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Date : 20/04/2021

Why Lynas Shares Dip 7% Today in ASX?

Lynas Rare Earths Limited (ASX: LYC) is the second largest, rare earths producer in the world. Outside of China, Lynas is the only producer of scale of these rare earth commodities. Mt Weld, Western Australia is home to one of the world’s highest-grade rare-earth mines. The concentrate produced here is then shipped to Malaysia where Lynas operates the world’s largest and most advanced rare earths chemical processing plant in the world.

Lynas share price falls despite strong financials.

Lynas released their quarterly activities report this morning and it can be seen that Favourable market conditions continued through the March quarter. Demand for NdPr remained robust accompanied by higher prices for both NdPr and SEG, leading to another strong quarterly result for the period ending 30 March 2021. The NdPr market price increase accelerated during the quarter (up 40% versus 31% during the previous quarter) despite some correction at the end of March. The Dysprosium price which had been relatively stable in the past quarters started to rally, while Terbium stabilized towards the end of March. As a consequence of these market trends, NdPr and SEG selling prices reached new records.

The financial highlights from the announcement are:

  • Total REO production: 4463 tonnes (Q2 FY 21: 3410 tonnes)
  • NdPr production: 1359 tonnes (Q2 FY 21: 1367 tonnes)
  • Quarterly Sales Revenue: A$110m (Q2 FY21: A$119.4m)
  • Sales receipts: A$133m (Q2 FY21: A$68m)
  • Closing cash balance: A$568.5m (Q2 FY21: A$512.6m)

Lynas is working towards diversifying their business by 2025. There are 4 key areas for this plan – Ramping up production at Mt Weld, Western Australia to try and meet the demand growth in rare earth metals, build a new processing facility in Kalgoorlie, continue investment in Malaysian facilities to increase processing capabilities, product range, and recycling, continue its USA operations of providing separation of rare earths and product finishing capabilities.

During the quarter, Lynas has progressed further in its vision. They have gained Approval and the site preliminary works for the Kalgoorlie project has commenced. A signed agreement with the U.S. Government to build a commercial Light Rare Earths separation plant in the USA has also been received.

Despite the largely positive result, Lynas share price today has dipped by over 8% and closed at $5.85 a share. This was largely due to the management of Lynas taking a measured approach to the operating climate ahead. They called for careful forecasts for the business ahead in light of the pandemic persisting in Europe and USA.

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