Rare Earths

Macquarie and Citi's take on Lynas: Mixed Q3 results, cloudy outlook for rare earth prices

Mon 24 Apr 23, 3:34pm (AEST)
Copper 3 Mining
Source: iStock

Key Points

  • Lynas produced record NdPr in the March quarter, but Total Rare Earth Oxide sales eased amid supplier shortages
  • Brokers flagged near-term risks including rare earth prices, the Malaysia license appeal and Kalgoorlie's ramp up
  • Macquarie retained a neutral rating, while Citi lowered its target price but retained a buy rating

Lynas (ASX: LYC) shares are trying to bottom after falling as much as 28% since Tesla’s announcement about eliminating rare earths from its next generation EV models on 1 March.

The stock rallied 4.75% to a one month high last Friday following the release of a rather mixed March quarter report.

LYC chart
Lynas 12-month price chart (Source: Market Index)

Record rare earths production, cooling prices

Lynas produced a record 1,725 tonnes of NdPr in the March quarter. But Total Rare Earth Oxide (REO) production volume was lower at 4,348 tonnes due to a supplier shortage of hydrochloric acid.  

“The demand for Lynas’ NdPr product family from customers outside China remained very strong during the quarter. This, together with excellent NdPr production volumes, resulted in strong sales performance in the quarter despite a decrease in the average selling price,” the company said in a statement.

March quarter

Q3 FY23

vs. Q2 FY23

vs. Q3 FY22

Sales volume REOt




Sales revenue




Average selling price




“Current pricing for Heavy Rare Earths has softened and we have chosen to retain some SEG product in inventory for future sale,” noted Lynas.

“Future pricing trends will depend mainly on the economic recovery in China and anticipation of Chinese production quotas for 2H 2023.”

Broker ratings: Macquarie and Citi

The risks are skewed towards the downside amid a cloudy near-term outlook for rare earth prices, uncertainties of Kalgoorlie’s ramp up and the key licence appeal in Malaysia. 

  • Citi retained a BUY rating but lowered its target price from $8.20 to $8.10

  • Macquarie retained a NEUTRAL rating with a $6.50 target price

“We’ve decreased basket prices 8%/10% in CY23/24 with NdPr US$/kg (VAT excl.) now in the mid $60’s. We expect this weakness to be temporary and for prices to recover throughout FY24,” said Citi.

“In aggregate, EBITDA and earnings are down ~18%/21% and ~20/27% in FY23/24.” 

Macquarie was also weary on a few factors including:

  • On 1H24 production: “We now believe a production suspension at the Malaysian refining plant in 1QFY24 is likely.”

  • On inventory: “We anticipate further inventory build in the 4QFY23, which would be unwound in 1HFY24.”

  • On risks: “In our view, uncertainties of Kalgoorlie’s ramp up and operations at LYC’s Malaysia plant present headwinds for the company’s near-term earnings outlook.”


Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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