Turkey discovers world's second largest rare earth reserve; Lynas shares plunge

A rare earth bonanza in Turkey could be a headline weighing on Lynas (ASX: LYC) shares on Thursday, down an unusual -6%.

The Turkish Ministry of Energy and Natural Resources announced the discovery of 694m metric tonnes of rare earth elements - a reserve so large that it could satisfy global demand for decades. 

“Eskisehir Beylikova, one of the important rare element fields of our country, is the second largest reserve area in the world after China. We are establishing a production facility that will process ore. After the trial production results, we will start the industrial facility investment,” said President Recep Erdogan. 

“Our goal is to process 570,000 tons of ore annually when this facility reaches full capacity, 10,000 tons of rare earth oxides, 72,000 tons of barite, 70,000 tons of fluorite and 250,000 of thorium,” Erdogan added. 

Rare earth elements are a group of 17 elements used in various advanced technologies including aerospace and defence, renewable energy, batteries and aviation. 

The Eskisehir discovery possesses 10 of the 17 elements and is close to the surface, which could simplify extraction and lower costs. 

Great, now go mine it

Finding a massive resource is one thing.

Now, Turkey only needs to trial production, undergo a few 'easy' feasibility studies and engineering design tests, finance the project, assemble the resources and labour to build it and hopefully, they'll emerge as one of the world's largest rare earth producers.

It's also worth noting that Turkey's inflation rate is almost 80% and the Turkish Lira has depreciated almost -50% against the US dollar in the last 12-months.

Classic knee jerk reaction

Assuming the Turkish discovery was the catalyst behind the -6% selloff for Lynas - then it is a rather classic knee jerk reaction.

After all, Lynas is the most dominant and household rare earths player outside of China. Now, there's a potential challenger for the top dog status.

This reminds me of the -15% three-day selloff for Lynas back in April 2021, when the company reported that Chinese players were planning to double production within the next 3 years.

Though, the sheer selling volume across the three days weighed the share price for quite some time.

Lynas price chart (Source: TradingView, Annotations by Market Index)