Shares of ASX-listed Lynas Rare Earths Limited (AU:LYC) were hit after the company announced a 50% decline in its Q2 FY24 revenue to AU$112.5 million, missing analysts’ estimates. Lynas shares dipped to a two-year low of AU$5.76 in early trading, leading to a decrease of 1.34% on Monday.
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However, the company assured its investors that the downfall resulted from a temporary shutdown for upgrade works, and production is anticipated to resume in the coming quarters.
Lynas Rare Earths is a producer of rare earth minerals, including products like neodymium and praseodymium (NdPr), lanthanum (La), and cerium (Ce).
Highlights of the Quarterly Update
Lynas’ sales receipts for the Fiscal second quarter that ended on December 31, 2023, were AU$107.1 million, down from AU$168.4 million a year ago. This was attributed to lower production numbers and the reduced prices of rare earths. The average price for NdPr was around $60/kg (ex-VAT) for Q2, which was impacted by reduced construction activities in China. Moving forward, the price remains contingent on the ongoing economic recovery in China, which is a pressing point for the company.
For the quarter, Lynas’ production for NdPr was down by 40% to 901 tonnes, mainly due to the shutdown of the Lynas Malaysia facility. During the shutdown, the company successfully upgraded the plant, increasing its separation capacity and reliability. This initiative is part of the plan to progressively increase separation capacity to approximately 10,500 tonnes per year.
Consequently, the production for the March quarter is now expected to be around 1,500 tonnes, above the earlier forecast of 900 tonnes. Moreover, the production forecast for the six months ending in June 2024 is expected to slightly increase from the previous estimate of 3,200 to 3,400 tonnes.
Is Lynas Rare Earth a Good Investment?
In the last 12 months, Lynas stock has traded down by 33%.
According to TipRanks consensus, LYC stock has been rated as a Strong Buy backed by seven Buys and one Hold recommendation. The Lynas share price forecast is AU$8.26, which implies a growth rate of about 42% from the current level.
