Gina Rinehart takes a 5.8 percent interest in Lynas Rare Earths and a 5.3 percent stake in NYSE-listed MP Materials

About Lynas Rare Earth Limited

Lynas Rare Earths Limited (Lynas Corp or the Group, ASX: LYC) is the world’s second largest producer of separated Rare Earth materials. The Group employs 1050 people globally. It is an integrated Rare Earths mining company from mine to customer and is the world’s only significant producer of separated Rare Earth materials outside of China. Lynas rare earth materials are essential inputs to the global energy transition, which is estimated to require $6 trillion worth of metals, according to Bloomberg New Energy Finance.

Growing importance of strategic minerals

Australia has to a significant degree been built on mining, dating from the 1850’s gold rush days through to the iron ore boom of the 2000’s. Today the realisation there is no renewable energy transition without rare earth metals has seen a sharp investor focus on this strategic metals space. These metals are the critical components of magnets and batteries used in electric and hybrid vehicles, wind turbines, solar panels, smart phones and defence applications like inter-continental missiles.

China dominates rare earth minerals processing by producing about sixty percent of the world’s rare earth elements and processing around eighty percent of them. China’s dominance arises because the mining and refinement of these metals is environmentally hazardous, and sustainability of the environment is not a major priority of the Chinese.

Furthermore, it is significant that China has cut off sales of special metals produced from these critical minerals to the United States. This was in retaliation of Washington’s ban on the export of sophisticated computer chips to China, that are a key component of advanced missiles and rockets.

The United States has just one rare earth elements operating mine, the Mountain Pass Mine operated by New York-listed MP Materials in California’s Mojave Desert. The situation is similar in Australia which is home to one of the world’s premier deposits of rare earth minerals, being the Mt Weld Mine, which is situated in the Kalgoorlie Gold Fields District. The Mt Weld Mine is owned by Lynas Rare Earths. The Mt Weld mine site is the subject of a $500 million expansion project to develop a concentration plant to meet the accelerating global demand for rare earth materials. Full operation of the plant is planned for later in 2024. This makes the processing plant not just economically important, but also strategically important to Australia.

This strategic importance is not lost on the Gina Rinehart controlled Hancock Prospecting that has recently acquired a 5.3 percent stake in MP Materials Corp for approximately US$150 million and a 5.8 percent equity stake in Lynas Corp for A$49 million. Experienced share market investors are maintaining a close eye on these two transactions that may prove to be the beginning of something more significant for both companies and Hancock Prospecting in the year ahead. This view is reinforced by the confirmation by Lynas in February 2024 that it initiated merger discussions with MP Materials, but the talks are not ongoing. Market sources indicated that the discussions included a cash-and-scrip offer for MP Materials.

Geo-political uncertainty driving demand for rare earth minerals

The global energy transition and other high-technology and defence applications for strategic minerals has given rise to the term ‘mineral security’ and highlighted the need for a clear strategic minerals strategy that involves Australia collaborating with a network of like-minded nations to develop secure and sustainable critical minerals supply chains.

Perhaps this explains why the privately-owned Hancock Prospecting has taken a minority interest in two of the world’s more prominent rare earths businesses that together have the foundations to create a secure and sustainable supply chain of strategic minerals to support the functioning of Australia’s advanced technologies and national security.

Astute investors are likely to closely follow the recent share market activity of Hancock Prospecting as it pursues what may prove to be a lucrative investment strategy involving Lynas Rare Earths and the NYSE-listed MP Materials.