Lynas Rare Earths Ltd (ASX: LYC) has emerged as a standout performer on Thursday morning, defying broader market trends with its shares trading slightly higher at AU$6.00. This performance contrasts sharply with a 1.5% decline seen in the ASX 200 index, highlighting investor optimism surrounding the company's recent developments.
However, later during the trading session, LYC’s share price dropped to flat AU$5.98 apiece (at 12:29 PM AEST).
Reasons Behind Lynas' Outperformance
Investor interest surged following Lynas' announcement regarding significant advancements in its Malaysia operations. The company is targeting the initial production of two separated heavy rare earth (HRE) products by 2025. This strategic initiative marks a pivotal milestone as Lynas Malaysia prepares to introduce separated dysprosium (Dy) and terbium (Tb) into its product portfolio alongside existing light rare earths offerings.
Significance of the Production Milestone
The production of Dy and Tb is crucial for manufacturing high-performance rare earth permanent magnets used extensively in electric vehicles and advanced technological applications like micro-capacitors. These elements are integral to powering electronic devices across various industries.
Currently, Lynas sells Dysprosium, Terbium, and other HRE oxides from its Mt Weld ore body as a mixed HRE compound known as SEGH.
Technical Advancements and Investment
Lynas disclosed that the reconfiguration of one of its solvent extraction circuits at Lynas Malaysia will enable the production of Dy and Tb. The redesigned circuit has a capacity to separate up to 1,500 tonnes of SEGH annually. Front end engineering design (FEED) has been completed, with detailed engineering underway, aiming for commissioning and ramp-up by mid-2025.
The project, estimated to cost $25 million, will be accommodated within Lynas Malaysia's existing Industrial Plan.
Strategic Developments and Future Plans
Additionally, Lynas continues to advance pre-construction activities for its planned U.S. Rare Earths Processing Facility. Both the Malaysian and U.S. facilities are designed to process third-party feedstocks as they commence operations.
CEO's Perspective
Amanda Lacaze, CEO and Managing Director of Lynas, expressed enthusiasm about the breakthrough. She emphasized that Lynas' Mt Weld deposit boasts a rich endowment of heavy rare earth minerals, complementing its existing light rare earth portfolio. Lacaze highlighted the strategic significance of expanding Lynas' product offerings to meet growing market demand for advanced rare earth materials.
Investment Perspective
Goldman Sachs (NYSE:GS) holds a bullish outlook on Lynas shares, considering them undervalued at current trading levels. The brokerage firm maintains a conviction buy rating and a price target of $7.40 on Lynas Rare Earths, reflecting confidence in the company's growth prospects and strategic initiatives.
Lynas Rare Earths' proactive steps towards enhancing its rare earth production capabilities at its Malaysian facility signify a significant stride towards meeting global demand for critical rare earth elements. As the company prepares to introduce separated heavy rare earth products, investors are optimistic about Lynas' role in driving innovation in the rare earth sector. With ongoing advancements and supportive analyst recommendations, Lynas remains poised for future growth amidst a challenging market environment.