Why is Gina Rinehart buying into Lynas? She’s accumulated a stake worth over $300m

Nick Sundich Nick Sundich, April 17, 2024

The big question on many investors’ minds this week is why is Gina Rinehart buying into Lynas Rare Earths (ASX:LYC)? A substantial notice lodged with the ASX last Tuesday (April 16) shows that she now owns 5.82% of Lynas Rare Earths, in a stake worth over $300m with over 54m shares at over $6 each.

It is unclear when she first bought shares in the company because she only had to disclose her ownership when she crossed the 5% threshold. But, in the previous 5 days prior to the notice, she spent nearly $49m. Why does she have shares in Lynas, and what will this mean for the company? We will seek to answer these questions, but first we’ll recap Lynas.

 

Recap of Lynas

Lynas is the world’s largest producer of rare earth materials outside China. Specifically, it produces NdPR (Neodymium and praseodymium), amongst the most sought after rare earths on the planet given their uses in technologies critical for decarbonisation, such as wind turbines and motors in electric vehicles. Lynas has a project in WA with a mineral deposit, which is one of the highest grade rare earth deposits in the world, and a nearby concentration plant.

It also has a processing plant in Kuantan, Malaysia, which is the world’s largest rare earth extraction facility outside the Middle Kingdom. Lynas is also building another processing facility in Kalgoorlie, WA for closer proximity to its deposit.

 

Solid numbers

The company made $739.3m in revenue and a $310.7m profit in FY23, representing an impressive margin of over 40%.

Lynas has been appetising for investors because it is the not just one of the few rare earth miners on the ASX, but the largest on the bourse as well as the largest outside China. It is highly susceptible to commodity prices, although the rare earths market is in better shape than the lithium and nickel markets.

Occupying investors’ minds for much of this year has been the prospects of a merger between it and MP Materials, the other major producer of rare earths on the planet. Talks took place, but have been suspended for the time being.

 

Why is Gina Rinehart buying into Lynas?

Obviously, Ms Rinehart likes the rare earths sector and its prospects, considering Lynas is not the first rare earths stock she owns. She also owns 5.85% of Brazilian Rare Earths and 10% of Arafura Rare Earths.

The sector is intriguing right now, presenting a good opportunity for investors. Over the past few years, rare earth metals have generally seen high demand and prices. But, customers of such commodities want sources from outside China due to national security and supply chain issues. Many ASX stocks, particularly Lynas, are a good opportunity for those customers, and in turn, investors in those companies.

Oh, there’s one rare earths stock Ms Rinehart owns that we neglected to mention, and it is probably the most notable of all. She owns over 5% of MP Materials, which has led to speculation she might play a role on what happens next with Lynas and MP – if indeed anything. Of course, we are only speculating here. Ms Rinehart accumulated a stake in Liontown Resources (ASX:LTR), and investors suspected that she would try and buy the company, something that has not eventuated (yet).

 

Watch this space

We’ll be watching closely what happens next with Lynas, whether Ms Rinehart is involved or not. The demand for rare earth sources outside China bodes well for the company, although it won’t be immune from fluctuating prices and supply chain issues. But one thing that is clear is that Australia’s richest woman clearly sees promise in the rare earths sector, given how many companies she has a stake in.

 

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