Lynas Rare Earths books record $541m profit, says demand outlook strong

Lynas Rare Earths has booked a record profit and has nearly $1bn in the back to back its bold growth agenda that includes capitalising on strong demand for wind turbines.

Lynas Rare Earths says wind turbines are driving the growth in demand for high intensity magnets and its rare earth products. John Moore/Getty Images/AFP

Lynas Rare Earths is cashed up and ready to accelerate its growth projects after booking a record $540.8m net profit for the year on the back of surging prices for its rare earth oxides.

Lynas closed June 30 with $965.6m in cash, after booking record $920m in revenue for the year, and earnings before interest, tax, depreciation and amortisation of $601.2m. It had total borrowings of $186.8m at the end of June, up from $171.1m the previous year.

Lynas will not pay a dividend.

Instead Lynas managing director Amanda Lacaze said the company’s cash position leaves the company in a strong position to pursue its growth projects, including its cracking and leaching plant at Kalgoorlie in WA and a $500m plan to expand its WA mining operations.

“Favourable market conditions and strong demand for Lynas’ rare earth materials saw sales revenue increase by 88.1 per cent and Net Profit After Tax (NPAT) increase by 244 per cent from the 2021 result,” she said.

Rare earths prices were sustained at high levels during the second half of the year, and the NdPr market price remained 70 per cent to 80 per cent higher than in the same period last year.”

Lynas shares have taken a hit in recent weeks after moves by China to increase its rare earth output quotas by 25 per cent, to 210,000 tonnes for the year.

In January Chinese authorities ordered the consolidation of its rare earth production through the merger the businesses of CHALCO, Minmetals and Ganzou Rare Earth Group, seen as a move to exert more control over pricing of the metals.

But Lynas downstream director Pol Le Roux told analysts on Friday the company was not concerned by recent falls in the price of rare earth oxides, nor by the increase in Chinese quotas, saying the major driver in the rare earth sector remained surging demand.

Prices for neodymium and praseodymium (NdPR), Lynas core product from its Malaysian refinery, was up 70 to 80 per cent in the June half, compared to the same time in 2021. The China domestic price for NdPr was $US120 per kilogram in the June quarter, Lynas said.

Mr Le Roux said Lynas expected demand for rare earth metals to rise 22 to 23 per cent in 2022, on top of a 16 per cent growth in 2021.

“The main drivers for this growth are basically very simple, and the first element is wind turbines,” he said.

“But the most important thing is to see the portion of direct drive (wind turbines)- and direct drive consumes a lot more NdPr or magnets, so it‘s 850 kilos of magnets per megawatt. And we foresee continuous growth,” he said.

Mr Le Roux said it would be “reasonable” to assume the global economic uncertainty could slow the growth in sales of electric vehicles, but said the overall demand picture for rare earth products was not going to slow down, and that China’s recent move to increase production quotas was in line with market expectations.

“Magnet buyers and makers were expecting the increase in quotas – rare earth suppliers would have preferred 20 per cent, but at the end of the day, the increase was 25 per cent,” he said.

“That shows that actually China is concerned about maintaining a certain stability in the market, and that should make us all very comfortable with the price forward.”

Lynas shares closed up 1.2 per cent on Friday at $9.03.