Lynas Corporation Ltd (OTCMKTS: LYSCF) has recovered from a harrowing plunge as its core business has received a significant boost. The stock continues to power through resistance levels, the second quarter having emerged as an inflection point after a steep pullback.
Lynas Corporation Price Analysis
A 50% plus rally from one-year lows might as well have brought to an end a bearish run that had threatened to plunge the stock lower. Price action indicates the stock has turned bullish as the uptrend continues to gather pace.
The resurgence follows the confirmation that the Company is poised to spend up to $345 million to set up an initial processing facility in Australia as part of an effort of boosting rare earth metal production. The announcement came just a day after the Company inked strategic partnership with Blue Line Corporation for the setting up of a rare earth separation facility in Texas.
The stock has since taken a flight as bulls continue to take the fight to the bears. A rally followed by a close above the $1.7 resistance level has since opened the door for the stock to make a run for 52-week highs of $1.95.
While the short-term momentum remains bullish, pullbacks after the recent spike will have to contend with support at the $1.7 level. A violation of the technical support level would leave the stock exposed to a drop back to the $1.50 mark, the next substantial support level.
What does Lynas Corporation Do?
Lynas Corporation is an exploration and mining company that engages in the mining extraction and processing of rare earth minerals. Its lead mining project is the Mount Weld project in Australia. The Company also operates an advanced materials plant in Malaysia.
$345 Million Investment
Lynas Corporation has taken a flight, in the market, on confirming plans to enhance its rare earth mining operations with a $345 million investment. The Company is to use part of the funds to boost production on setting up a rare earth processing facility in Western Australia. Part of the funds will also go towards financing a new processing facility in Malaysia.
A move to enhance operations in Malaysia comes as a surprise, given that the Company has struggled to secure license renewals due to concerns over waste storage. However, the massive investments come on the growing belief that demand for rare earth materials will continue to surge as they continue to find great use in consumer electronic devices as well as electric cars.
With the investment, Lynas Corporation hopes to bolster its rare earth production volume to 10,500 tons per annum made up of neodymium-praseodymium products.
In addition, the Company has signed a memorandum of understanding for the setting up of a rare earth separation facility in the U.S. The Company is collaborating with Blue Line Corporation for the setting up of the facility in Texas.
Jon Blumenthal, president, and chief executive of Blue Line Corporation, said: “We are looking forward to working with Lynas to provide a secure source of rare earth materials to both US and international markets, and using our technical expertise to produce raw materials for uses in green and other high tech industries.”
The facility will seek to address the needs of clients in the U.S at a time when the country is trying to reduce its reliance from China amidst a bruising trade war. Chinese Companies enjoy a monopoly on rare earth metal supply at about 85%.
According to the Chief Executive Officer, Amanda Lacaze the proposed U.S facility will help complement operations in Malaysia and will allow Lynas to close critical supply chain gap for rare earth metals in the U.S.
“Electric vehicle manufacturers are looking for the security of supply of the heavy rare earths as well as on the light rare earths, and this provides that opportunity,” said Ms. Amanda.
Lynas Corporation remains well positioned to generate significant value given the investments it is making in enhancing rare metals production. Demand for rare earth metals is on the rise given the rising sales of electronic devices as well as electric cars.
With that in mind, the Company’s core business can only continue to grow as demand continues to outpace supply. The stock looks set to continue edging higher as investors take note of Lynas Corporation long-term prospects as a key supplier of rare earth metals.
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Disclosure: We have no position in LYSCF and have not been compensated for this article.