Australia’s Lynas Rare Earths Ltd (AU:LYC) is raising $538 million through an equity sale. The miner plans to use the funds to increase stockpiles, expand processing plants, and invest in magnet makers in Malaysia and the United States. Rare earths are critical inputs for electric vehicles, medical devices, and defense gear, which makes control of supply an issue of global interest.
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At the same time, governments in the United States, Australia, and Japan have been working with Lynas to reduce reliance on China. Beijing currently dominates the rare earth trade through export rules and quotas. In response, Washington has already taken a stake in MP Materials (MP), a Las Vegas-based producer, and has also introduced a decade-long price floor for rare earths that is nearly double today’s market price. This policy move is designed to encourage new supply and protect producers from price shocks.
Expansion Plans Meet Profit Pressure
Lynas is already the largest producer of rare earths outside China. The company first broke into the light rare earth market in 2013 and has since added capacity for heavy rare earths. These elements are used in permanent magnets that run inside motors and turbines. According to Chief Executive Amanda Lacaze, the new capital will allow Lynas to take part in downstream operations, including magnet plants in Malaysia and the United States.
However, risks still loom. Lynas is developing a rare earth facility in Texas with support from the United States Department of Defense, but the plan faces hurdles due to supply contracts. In addition, the company reported a sharp drop in net profit for the year ended June 30. Profit fell to $8 million from $84.5 million last year due to production issues and higher costs linked to expansion. Revenue, though, rose 20% to $556 million.
Overall, the new equity raise positions Lynas to expand its role in the rare earth supply chain, meeting the growing demand from Western markets. Investors will be watching how quickly the company can convert new projects into stable output and secure long-term contracts.
Is LYC Stock a Buy, or a Sell?
On the Street, Lynas Rare Earths divides opinion and boasts a Hold consensus rating. The average LYC price target stands at AU$10.08, implying a 31.56% downside from the current price.
