Lynas Share Price Up 15% since August: Is It Worth Another Look?

At time of writing, the share price of Lynas Corporation Ltd [ASX:LYC] is up a solid 2.57%, trading at $2.60.

The Lynas share price has staged a recovery from a closing low of $2.27 on 23 August, and is up more than around 15% to date.

This handy chart shows you how Lynas have moved with the various twists and turns in the trade war:

Lynas Share Price Chart - ASX LYC Analysis

Source: tradingview.com

We look at their latest quarterly update, the latest moves in the rare earths space, and the long-term outlook for Lynas.

Rare Earths: the 17 obscure minerals more critical than oil and gas (free report).

Investors like quarterly update, Lynas share price rises

The Lynas share price spiked up as high as $2.70 in morning trading, eventually settling at around $2.60.

Here are the financial highlights from Lynas’ quarterly update:

  • Sales revenue of $99.1 million — up 13% from Q4 FY19 result ($87.5 million)
  • Cash balance up nearly 33% to $119.1 million from Q4 FY19 ($89.7 million)

With a production limit being put in place by the Malaysian government, the company produced 1242 tonnes of NdPr and had total REO production of 3926 tonnes.

The company noted that:

At the same time, continued difficult global economic conditions, particularly in China, weighed on Rare Earth market prices during the September quarter. We expect this situation to improve once US-China trade tensions ease, with prices expected to better reflect the future demand growth already being observed in Japan.

Lynas will build a Heavy Rare Earths separation facility — the only one of its kind outside of China.

The company also has a pathway towards a licence renewal in Malaysia.

So a positive quarterly, all things considered.

Resource Minister flags security risks of concentrated rare earths market

In a recent interview on Sky News, Resource Minister Matt Canavan is quoted as saying the following (via Mining.com):

There is a good case for worldwide cooperation here to diversify the supply of these minerals…the concentration of all these markets could cause a risk to the security and affordability of the supply of these critical minerals.

As a result of the potential security risks, Australia is now in talks with the US, Japan, and South Korea, trying to figure out how to develop local rare earths projects.

Meanwhile Lynas has talked with the US defence department and the Defense Logistics Agency.

Long-term Lynas outlook does not solely hinge on outcome of trade war

As you can see in the chart at the start of this article, trade war machinations play a significant role in Lynas’ share price movements.

If China and the US manage to patch things up before the 2020 presidential election — you may see a sharp fall for shares of Lynas.

But long-term however, uptake of permanent magnets in EVs could be poised to increase dramatically.

So you could trade Lynas based on which way you think the deal will go.

Or from an investment perspective, you could look at the various applications of rare earths and how this fits into long-term trends.

Given that the share price has risen since late August, it is possible that some investors are now seeing past the trade war speculation to demand fundamentals.

For a more in-depth look at the rare earths question, be sure to read this free report on rare earths. It’s got some handy charts and neatly sums up the various forces at play in the rare earths market.

Regards,

Lachlann Tierney,
For Money Morning


Lachlann Tierney is a writer for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Ryan is involved in three publications:


Leave a Reply

Your email address will not be published. Required fields are marked *

Money Morning Australia