Australia's Lynas sees annual profit decline, re-evaluates Texas rare earths plant

Lynas Rare Earths of Australia announced on Thursday a larger-than-anticipated decline in its annual profit. The company also expressed significant uncertainty regarding the future of its heavy rare-earths processing plant in Texas.

Lynas., the world's largest producer of rare-earth materials outside of China, has confirmed ongoing negotiations with the US Department of Defense (DoD), Reuters said in a report. 

These discussions are focused on establishing a mutually acceptable offtake agreement for the rare-earth production that will originate from Lynas's new processing facility in Seadrift, Texas. 

This strategic collaboration underscores efforts by both nations to secure a diversified and stable supply chain for these critical minerals, which are essential for a wide range of advanced technologies, including defense applications.

"While there can be no certainty that offtake agreements will be agreed, any offtake agreements would need to be on commercial terms acceptable to Lynas," the miner said.

Investments

Lynas had been developing the facility under a contract with the US DoD, with operations slated to commence in fiscal 2026. 

However, the company suggested that the plant's construction might not proceed.

"We are big supporters of continued investment in development of outside-China's supply chains," CEO Amanda Lacaze told an investor call.

She said:

Following this, the US government reached a multi-billion dollar agreement last month to become the primary shareholder in MP Materials (MP.N), Lynas's largest competitor outside of China. 

The deal also includes a guaranteed floor price for MP Materials' main rare earth product and a $150 million loan to facilitate its expansion in heavy rare earths separation.

Pursuing partnerships

Lynas further aims to partner with emerging rare earth magnet manufacturers outside of China, including those in the US, and is open to acquiring equity in these ventures.

"There are seven magnet projects coming to market in the U.S., many of which actually have some form of government funding, which de-risks them," Lacaze was quoted in the Reuters report. 

She further noted that the US likely has more magnet projects than the rest of the world combined.

Last month, the miner entered into an agreement with Korea's JS Link to establish a magnet facility in Malaysia, where the miner already conducts processing operations.

Financials

For the year ending June 30, Lynas reported a net profit after tax of A$8 million ($5.20 million), a significant drop from the A$84.5 million recorded the previous year.

The company's annual results also fell short of the Visible Alpha consensus estimate, which stood at A$30.4 million.

Lynas's profit decline was attributed to depreciation costs incurred from the expansion of its Kalgoorlie and Mt. Weld facilities. Production at Kalgoorlie did not meet its nameplate capacity.

The projected capital expenditure for fiscal year 2026 is approximately A$160 million.

The miner declared an equity raising of A$750 million to capitalize on "new growth opportunities." The newly issued shares are priced at A$13.25 each, representing a 10% discount to Lynas' closing price on August 27.

Trading of its shares was halted in anticipation of the equity raising.