can be helped, Lynas probably wants to be the main player in the West. If too many cooks are in the 'rare earths kitchen', it could turn into a race to the bottom.
Positive view on Lynas share price
As extra icing on the cake, Lynas is also winning over the sentiment of some analysts.
Canaccord Genuity, a full-service investment bank and broker, rated Lynas shares a buy with a price target of $7.15. Given the current share price is $6.82, Canaccord's target suggests a further 4.8% upside from the present level.
Earlier this month, Macquarie set a target of $6.80 for the Lynas share price, which was trading at $5.81 apiece at the time.
Lynas is expected to release its full-year results on 28 August.
