Rare earths juggernaut Lynas Corporation Ltd [ASX:LYC] has raced out of the gate this morning.
The Lynas share price is up 17% at time of writing. Surging on the back of confirmation that the US military will fund their plans for a Texas plant.
It’s the breakthrough that’s been months in the making. But, now that it’s confirmed, it could have some major ramifications for the future of rare earths supply.
Heavy minerals, light details
Dubbed ‘Phase 1’ this deal is still a fairly secretive affair.
Aside from the location and intention, Lynas had little info to share. No doubt because the Department of Defence (DoD) wants to keep it that way. After all, this plant will likely be producing materials for military applications.
Because of this we don’t know exactly what the Phase 1 facility will entail. Nor do we know how much money Lynas received to get it up and running.
However, what is clear is that this project has potential to expand. A tender that could lead to ongoing contracts down the line. As Lynas notes:
‘Successful competition of Phase 1 milestones may lead to further contracts for commercial scale production and operation of a U.S. Heavy Rare Earth separation facility, however, this is not guaranteed.
‘Following Phase 1, the DoD will conduct a merit evaluation of Lynas/Blue Line and any other parties selected for Phase 1.’
In other words, Lynas will have to produce a feasible and cost-effective plant. One that will prove to the DoD that it is a valuable venture for the US.
Whether there are key milestones or quotas that will need to be met though, we don’t know. Again, there are no concrete details around specifics.
Nevertheless, the fact that this Phase 1 plant has been greenlit is significant.
It demonstrates that the US really is committed to shaking up the rare earths market. One that has for the longest time been dominated by China.
Breaking the stranglehold
See, as it stands today, China supplies roughly 85% of the rare earths market. Giving it significant influence over these increasingly vital minerals.
For the US, this has been an ongoing concern. Especially as their only domestic rare earths miner has been blacklisted for government projects. This is due to Chinese ties within the company.
As such, the DoD has been meticulous in trying to make this new facility as independent as possible. Ensuring that the production of these rare earths is totally secure.
And it means the Rare Earth Boom 2.0 is now officially underway. A scenario that could see this obscure mineral sector explode in demand. You can read all about this boom, and how to capitalise upon it, right here.
Right now though, know that this is likely just the beginning. Because if this deal foreshadows anything, it’s that there is the potential for a lot more to come.
For Money Morning