Lynas Rare Earths Reports 73% Drop in Profit, Blames 'Stubbornly Low' Prices

Lynas Rare Earths, the world's largest producer of rare earths outside China, has reported a significant decline in profits for the 2023–24 financial year (FY24), attributing the slump to "stubbornly low" prices for the critical minerals used in mobile phones, batteries, and high-tech defense equipment.

The company's net profit after tax (NPAT) was $84.5 million, a substantial decrease from the $310.7 million reported in FY23. Revenue also declined, falling to $463.3 million from $739.3 million in the previous year. These figures highlight the challenges Lynas faced in a market environment characterized by weak demand and persistent price pressure.

Navigating Price Volatility and Subdued Demand

Despite the disappointing financial results, Lynas remains optimistic about its future growth. CEO and managing director Amanda Lacaze acknowledges the year's challenges but highlights the company's resilience and proactive measures to mitigate market volatility. "2024 was both an exciting and challenging year for Lynas Rare Earths," she said. "Whilst a number of major milestones were achieved for our company, inside China demand was subdued for most of the year and rare earths market prices remained stubbornly low."

While acknowledging the challenging market conditions, Lacaze emphasizes the company's strategic approach to managing price volatility. "Pleasingly, there have been positive movements in the NdPr (neodymium-praseodymium) market price since May 2024." This indicates a potential shift in the market dynamics, with the possibility of price recovery in the near future.

Operational Efficiencies and Growth Initiatives

Lynas continues to invest heavily in its growth pathways in Western Australia (WA) and Malaysia. The company has invested $579.3 million in capital and mine development projects during FY24, focusing on the new Kalgoorlie rare earths processing facility, the Mt Weld expansion project, and capacity and efficiency projects at Lynas Malaysia. Despite this significant capital investment, the company ended the period with a robust cash balance of $523.8 million.

Lynas' achievements in FY24 include securing a variation to its Malaysian operating license, enabling the continuation of cracking and leaching operations in Malaysia. The company also achieved first production from its new Kalgoorlie processing facility, a testament to the team's perseverance and expertise. Despite a 8% decrease in NdPr production, Lynas managed to reduce total costs by 17%, demonstrating its commitment to operational efficiencies.

Looking Ahead: A Focus on Growth and Value Creation

Lynas is focused on fulfilling key customer needs, maximising internal efficiencies and delivering "excellent value for our shareholders." The company is confident in its ability to navigate the current market challenges and capitalize on the growing global demand for rare earths. The company's strategy of investing in operational efficiency, expanding its production capacity, and securing new markets positions it well for future growth.

The development of the Kalgoorlie processing facility remains a key focus, with the facility ramping up as planned to align with increased production capacity at Mt Weld and Lynas Malaysia, and with market demand. "Lynas continues to invest to ensure we are able to grow with the market," Lacaze said. The company is also making progress with its United States processing facility, despite some delays caused by wastewater issues. Despite these challenges, Lynas is committed to building a robust global rare earths supply chain and fulfilling the growing demand for these critical minerals.

Lynas' Share Price: A Positive Outlook?

While the company faces challenges from low prices and subdued demand, there are signs that the market is beginning to respond positively to Lynas' performance. The company's recent investments in growth and efficiency, coupled with its strong financial position, have buoyed investor confidence. The Lynas share price has experienced a notable rally in recent weeks, exceeding 11% in just one week. Analysts, such as those from Canaccord Genuity and Macquarie, are optimistic about Lynas' future, with price targets suggesting potential upside for the share price. Lynas' full-year results, due to be released on August 28, will offer further insights into the company's performance and provide a clearer picture of its future prospects.

This positive outlook is fueled by several factors. The global demand for rare earths is expected to grow significantly in the coming years, driven by the increasing adoption of electric vehicles, renewable energy technologies, and advanced electronics. As a key player in the global rare earths market, Lynas is well-positioned to benefit from this growth. The company's commitment to investing in its operations, expanding its production capacity, and securing new markets will further enhance its position in the industry. While the current market environment is challenging, Lynas' strong financial position, operational efficiencies, and focus on growth provide a solid foundation for future success.

The company's full-year results, expected on August 28, will provide further insight into its performance and offer a more detailed view of its future prospects. The market will be watching closely to see how Lynas navigates the current challenges and leverages its position to capitalize on the growing global demand for rare earths.