Australian rare earths miner, Lynas, has recently reported a significant decrease in profit for the first half of the 2024 financial year. The company experienced a 74 percent decline in net profit after tax, with a net profit of $39.5 million, down from $150.1 million in the same period the previous year. This decline in profit can be attributed to the low demand for rare earths in China, particularly in the appliance sector, which has been affected by a construction downturn. The average domestic price of Neodymium and Praseodymium (NdPr), which are used in various industries including electric vehicles and wind turbines, also fell during this period.
Despite the current economic conditions, Lynas remains optimistic about the future demand for rare earths. The company predicts that demand will continue to increase until 2050, reaching over 180,000 tonnes per annum. In 2023 alone, the demand for NdPr was 45 percent higher compared to 2019. However, Lynas acknowledges that the main factor that could potentially trigger a change in price trend is China’s economic recovery.
Lynas CEO and Managing Director, Amanda Lacaze, expressed her confidence in the company’s future success despite the challenging market conditions. She noted that the progress achieved in the first half of the year has laid a strong foundation for their operations. Lacaze highlighted the variation to the Malaysian operating license, which allows for the continued import and processing of rare earth elements from their Mt Weld mine. This development ensures a continuing path for Lynas’ operations in Malaysia.
In terms of financial performance, Lynas reported a 36.5 percent drop in revenue and a nearly 67 percent decrease in earnings before interest and taxes, depreciation, and amortization (EBITDA). The company’s closing cash and short-term deposits balance also decreased by 26.6 percent compared to the prior corresponding half.
Despite these challenges, Lynas has made significant strides in other areas. The company signed an additional contract with the U.S. Department of Defense for a heavy rare earths plant in Texas. This contract includes reimbursement of construction costs, with a contribution of approximately US$258 million allocated to the project by the U.S. government.
Lynas also received an updated operating license in Malaysia, allowing them to continue importing and processing rare earth elements from their Mt Weld mine. Major upgrade works were completed at the Lynas Malaysia plant, which improved the rare earth separation process and plant reliability. Additionally, Lynas has been working on the construction of a new rare earths processing facility in Kalgoorlie, Western Australia, and an expansion project at Mt Weld to increase production.
Investors have responded positively to Lynas’ report, with the company’s share price rising by 5.31 percent on the Australian Stock Exchange. Lynas believes that once their ongoing projects are complete, they will be well-positioned to take advantage of forecast market growth and improved pricing conditions.
As the world’s second-largest producer of separated rare earth materials, Lynas remains confident in the importance of the rare earths market to various industries. The company is committed to optimizing its operations and capital growth projects to ensure success in all market conditions and stages of the market cycle.
In conclusion, Lynas’ recent report highlights the challenges faced by the company due to subdued economic conditions in China and a decrease in demand for rare earths. However, Lynas remains optimistic about future market growth and is actively working on various projects to position themselves for success. With their strong portfolio of projects and a commitment to managing costs and operations efficiently, Lynas aims to capitalize on forecast market growth and improved pricing conditions.
