Why Lynas, Iluka Resources and rare earth stocks are going vertical

Rare earth miners Lynas and Iluka Resources have delivered explosive gains this week, rallying 9-10% between Monday and Tuesday as speculation mounts that Australia could follow the United States in establishing a price floor for rare earths.

Both stocks are now up 40-50% since the start of July.

Rare earth stocks kick on

The catalyst for this week's rally stems from media reports suggesting Australia could soon implement a price floor mechanism similar to the landmark deal struck between the US Department of Defence and MP Materials last month.

The Pentagon agreed to a 10-year price guarantee of US$110/kg for neodymium-praseodymium oxide (NdPr), starting from the fourth quarter of 2025. The deal includes a unique profit-sharing arrangement where the US government receives 30 per cent of any upside if prices exceed the guaranteed floor.

This represents a shift in approach, with western governments now actively intervening to reduce dependence on Chinese rare earth supply chains after Beijing briefly imposed export controls earlier this year.

Shares in MP Materials rallied 50% on the day of the announcement (10 July) to a three year high. Rather than giving back gains as typically happens, the stock has continued its march higher, adding another 50% to now trade at record levels.

MP Materials daily price chart (Source: TradingView)

Massive earnings impact for local players

Morgan Stanley highlights the potential earnings windfall for Australian miners if similar arrangements are established locally.

Lynas Corporation (ASX: LYC) impact:

• Base case FY27 EBITDA would surge 79 per cent from $750 million to $1.35 billion

• Stock would trade on 7x EV/EBITDA for FY27 (versus current base case of 13x)

• Assumes US$110/kg price floor applied to estimated 11.2kt of NdPr production

Iluka Resources (ASX: ILU) impact:

• Base case CY27 EBITDA would increase 23 per cent from $416 million to $510 million

• Assumes price floor applied to 2.9kt of NdPr production from Eneabba refinery

• First production expected in CY27

The numbers highlight just how transformative guaranteed pricing could be for the sector, particularly given current (and relatively soft) market conditions.

Current pricing context

To put these projections in perspective, Lynas was selling rare earths for A$60.2/kg in the June quarter. This represents a substantial improvement from December 2024 lows of around A$40/kg but well off highs of US$145/kg in early 2022.

A US$110/kg price floor would guarantee a significant premium to current prices, providing long-term revenue certainty that could unlock major expansion plans and reduce project risk.

While Lynas has existing supply agreements with Japan Australia Rare Earths, Morgan Stanley notes the company remains free to pursue higher-priced contract arrangements should they become available.

For Iluka, the timing could prove crucial as its Eneabba rare earth refinery remains under construction. Securing long-term pricing certainty ahead of first production would de-risk the project and potentially accelerate development timelines.

The bottom line

The surge in rare earth stocks reflects more than just cyclical commodity price movements, it signals a fundamental shift toward strategic mineral security that's reshaping project economics.

While the Australian government has yet to confirm any price floor mechanism, the precedent set by the US deal and the strategic importance of rare earths suggest policy support is increasingly likely.