Lynas Rare Earths production volumes remain subdued while lithium spot prices are low

About Lynas Rare Earth Limited

Lynas Rare Earths Limited (Lynas, or the Group) is the world’s second largest producer of separated Rare Earth materials and the only significant producer of scale of separated Rare Earths outside of China. Rare Earths are known as the ‘vitamins’ of manufacturing and are essential inputs to high growth global manufacturing supply chains and green technologies like electric vehicles and wind turbines. They are key enablers for technologies seeking to lower emissions, reduce energy consumption, and are a key component in technologies that make products lighter and smaller.

Soft June quarter production volume

Continuing lower prices explain why Lynas’ Rare Earth products Neodymium and Praseodymium (NdPr) production volumes remained subdued during the June quarter. NdPr production for the quarter was 1,504 tonnes of Rare Earth Oxide compared to 1,724 tonnes for the March quarter. These are the key raw materials used in ultra-strong permanent magnets that are essential to produce electric motors for electric vehicles and for use in wind turbines. They also have important military applications.

June quarter gross sales revenue for Lynas was A$136.6 million, up from A$101.2 million for the March quarter as realised prices improved slightly.  Closing cash and short-term deposits at 30 June 2024 were A$523 million, down from A$616 million at 31 March following cash payments of A$131 million for capital expenditure and exploration and development.

During the June quarter Lynas continued to build inventory rather than sell into the current subdued spot price environment. The Group completed some essential maintenance at Lynas Malaysia during the quarter, which also impacted production volume.  Ramp up of downstream production capacity at Lynas Malaysia is continuing with an interim production target of 9,000 tonnes per annum.

Recent Ore Reserve update

In its latest Ore Reserve update for the Company’s Mt Weld deposit, Lynas has confirmed 32 million tonnes of ore at 6.44 percent of contained Total Rare Earth Oxide present in the deposit, representing the equivalent of 2 million tonnes of Total Rare Earth Oxide. This is a 63 percent increase on the June 2018 Ore Reserve estimate and provides a 20-year Reserve mine life for the expanded production capacity of 12,000 tonnes per annum of Neodymium and Praseodymium Oxide.

Strategic importance of the critical minerals sector

Lynas is well-placed to benefit from global demand for lithium as the world decarbonises. Australia has 27 percent of the world’s known recoverable lithium resource and has a proven capability at mineral extraction with a long track record as a reliable exporter of commodities and resources.

However, the 2024 year has been marked by a global lithium price downturn, primarily driven by a supply surplus caused by increased lithium supplies from China. The global lithium refining industry has always been dominated by China which has used its market dominance and anti-competitive practices to deter others from entering the market. This includes subsidising production and dumping lithium products at below-market prices into international markets.

Today eighty percent of the world’s battery cells and sixty percent of the Electric Vehicle battery market is supplied by Chinese manufacturers. This market concentration creates pricing pressure that is currently impacting Lynas and other Western-aligned lithium manufacturers. However, offsetting this pricing pressure are the national security interests of the United States and its Western allies, including Australia. This may result in lithium and other critical mineral refining being supported by Western governments through tax and other incentives.

Lynas is the world’s second largest producer of separated Rare Earth materials and the only significant producer of scale of separated Rare Earths outside of China. Lynas has one of the world’s highest grade Rare Earths mines at Mt Weld, and a Concentration Plant located 1.5 kilometres from the mine site and a state-of -the-art manufacturing facility in Malaysia.

Despite short-term product pricing pressures, Lynas should derive long-term benefits from its portfolio of integrated assets that explore, develop, mine and process Rare Earth minerals. This is because the Rare Earths market remains of critical importance to many industries in Western countries, and this should support strong customer demand for Lynas’ products.