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In response to increased interest and heightening trade tensions, Lynas will stockpile its rare earths for “strategic customers.”
In response to increased interest and heightening trade tensions, rare earths producer Lynas (ASX:LYC,OTC Pink:LYSDY) will stockpile its rare earths for “strategic customers.”
Citing market volatility, which drove prices for neodymium (Nd) and praseodymium (Pr) 50 percent higher in Q2 before returning to lower levels, the company has already reserved 323 tonnes.
“Demand is growing strongly within this key customer base and Lynas will continue this strategy of reserving production to meet the current and future needs of these strategic customers in the current quarter,” the company notes in its latest quarterly activities report.
Rare earths have featured prominently in resource sector news since early in Q2, when rumors hit that China may reduce or limit exports of the technology metals to the US as part of an ongoing trade feud.
The speculation drove prices for Nd and Pr, which are in high demand, up 50 percent, according to Lynas.
As the only significant producer of rare earths outside of China, Lynas also experienced a price surge following the increased market attention. In early June, company shares grew by 99.95 percent year-to-date, before settling mid-month.
“During the quarter there was heightened interest in both Lynas and the rare earths market as a result of geopolitical and macroeconomic factors,” reads the company’s quarterly report. “Lynas is ideally positioned as a preferred supplier to rest of world customers.”
Despite restricting sales of Nd and Pr to its client base, the company posted sales revenue totals for the period of AU$87.5 million.
Currently, the critical metals producer has mining operations in Australia and production and refinement capacity in Malaysia. However, a new joint venture with Texas-based Blue Line may give the Australian company some much needed exposure to both the heavy rare earths (HRE) sector and the US market.
“The project has the potential to create a strong position for Lynas in the critical HRE market, in addition to Lynas’ current position as the second largest supplier of light rare earths,” reads the report from Lynas. “The proposed joint venture would also support the development of the magnet industry and downstream industries in the US.”
In the meantime, Lynas has plans to ramp up its present production from 1,223 tonnes of NdPr in Q2 to 1,591 tonnes in Q3.
Shares of Lynas were down 2.43 percent on Monday (July 29), trading at AU$2.60.
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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.