This morning in the AFR Barrenjoey named it’s top battery metal picks ahead of earnings season. Lynas was one of its top picks with a $12.50 price target and a 46% upside from the current share price. The section on Lynas is copied below:

“Barrenjoey is positive on $7.7 billion Malaysia-based rare earths miner Lynas Corporation and Mr Morgan expects its Kuantan processing plant to deliver for shareholders.

“I think Lynas could beat expectations,” he said. “Last quarter the town water supply they used to run their plant had a catastrophic event and that issue’s been fixed. They’ve got the opportunity to get the plant flat out, so I think there’s upside risk to the numbers.”

Lynas shares are down 22.8 per cent over the past year, but remain 333 per cent higher over the past five years as Western governments support rare earths producers outside China, as strategic assets.

Barrenjoey forecast Lynas to post a net profit of $363.6 million on sales of $896.9 million in financial 2023 on an EBITDA margin of 54.9 per cent. It has an overweight rating on the stock and $12.50 share price target, which represents 46 per cent upside to the $8.58 market price on Wednesday.”

Disc: Held IRL

According to a story in the AFR this morning, Lynas suspects fake social media accounts are spreading disinformation and political agendas hostile to its rare earths business.

Some key points from the story:

• Lynas has received evidence it was the target of a coordinated cyber campaign that acted in the Chinese national interest.
• US cybersecurity firm Mandiant told Lynas that fake social media accounts had sought to incite protests in April and May against the company’s plan to build a rare earths processing plant in Texas.
• coincided with final negotiations between Lynas and the US government over a $US120 million financial support package for the Texas project  which is part of a US plan to break China’s stranglehold on production of the 17 rare earth elements needed for electric vehicles and defence tools like drones
• Two other North American producers of rare earths were targeted
• consistent with a broader, pro-China cyber campaign dubbed as “Dragonbridge”

Mandiant has no proof the Chinese government was involved.

Lynas has been the subject of disinformation campaigns in Malaysia for some years, however, this is the first time Lynas has seen evidence of direct links between fake social media accounts spreading disinformation and political agendas.

Disc: Held IRL

LYNAS AWARDED US$120M CONTRACT TO BUILD COMMERCIAL HRE FACILITY

Lynas Rare Earths Ltd (ASX: LYC, OTC:LYSDY) (Lynas) is pleased to announce that wholly owned subsidiary, Lynas USA LLC, has signed a follow-on contract for approximately US$120 million with the U.S. Department of Defense (DoD) to establish a first of its kind commercial Heavy Rare Earths (HRE) separation facility in the United States.

This mutually beneficial contract supports Lynas to establish an operating footprint in the United States, including the production of separated Heavy Rare Earth products to complement its Light Rare Earth product suite. As a result, U.S. industry will secure access to domestically produced Heavy Rare Earths which cannot be sourced today and which are essential to the development of a robust supply chain for future facing industries including electric vehicles, wind turbines and electronics.

Lynas worked closely with the DoD on the Phase 1 contract for a U.S. based Heavy Rare Earth separation facility (announced 27 July 2020) and the company is delighted to have reached agreement for a full-scale commercial HRE facility.

Construction costs for the HRE capability as submitted in June 2021 are fully covered by this DoD contract, which is sponsored and funded by the U.S. DoD Industrial Base Analysis and Sustainment (IBAS) program.

Lynas plans to co-locate the Heavy Rare Earths separation facility with the proposed Light Rare Earth separation facility (announced on 22 January 2021) which is sponsored and half funded by the U.S. DoD Title III, Defense Production Act office.

Following a detailed site selection process, the facility is expected to be located within an existing industrial area on the Gulf Coast of the State of Texas and targeted to be operational in financial year 2025.

Feedstock for the facility will be a mixed Rare Earths carbonate produced from material sourced at the Lynas mine in Mt Weld, Western Australia. Lynas will also work with potential 3rd party providers to source other suitable feedstocks as they become available.

Lynas Rare Earths CEO and Managing Director Amanda Lacaze commented: “The development of a U.S. Heavy Rare Earths separation facility is an important part of our accelerated growth plan and we look forward to not only meeting the rare earth needs of the U.S. Government but also reinvigorating the local Rare Earths market. This includes working to develop the Rare Earths supply chain and value added activities."

Disc: Held IRL

Lynas released its 4Q21 report this morning.

My take

• Record quarterly sales revenue ($185.9 million) and sales receipts ($192 million)despite the Malaysian restrictions on the number of workers permitted on site during COVID.
• FY21 revenue ($465.5 million) appears to be in line with analyst forecasts ($473 million, SWS data)
• Strong cash balance of $860.8 million, up from $101.7 million FY20. Although $413.9 million of this was revenue from capital raising (see Cash Position attached below)
• NdPr oxide prices have more than doubled over FY21 but prices have softened slightly since April.

 Full ASX Announcement

Highhlights:

• Quarterly Sales Revenue: A$185.9m (Q3 FY21: A$110m
• Sales receipts: A$192m (Q3 FY21: A$133m)
• Closing cash balance: A$680.8m (Q3 FY21: A$568.5m)
• Total REO production: 3778 tonnes (Q3 FY21: 4463 tonnes)
• NdPr production 1393 tonnes (Q3FY21:1359 tonnes)

Full ASX Announcement

Lynas Rare Earths Limited has just been been awarded a $14.8 million grant as part of the Australian government’s Modern Manufacturing Initiative.

The grant will enable Lynas to commercialise an industry-first Rare Earth carbonate refining process that has been developed by our inhouse research and development team. The new process has been tested at bench scale and has proven effective in producing a higher purity Rare Earth carbonate that can feed the Lynas Malaysia plant as well as the proposed U.S. Rare Earth processing facility.