MALAYSIA, 24/04/2024 (Asia News Channels) - Australian mining company Lynas Rare Earths Ltd. reported a substantial decrease in sales revenue for the third quarter, failing to meet market expectations. This downturn is attributed to falling rare earth prices and increased costs associated with their operations in Western Australia.
During the third quarter, the market for rare earths remained weak. This was primarily due to expanded production in China, the leading producer, coupled with a slower-than-anticipated recovery in demand. Lynas CEO Amanda Lacaze expressed the challenges faced by the industry in a recent analyst call. "The market continues to be less than kind to us and to anybody else in the rare earths sector," Lacaze commented, acknowledging only a minor improvement in prices which did not accelerate significantly.
Reflecting on the broader economic context, Lacaze noted, "There's a general consensus that the current price is below cost for many Chinese producers. There's also a general consensus that the Chinese economy is starting to pick up momentum again." Due to these persistently low prices, Lynas has decided not to increase production at its Malaysian facilities and instead, will maintain its inventory levels until prices show an upward trend.
For the quarter ending March 31, Lynas posted a sales revenue of A$101.2 million ($65.64 million), a sharp decline from the A$242.8 million recorded a year earlier. This figure fell short of the A$146.3 million forecasted by analysts, as compiled by Morgan Stanley, leading to a 1.2% drop in Lynas shares.
Furthermore, Lynas announced an upward revision in the budget for its Kalgoorlie facility, increasing the estimate to A$800 million from the previously projected A$730 million reported last October. Despite these financial adjustments, Lacaze highlighted that cost management remains a critical focus for the company.
The company also provided updates on its strategic initiatives, including the Mt Weld Expansion Project in Western Australia, which is progressing on schedule with ongoing construction activities. Additionally, Lynas is planning to commence earthworks at a new processing plant in Texas by year-end, aligning with U.S. efforts to decrease dependency on Chinese rare earth supplies. "I think nobody would be surprised that the U.S. government is very focused on making sure this project moves forward as fast as possible," Lacaze stated, underscoring the strategic importance of this development.
Overall, Lynas faces ongoing market and operational challenges as it navigates the volatile rare earth sector, balancing production strategies and cost management while preparing for future growth opportunities in the U.S. market.
-- ASIA NEWS CHANNELS