Lynas Rare Earths Ltd (ASX: LYC) shares are catching the eye on Monday.
At the time of writing, the rare earths producer's shares are up 3% to $8.56.
Why are Lynas shares racing higher?
Investors have been bidding Lynas shares higher today after responding positively to its quarterly update.
During the third quarter, Lynas reported sales revenue of $123 million and sales receipts of $124.6 million, which was an increase of 21.5% and 15.7%, respectively, over the prior corresponding period. Though, both figures were lower than the second quarter.
Total rare earth oxide (REO) production came in at 1,911 tonnes for the quarter, while NdPr production — the material used for magnets used in EVs and wind turbines — was 1,509 tonnes.
Lynas advised that during the quarter, projects to support the delivery of the Lynas 2025 target production of 10.5kt per annum continued. This included kiln maintenance at Lynas Malaysia and process modifications at the Kalgoorlie Facility to enhance the quality of Mixed Rare Earth Carbonate (MREC).
Work also advanced on Lynas' U.S. project, although wastewater management challenges at the Seadrift site prompted a revised engineering approach.
Discussions with the U.S. Government are underway regarding additional funding needed to implement these changes, especially in light of global tariff developments which could impact project costs.
Heavy Rare Earth production underway
Perhaps the most exciting news from the quarter is the commissioning of Lynas' new Heavy Rare Earth separation circuit.
A small quantity of Holmium concentrate has already been produced, and Lynas has now commenced the separation of Dysprosium (Dy) — with first Dy production expected in May and Terbium (Tb) production to follow in June.
Management believes that this is a major milestone for Lynas and a game-changer for the industry.
Once fully operational, Lynas will become the only commercial producer of separated Heavy Rare Earth products outside China — an achievement that dramatically strengthens its competitive position.
It notes that given the recent export restrictions from China on Heavy Rare Earths and magnets containing these materials, Lynas is now uniquely placed to support supply chain diversification at a time when western economies are desperately seeking alternatives.
Management has already engaged with target customers, offering pricing that reflects demand dynamics outside China, rather than relying on outdated China-based indices.
Commenting on developments, Lynas CEO Amanda Lacaze, said:
This is an exciting development for Lynas and our customers and sets Lynas apart as the only commercial producer of separated Heavy Rare Earth products outside China. In recognition of the importance of these products in supply chain resilience, Lynas has engaged with target customers. Our pricing offer reflects the high demand for these products outside China rather than the market index which is based on inside China transactions.
Lynas' unique role as the largest supplier of separated rare earths ex-China, and the imminent addition of Dy and Tb to our product range, means that we are ideally positioned to contribute to supply chain diversification and to benefit from favourable market conditions. We expect it will take some time for customers to reorganise supply chains and agreements, however, this presents an opportunity for a sustained market restructure. Lynas is engaging with direct and indirect customers to develop new sales agreements.
