By Melanie Burton and Adwitiya Srivastava
MELBOURNE (Reuters) -Prices of rare earths could rally further given growing demand for Western material, reflected in a recent deal by the United States that has shown its resolve to rebuild the sector outside China, the CEO of top producer Lynas Rare Earths said.
The U.S. Department of Defense this month agreed to a multi-billion dollar deal to become the largest shareholder in the Australian company's peer, MP Materials, the sole U.S. miner of the magnetic metals used in electronics, electric vehicles and aircraft engines.
As part of the deal, it offered a floor price of $110 per kilogram for the two most popular rare earths, a price nearly twice the current Chinese market level.
Lynas CEO Amanda Lacaze, who heads the world's largest rare earths producer outside China, said the MP Materials deal reflected the U.S. government's determination to break Beijing's dominance and to drive investment in its own industry.
“Can (prices) go above $110? Yes and I think the recent detail of the deal is that there would be an expectation for the government that that is likely to happen, because they have negotiated exposure to upside,” she said.
After Beijing curbed exports earlier this year, automakers panicked over a rare earths supply bottleneck, though those concerns have started to dissipate as Chinese rare earths magnets began to flow again.
Japanese magnet makers had “significantly increased” their output over the past quarter due to the Chinese supply shortages, and Lynas was working with them to develop automotive customers outside their home country, Lacaze said.
Lynas beat estimates for fourth-quarter revenue by 10%, driven by higher selling prices across all rare earths products, and entered into a magnet manufacturing deal with South Korea's JS Link.
It received an average selling price of A$60.20 per kg, the highest since the July 2022 quarter, compared with A$42.30 per kg a year earlier.
Shares climbed as much as 4.2% to A$10.57, the highest level since April 5, 2022, compared to a 0.3% decline in the broader Australian mining index.
Lynas posted sales revenue of A$170.2 million ($112.3 million) for the quarter ending June 30, beating a Visible Alpha consensus estimate of A$155 million by about 10% according to Barrenjoey, and up from A$136.6 million a year earlier.
The company's total rare-earth oxide (REO) output for the fourth quarter was at 3,212 REO metric tons, compared with 2,188 REO tons reported a year ago.
Lynas also disclosed a deal with South Korean permanent magnet manufacturer JS Link to develop a permanent magnet value chain in Malaysia and said it sees the country as a key market for industry growth.
