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Lynas (ASX:LYC) share price jumps after FY23 first quarter update

The Lynas Rare Earths Ltd (ASX: LYC) share price is up around 7% after the miner told investors how the first three months of FY23 went.

Lynas’ FY23 first quarter

The business reported that it generated quarterly sales revenue was $163.8 million, down from $294.5 million in the FY22 fourth quarter.

Sales receipts for the latest quarter were $234.4 million, down from $351 million in the fourth quarter.

It finished the quarter with $1.03 billion of cash, up from $965.6 million at the end of FY22.

Total rare earth production was 3,500 tonnes, down from 3,650 tonnes. But, NdPr – Neodymium (Nd) and Praseodymium (Pr) – production was 1,045 tonnes – down from the fourth quarter of FY22.

‘Mixed quarter’

Lynas said that this was a mixed quarter. It’s continuing to face “significant operational challenges”, including a complete outage of water supply in Malaysia.

It explained that a “catastrophic” equipment failure experienced by the local water supplier to its Malaysian facility resulted in approximately 16 days of lost production during the quarter.

The Malaysian team are working on additional strategies to reduce the reliance on fresh water supply, including options to increase water recycling.

However, Lynas said that “market demand continues to grow strongly” and it has worked out a growth plan, including several major projects.

Growth plans

The Mt Weld exploration programme commenced, supported by JARE (Japan Australia Rare Earths) – its long-term partner and senior lender. JARE provided financial support in the form of US$9 million through a share placement.

A capacity expansion has been announced for Mt Weld, targeting production of 12,000 tonnes per year of finished NdPr oxide.

It’s continuing to progress on the construction of the Kalgoorlie rare earth processing facility. Management said the plan is going to progress. The business is making progress on the US rare earth processing facility as well.

Lynas also said that the Kalgoorlie project now includes the additional scope of works to implement the industry-first rare earth carbonate refining process which received co-funding through the Australian government, it also includes upgrades to certain equipment and infrastructure to allow for future capacity expansion at Kalgoorlie. These changes led to a 15% increase to the initial $500 million project budget.

Final thoughts

I think that Lynas has a very promising future. Its work on the growth projects is looking good. However, it doesn’t have much control over the price of rare earths.

With the Lynas share price down over 20% this year, I think it could be worth having a sniff at this level for the long-term because of how important rare earth from a Western country could become.

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