The Lynas Rare Earths Ltd (ASX: LYC) share price is up more than 10% after announcing some positive US news.
What did Lynas announce?
Lynas announced that it has entered into an agreement with the US Government to build a commercial light rare earth separation plant in the US.
This collaboration with the Department of Defense is sponsored by the Title III Defensive and Production Act program sits within the Pentagon’s office of industrial policy.
The project is scheduled to be completed in accordance with the Department of Defense timetable as part of the Lynas 2025 plan.
Detailed costings are still being finalised, but Lynas expects the Department of Defense funding to be capped at approximately US$30 million. Lynas is also expected to contribute approximately US$30 million under the agreement.
What are some details about the plant?
Lynas expects the plant will be located in Texas and will produce approximately 5,000 tonnes per year of rare earths products, including approximately 1,250 tonnes per year of neodymium-praseodymium (NdPr).
The plant will be able to receive material directly from the cracking and leaching plant that Lynas is developing in Kalgoorlie, Western Australia.
If the contract with the DoD for a heavy rare earth separation facility, previously announced in July 2020, proceeds to the next phase then the Texas facility would house both heavy rare earths and light rare earths processing facilities. It would serve both the Defense Industrial Base (DIB) and the growing commercial market, including electrical and green technologies made in the US as well as in global markets.
Management comments
Lynas CEO and Managing Director Amanda Lacaze said: “As the only non-Chinese commercial producer of separated rare earths products to the global marketplace. Lynas is delighted by the opportunity to develop a light rare earth separation facility in the US.
“Rare earth materials are critical inputs to many industrial supply chains, including electrical vehicles, electronics and several defence applications.
“This agreement is consistent with the US Government’s commitment to rebuild the domestic industrial base, while working effectively with partner nations…This secure supply will provide the essential foundation for the renewal of downstream specialty metal making and permanent magnet manufacturing in North America.”
Summary thoughts
Lynas isn’t typically the type of business that I’d want to invest in, but I can see why its share price has been rising strongly because of how important it is going to be for the US manufacturing system.
I don’t know what the right price to pay for Lynas shares is, so I’m just going to be an interested observer.
There aren’t many ASX growth shares I’d buy in the commodity space, though RPMGlobal Holdings Ltd (ASX: RUL) looks like a quality software business.
