Why Lynas shares tumbled 9% despite record rare earth prices

Lynas Rare Earths (LYC) fell short of production and revenue forecasts again in the June quarter, extending a run of operational setbacks despite a market backdrop shaped by export curbs and efforts to break China's hold on supply.

Lynas produced 1,857 tonnes of NdPr, the neodymium-praseodymium oxide that drives most of its revenue. The figure was 15% below consensus and down 7% on the March quarter.

A broad miss

Here are the key numbers for the June quarter, compared to a year ago and against analyst expectations:

• NdPr production down 11% to 1,857t vs 2,179.5t ests (15% miss)

• Total REO production up 8% to 3,481t vs 3,635.0t ests (4% miss)

• Sales revenue up 70% to $288.9m vs $372.9m ests (23% miss)

• Record average selling price up 63% to $98.2/kg vs $101/kg ests (3% miss)

• Dy and Tb production of 19t, up from 8t in March vs. none a year ago

Lynas blamed problems at the new Mt Weld water recycling plant and a variation in ore quality, made worse by swapping a moveable crusher for a fixed one, which let more impurities into the concentrate feeding its Kalgoorlie and Kuantan plants. It was the second quarter running that processing issues held back output, after the March quarter total landed around 19% below consensus on separate problems at the Kalgoorlie cracking and leaching plant. Lynas said the water plant issues are resolved and the ore variation is now understood, with operating standards adjusted.

The estimated cost of the expanded heavy rare earths facility at Lynas Malaysia has risen to $294 million, a 63% increase from the $180 million flagged in October 2025. Lynas pointed to extra equipment to meet customer purity specifications, higher costs for sourcing gear outside China, and cost escalation tied to the geopolitical environment.

First gadolinium from the plant is now expected in early FY28, with yttrium to follow in early 2028.

Where to from here?

As the world's largest rare earths producer outside China, there's no denying how important Lynas is to Western supply chains.

Rare earth prices have improved strongly off 2024–25 lows, and supply agreements increasingly come with price floors to incentivise global supply chains. Lynas was one of the first movers, signing a long-term deal with Japan Australia Rare Earths for 5,000 tonnes of NdPr a year at a floor of US$110/kg.

So the strategic and pricing scaffolding is there to support earnings visibility and future production. But it doesn't excuse the recent run of operational headwinds.

In response to the March quarter result, Macquarie said it did not see "sufficient management confidence to materially lift operating rates at the cracking and leaching facility in the near term to support higher production." Today's result piles on another set of problems, this time the water recycling plant and ore quality.

The same note, dated 21 April, pencilled in a near-term NdPr run-rate of 8,800 tonnes a year. Today's quarterly implies 7,428 tonnes or a 15.5% miss against their forecasts. Macquarie had a $20.00 target and Neutral rating at the time, seeing the stock as "fully valued, with Kalgoorlie operational performance and ramp-up remaining the key near-term focus".

So this leaves Lynas in an awkward spot, where the commodity is front-and-centre for global supply chains, backed by the increasingly common floor price in offtake agreements, yet the company keeps handing the market sizeable operational misses.

The stock has fallen around 30% since its 14 April close, though today's action hints at some dip buying, down 4.1% ($15.30) after an earlier fall of 9.0% ($14.51).