The Lynas Rare Earths Ltd
(ASX: LYC) share price has sunk more than 6% after giving its March 2021 quarter update to investors.
Why the Lynas share price is dropping
Lynas said that there are favourable market conditions and it continued through the March quarter. Demand for neodymium-praseodymium (NdPr), being rare earths, remained robust. This was accompanied by higher prices for both NdPr and SEG, leading to another strong quarterly result for the period ending March 2021.
Total rare earth oxides (REO) production was 4,463 tonnes, up from 3,410 tonnes in the second quarter of FY21. NdPr production was 1,359 tonnes, almost the same as last quarter.
Lynas said it continues to assess production rates. At this stage, it has elected to remain at 75% of Lynas NEXT rates as it allows the business to maintain its COVID safety protocols and manage variability in the current circumstances, particularly relating to inbound and outbound logistics.
Quarterly sales revenue was A$110 million. That’s compared to A$119.4 million in the second quarter of FY21. Sales receipts were $133 million (up from $68 million in the second quarter of FY21).
Regarding the Lynas 2025 project, there has been approval and commencement of site preliminary works for the Kalgoorlie project. It also signed an agreement with the US government to build a commercial light rare earths separation plant in the US.
Investing
Lynas said that it’s continuing to invest in innovation and improvement projects at both of its operating sites. During the quarter, a number of plant trials were conducted at Mt Weld, including a week-long trial on a parcel of Apatite (AP) ore that had been mined and stockpiled during ‘Mining Campaign 3’.
These trials will help inform future flowsheet development at Mt Weld and enable the business to process AP ore in the future.
Summary thoughts about Lynas and the share price
Lynas said that, whilst the COVID-19 pandemic is persisting, especially in Europe, means that Lynas should be considered with its forecasts, it expects the rare earth market to recover very quickly, with strong demand.
The ASX rare earth miner said it understands that Chinese players are anticipating this growth with several production capacity increases announced. One announcement was the doubling of production within three years by Northern Rare Earth, the global leading rare earths supplier.
Lynas said it will continue to support the development of “robust” outside China supply chains.
The Lynas share price has been a very strong performer over the last year – rising from $1.50 to around $6. A slight pullback to today’s price must take that into account. It’s still up a lot.
I think Lynas could be one to watch over the next few years. Particularly if it continue to increase its importance in the global rare earth market.
