At time of writing, the share price of Lynas Corporation Ltd [ASX:LYC] is up 0.25%, trading at $2.005 per share.
Lynas share price has been in a retracement following a spike associated with a takeover bid from Wesfarmers Ltd [ASX:WES]:
The latest news out of the company is that it has signed a Memorandum of Understanding (MoU) with a US company for a joint venture (JV) processing facility to be based in Texas.
Lynas’ share price gets small bounce on news of US facility
The Lynas share price spiked as high as $2.07 at the commencement of trading, only to settle lower.
The details of the US facility are as follows:
- Lynas, in collaboration with Blue Line Corporation will work over the next 12 months to develop a rare earths separation facility in Hondo, Texas
- Initial focus on heavy rare earths separation (dysprosium and terbium)
- Focus may expand to include light rare earths (neodymium, praseodymium and lanthanum)
- Lynas to majority own facility
Amanda Lacaze, CEO and Managing Director of Lynas, said of the agreement:
‘This is an exciting opportunity to develop local separation capacity for our customers in the United States and to close a critical supply chain gap for United States manufacturers.’
The MoU comes after a previous indication by Lynas that it would be setting up processing operations at its Mt Weld site. It is unclear if this plan is still on the cards.
Overall, these moves taken together indicate that Lynas is working on ‘contingency plans’ should further complications arise from its ongoing processing operations in Malaysia.
Lynas is the largest producer of rare earth materials outside of China and its products are used in a range of high-tech/clean energy applications which include permanent magnets, catalytic converters, batteries, electronics and water treatment chemicals, among other things.
Should you buy Lynas at this stage?
Money Morning’s Murray Dawes has an in-depth look at what’s happening in rare earths at the moment from a technical perspective. It’s well worth a watch:
He concludes that volumes indicate a potential comeback is on the cards.
That being said, as an individual stock, Lynas strikes me as a particularly risky punt given the number of unresolved variables at play.
This is not a play for the faint-hearted.
But if you are open to putting greater risk in your portfolio, the previously mentioned ‘contingency plans’ may be a sign that the company is working hard to secure its long-term future.
The company will provide a further update to investors Tuesday (tomorrow), so check back here to learn more.
For Money Morning