Lynas (ASX:LYC) turning green into gold

Lynas (ASX:LYC) has again confirmed there is a lot of money to be made in the rare earths game by taking on China and proving to be a reliable, low-cost provider not influenced by the eccentricities and price gouging of the Communist Party government of President Xi JinPing.

Lynas reported a 58% rise in quarterly revenue as the miner cashed in on soaring global demand for greener sources of power, especially demand for magnets (in wind power) and batteries and EVs.

Demand for rare earth minerals – which are used in everything from cars to laptops to missiles – has surged in recent years and shown no sign of easing as countries and companies look to cut their carbon emissions.

The surge in output and prices saw Lynas end the 2021-22 financial year with year-end cash balance of $965.6 million which it said “provides a confident basis for funding continued growth as demand grows.” That was up sharply from the $681 million at June 30, 2021.

Record sales receipts of $351 million were achieved in the quarter. While Lynas’ fourth quarter revenue grew by nearly three-fifths year-on-year to $294.5 million, the miner reported lower revenue compared with third-quarter figure of $327.7 million.

Total receipts from customers for the year to June was $855 million, almost double the $465 million reported for 2020-21.

Lynas said its quarterly rare-earths oxide (REO) production fell 26.2% sequentially as the company experienced water supply disruptions in Malaysia where drought conditions continue to hit processing capacity.

The company also revealed quarterly production of 1,579 tonnes of neodymium and praseodymium (NdPr), down from 1,687 tonnes in March quarter.

Minerals like NdPr are mostly used by automakers to make magnets used in electric vehicles.

Lynas’ also reported an average selling price of $79.2 a kilogram for its product range, double the value it got last year.

“In the quarter, demand for rare earths for NdFeB [neodymium] magnets inside China weakened impacted, in particular, by the Covid-19 related lockdowns in several industrial regions in China. In the longer term, global demand for NdFeB magnets is forecast to grow from 130,000 [metric] tons of NdFeB magnets consumed in 2020 to 265,000 tons in 2030.

“The demand for Lynas products, mostly sold in outside China markets, remained very strong during the period,” the company said.

Operations at its Mt Weld mine in WA “continued Mining Campaign 4-1 during the quarter and transitioned from waste mining to waste-and-ore mining. Ore mined in this campaign is being transported to the run of mine stockpile for future blending. Campaign 3 ores were processed in the mill during the quarter.”

“The Lynas Malaysia plant remains focused on delivering nameplate capacity production of NdPr. However, water shortages due to supplier issues limited production in this quarter.”

Lynas said it has implemented a number of mitigating strategies, “but the ongoing water shortages from our commercial supplier resulted in several complete or partial temporary production halts during the quarter. NdPr production was prioritized as reflected in the total production volume.”

Like so many resource companies, cost rises were a problem in the quarter

“As has been reported across industry, various cost categories have seen significant increases over the past 12 months. Royalty cost increases follow price increases in the market, freight costs were approximately double due to global shipping cost increases and the addition of charter ships to mitigate the impact of port and shipment delays. Chemical input costs have increased by approximately 20% with some specific chemicals seeing changes of up to 70%,” Lynas said.

Lynas shares closed up 0.7% at $8.12 after being in the red for part of Monday’s session.