The Lynas Corporation Ltd (ASX: LYC) share price is up 11.5% after an announcement today, here’s why.
Lynas Corporation is a ‘rare earths’ minerals producer. Rare earths are minerals which are used as inputs to create many of the electronic devices (e.g. mobile phones) we know and use each day. Lynas has two large projects: Mt Weld in WA is a deposit and mining facility; Kuantan in Malaysia is a rare earths separation facility. Lynas is one of the world’s largest products of rare earths outside of China.
Lynas’ Future In Malaysia
The Malaysian Prime Minister made comments about Lynas at a press conference on Thursday.
Lynas said it welcomes the Prime Minister’s comments which acknowledge the importance of the continuation of the Lynas operations in Malaysia.
This is another positive step for the company, as uncertainty has plagued its Malaysian operations. Lynas said it will continue to update the market as further clarification from the Malaysian government is received.
According to the Australian Financial Review, the Malaysian Prime Minister Mahathir Mohamad said that his country will allow Australian rare earths producer Lynas to keep operating a processing plant in the country. He added that Malaysia did not want to lose such a large investment.
Lynas is pursuing other avenues for its rare earth processing, signing a memorandum of understanding for a joint venture with Texas company Blue Line Corporation, to develop rare earths separation in the United states.
Wesfarmers Ltd (ASX: WES) recently made a takeover offer to acquire Lynas for $2.25 per share, which Lynas rejected. It seems as though this was the right move on Lynas’ part as the share price is now $3.06, which is 36% higher than the takeover offer price.
Lynas might still not be out of the woods with the Malaysian Government, as this has been a drawn out process with no renewal on the license yet. Although it is making good moves by focusing some attention to other locations for processing.
However I’m not a fan of investing in commodity businesses, as they are cyclical in nature and their profit can be unreliable year to year.
There are quality ASX shares to choose from that don’t suffer the pitfalls of commodity businesses. You could find the next share for your portfolio in our free report below.
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