Rare Earths Miner Reports 74 Percent Profit Drop Due to Weak China Demand

Rare earth minerals produced by Australia's Lynas Corp from its Mount Weld operations are displayed near Laverton, Western Australia on Aug. 23, 2019. (Melanie Burton/Reuters)

Rare earths miner Lynas has reported a 74 percent decline in net profit after tax in the first half of the 2024 financial year.

Lynas produces rare earths Neodymium and Praseodymium (NdPr) which are used in powerful magnets for electric vehicles, wind turbines, electronics, appliances, and technologies.

In the first half of the 2024 financial year, Lynas reported a net profit after tax of $39.5 million (US$25.9 million), down from $150.1 million in the first half of 2023.

The average domestic price of NdPr fell from US$60.4 (AU$92.2) per kilogram in June 2023 to US$56 per kilogram in December 2023 amid a construction downturn in China.

“Rare earth market prices continued to be subdued due to low demand in China, especially in the appliance sector (e.g. air conditioning) which is affected by the construction downturn. China’s economic recovery is seen as the main factor which could possibly trigger a change in price trend,” Lynas said in a presentation (pdf).

‘Subdued Economic Conditions in China’: Lynas

However, Lynas is predicting demand for rare earths to soar all the way until 2050 to more than 180,000 tonnes per annum.

It said demand for the rare earth NdPr was 45 percent higher in 2023 compared to 2019.

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However, despite this, the company reported modest growth (pdf) in NdPr demand in 2023 “mainly due to subdued economic conditions in China.”

Management Comment

Lynas Rare Earths CEO and Managing Director Amanda Lacaze said (pdf), “The 2024 financial year is a transitional year for Lynas and the progress achieved in the first half of the year has established an excellent foundation for our future success.

“This included the variation to the Malaysian operating licence which allows for the continued import and processing of lanthanide concentrate from our Mt Weld mine and provides a continuing path for our operations in Malaysia.

“Notwithstanding the exciting expansion and exploration activities undertaken in the half year, and the low market price environment, I am pleased to report a profitable first half for the business.”

The company reported a 36.5 percent drop in revenue from $370 million in the first half of 2023 to $234.8 million in the first half of 2024.

Earnings before interest and taxes, depreciation, and amortisation (EBITDA), which is another measure of the company’s core profitability, also fell nearly 67 percent from $189 million to $62.6 million.

Lynas reported a closing cash and short-term deposits balance of $686.1 million at the end of the first half of the 2024 financial year, down 26.6 percent from $934.2 million in the prior corresponding half.

What Else Happened During the Half?

Lynas signed an extra contract with the U.S. Department of Defence for a heavy rare earths plant in Texas. Under the contract, Lynas’ construction costs will be reimbursed.

“A contribution by the U.S. Government of approximately US$258 million is currently allocated to the project,” Lynas said.

Lynas also received an updated operating licence in Malaysia on Oct. 24, 2023 (pdf), which will enable it to continue to import and process lanthanide concentrate (rare earth elements) from the Mt Weld mine in Western Australia.

Since the release of this licence, the company has completed major upgrade works at the Lynas Malaysia plant, involving a six-week temporary shutdown.

These works improved the rare earth separation process and reliability of the cracking and leaching plant.

“These were the most significant works at Lynas Malaysia in over a decade and were successfully completed with no safety incidents. The plant recommenced operations in January efficiently and without incident,” Lynas said.

Lynas will boost research and development investment in Malaysia from 0.5 percent to 1 percent of gross sales, under the licence. The licence is valid until March 2, 2026.

In Western Australia (WA), Lynas mostly completed construction at the new rare earths processing facility in Kalgoorlie.

The first feed of material from the Mt Weld mine, in Laverton, was introduced into the plant in Dec. 2023.

Team members from Lynas in Malaysia are assisting to boost production at the Kalgoorlie facility. Mixed Rare Earth Carbonate from Kalgoorlie will be introduced into the Lynas Malaysia plant in the second half of of the 2024 financial year.

The Kalgoorlie plant could also feed the rare earths plant in Texas, United States, in the future.

An expansion project is also taking place at Mt Weld, which will support an increase in production by mid-2024. The WA Environmental Protection Authority has recommended a life of mine proposal for the project be approved.

What’s Ahead?

Investors appeared to respond positively to the Lynas report on the market. The company’s share price rose 5.31 percent to $6.15 on the Australian Stock Exchange (ASX) in trade on Feb. 26.

Lynas noted that 2024 was an important “transitional year” and the company had a significant portfolio of projects supporting a major growth plan.

Once these projects are complete, the company believes it will be in a good position to take advantage of “forecast market growth” and better pricing in 2024.

Lynas CEO Ms. Lacaze expressed the company was continuing to see “strong customer demand” for products and said the rare earths market is “important to many industries.

“Lynas has a proven track record of managing costs and operations to ensure that we can be successful in all market conditions, and across all stages of the market cycle,” Ms. Lacaze said.

“Optimising our industrial footprint through operating efficiencies and capital growth projects will ensure Lynas is well positioned to benefit from forecast market growth and any improvement in market pricing conditions.”

Lynas is the world’s second-largest producer of separated rare earth materials.