Macquarie has upgraded its outlook for local lithium and rare earth stocks, reflecting further tightening in the supply/demand environment and continued strength in spot prices.
Macquarie said that Lynas remains the only pure-play rare earth stock under its coverage, supported by a “buoyant pricing environment”.
“We expect LYC to start to deliver increased production rates in the next 6-12 months as COVID-19-related restrictions start to ease.”
“Completion of the Kalgoorlie cracking and leaching plant in 2023 presents a material operational de-risking event for the company.”
For the uninitiated, Lynas is progressing a rare earths processing facility in Kalgoorlie WA. All approvals have been received and preliminary site works are “well advanced”, according to the company’s first-half FY22 results.
Lynas has a rare earths processing plant in Malaysia, one of the conditions for the company’s Malaysian operating licence was to:
“Ensure that the Cracking and Leaching plant outside Malaysia is in operation before July 2023. After that period, Lynas will no longer be allowed to import raw materials containing Naturally Occurring Radioactive (NORM) into Malaysia.”
Macquarie is Outperform rated on Lynas with a $14.00 price target.
Iluka is increasing its exposure to rare earths through the Eneabba Project in WA.
The Project completed the final shipment of Phase 1 material in 2021.
Construction has commenced for Phase 2, with commissioning to occur by mid-2022. Phase 2 will upgrade monazite-zircon material from Eneabba to a higher value product.
The company is currently studying the feasibility of developing a fully integrated rare earths refinery at Eneabba, which would provide a strategic processing hub for Australia’s rare earth resources.
“The potential development of a downstream refinery that would see Iluka produce rare earth oxides presents a major near-term catalyst for Iluka and upside to our base case.”
Macquarie is Outperform rated on Iluka with a $13.00 target price.
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