“Not the moment” for abandoned rare earths mega-merger, says Lynas boss

Lynas CEO Amanda Lacaze says time is not right for a mega merger with MP Materials, which would create a “western champion” for rare earths.

Amanda Lacaze at the Sydney Energy Forum in 2022. Pic: Getty Images

• Rare earths mega-merger not currently on the cards, says Lynas boss

• But customers waking up to need to develop new sources of rare earths

• Lynas aiming to ramp up 'heavies' as China chokes supply to customers during geopolitical cage match

Lynas (ASX:LYC) boss Amanda Lacaze says now is "not the moment" for the creation of a company that would boast a monopoly on rare earths in the West, suggesting discussions with New York-listed MP Materials were not currently on the cards.

Speaking on the sidelines of a talk for the WA Mining Club on Wednesday, Lacaze told media there were no discussions going on between the two $8.5bn capped companies currently.

"We would have to disclose if there were, but ... deals often have their moment. And now is not the moment, unfortunately," she said.

"I've made no bones about the fact that I thought it was an excellent sort of hook up that it would ... create a true Western champion. But for a variety of reasons, it didn't happen."

The discussions came into focus last year, especially given Aussie mining magnate Gina Rinehart's status as a major shareholder on both registers, but MP has become a lot less attractive from a valuation standpoint since then.

Despite losing cash, its status as the only rare earths operation in the US has seen its share price surge more than 100% this year as the Trump Administration's rhetoric has provided a rocket for local critical minerals stocks in the US, compared to a ~39% gain for Lynas, the lowest cost producer globally of key light rare earth product neodymium-praseodymium.

Lynas copped a downgrade to underperform from Macquarie this week, which suggested its market cap was pricing in NdPr prices in the order of US$95/kg, not the US$63/kg spot price currently posted by Chinese price reporting agencies.

But it has engineered a shift in focus this year, becoming the first non-Chinese producer from its Malaysian processing plant of separated dysprosium and terbium oxides, key materials that boost the performance of magnets underpinning future tech like EV motors, wind turbines, drones and defence applications.

Placed under export controls this year as China led a rearguard to Donald Trump's 'Liberation Day' tariffs, the need to source these outside the Middle Kingdom has never been more acute.

He ain't heavy

That's placed resources like ionic clays in Malaysia and, to a lesser extent, Brazil, on Lynas' radar.

It has so far signed an MoU with a State Government in Malaysia, a country with the same geological potential for ionic clays like those found in southern China.

The investment is so far small, around $25m at the Kuantan plant, though Lacaze said more investment would be needed if the decision was made to expand its capacity further and really eat into China's grip on that end of the market.

After touching on M&A in a speech at the Macquarie Conference in May, she said Lynas keeps a "watching brief" on rare earths projects globally but had, so far, decided investing in expanding Mt Weld, its monster deposit near Laverton in WA, was a better option.

"Last year we also upgraded our resource and our reserve statement and a key part of that was the increase in heavies at Mt Weld. So we can make decisions about mining the Mt Weld orebody differently to give us more feedstock," she said.

Earlier Lacaze told the room at Optus Stadium that customers needed to be realistic about the need to develop a supply chain diversified from China, which has near total control of the permanent magnet market.

"I would say to you that outside of China today, we would still say that there are three segments of customers," she said.

"There is one who ascribes to what I would call the hoping and wishing and praying – otherwise known as ostrich strategy – which is if I keep my fingers crossed and my eyes closed and wish very hard, this will go away and I'll still be able to buy cheap stuff from China.

"There is a second group of customers who recognise that this is a clarion call, and that even though there may have been a brief reprieve, that China has demonstrated its ability to weaponise this economic advantage.

"And then there is a third group who have recognised it and are actively engaged in setting up these supply agreements with us and recognise that you do actually have to apply a risk based pricing approach to sourcing these materials."

But the critical aspect for the US, EU countries and other western nations is they can't have modern manufacturing industry without once obscure rare earth minerals.

"If your objective is to reshore manufacturing, as indeed the US Government's objective is, then they must have a secure supply chain of rare earths," Lacaze said, though she says the "runway to there being significant new supply" is still "probably years away.

Hopefuls line up

While Lynas is the undisputed leader among the ASX's rare earths stocks, there are a number aiming to become producers or develop deposits that draw the attention of major players.

ASX mineral sands giant Iluka Resources (ASX:ILU) has Canberra onside to build a refinery at Eneabba near Geraldton, where it will process monazite waste rock from previous mineral sands mining to deliver the first separated rare earth oxides in Australia from 2027.

The $1.8bn project could open the door to the development of one of Africa's most promising deposits Mrima Hill in Kenya, where ASX junior RareX (ASX:REE) is partnering with Iluka to see whether the mine can be developed in East Africa and have it material processed at Eneabba.

RareX also holds the Cummins Range rare earths, phosphate, gallium and scandium project in WA's north, while fellow WA explorer Victory Metals (ASX:VTM) has pulled in a US$190 million letter of intent from the US Government's Export-Import Bank and a pledged of US$10m from Saudi Arabia's sovereign investment firm to potentially bankroll its North Stanmore project in WA.

Sanabil Investments is providing a US$10m loan and first right to provide future funding for A$330m for the development and construction of a processing plant at North Stanmore.

According to a scoping study in March the $337m project would product 59,300t of mixed rare earth carbonate containing 13 rare earth oxides and 3080t of scandium and hafnium oxide annually over a 31 year life, with an NPV8 of $1.2bn.

Over in Brazil a host of companies have outlined high grade ionic clay hosted deposits, led by Meteoric Resources (ASX:MEI) at its Caldeira project and Gina Rinehart-backed Brazilian Rare Earths (ASX:BRE), which boasts the Rocha da Rocha deposit.

Other companies operating in Brazil's burgeoning rare earths space include early stage explorer Australian Mines (ASX:AUZ), which holds the Jequie project in Bahia and Brazilian Critical Minerals (ASX:BCM), which put out a scoping study in February on its Ema project in Amazonas, which suggested the mine could produce 4800tpa of TREO within a 55.3% TREO MREC product as unit operating costs on an NdPr basis of just US$16.95/kg.

That would make the mine profitable even at current depressed prices, with a post-tax NPV8 of US$498m at just US$74/kg NdPr, post-tax IRR of 55% and payback period of 28 months.

Over in Africa, the proposed $150m sale of Peak Rare Earths (ASX:PEK) to China's Shenghe Resources, which will hand its Ngualla project in Tanzania to one of China's largest rare earth producers has highlighted the significance of the continent to the geopolitical contest over the commodities.

On the other side of southern Africa Aldoro Resources (ASX:ARN) is drilling out what it has called a potential tier-1 discovery of rare earths and niobium at Kameelburg in Namibia in a 1.4km wide carbonatite plug that juts 275m out of the ground over the surrounding peneplain.

At Stockhead, we tell it like it is. While Aldoro Resources, Brazilian Critical Minerals, Australian Mines, Victory Metals and RareX are Stockhead advertisers, they did not sponsor this article.

Originally published as “Not the moment” for abandoned rare earths mega-merger, says Lynas boss