Lynas Rare Earths (LYC) - Supply tightness looms

Lynas Rare Earths engages in the exploration, development, mining, extraction, and processing of rare earth minerals in Australia and Malaysia. The company owns the Mount Weld mine and concentration plant in Western Australia. Its primary processing asset is the Lynas Advanced Materials Plant (LAMP) in Malaysia (supplied by Mt Weld), the only major rare earths processing plant outside China. At LAMP, the various rare earths are separated and exported to manufacturers of electronics, wind turbines, hybrid cars and electric vehicles in Asia, Europe and the US. Lynas was incorporated in 1983and is based in Perth, Australia.

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We have raised our target price for Lynas to $7.80 from$7.40 and reiterate our Accumulate recommendation on the prospects of higher rare earth oxide (REO) prices as supply is cut from the civil war-torn Myanmar after a rebel militia captured the major REO mining region in early October.

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China evacuated its citizens from the region and ceased imports from early September. We expect REO supply will eventually restart, but that may take until early 2025. Until then, supply tightness should develop, lifting REO prices.

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