Lynas Faces Profit Squeeze as New Facilities Ramp Up and Market Prices Pressure Margins

• FY25 revenue rose 20.1% to A$556.5 million
• Net profit after tax dropped 90.5% to A$8.0 million
• Completed Mt Weld expansion and Kalgoorlie processing ramp-up
• First production of separated Heavy Rare Earth oxides outside China
• Announced MoU with JS Link for magnet manufacturing in Malaysia

Financial Performance Amid Market Headwinds

Lynas Rare Earths Limited delivered a mixed FY25 financial report, with revenue climbing 20.1% to A$556.5 million, primarily driven by an 18% increase in high-value Neodymium-Praseodymium (NdPr) production and sales. However, net profit after tax plunged 90.5% to A$8.0 million, reflecting increased depreciation charges from new facilities, lower-than-expected production at the Kalgoorlie Rare Earths Processing Facility, and higher fixed costs during the commissioning phase.

Operational Milestones and Capacity Expansion

The year marked the completion of Lynas’ major Lynas 2025 growth initiative, including the Mt Weld expansion project in Western Australia and the ramp-up of the Kalgoorlie processing facility. Notably, Lynas achieved a significant milestone with the first commercial production of separated Heavy Rare Earth oxides; Dysprosium and Terbium; at its Malaysian advanced materials plant, positioning Lynas as the only commercial producer of these critical materials outside China.

Strategic Outlook – Towards 2030

Building on these achievements, Lynas unveiled its Towards 2030 strategy, aiming to optimise returns from recent capital investments and expand downstream processing capacity. A key development is the signing of a non-binding Memorandum of Understanding with Korean magnet manufacturer JS Link to develop a 3,000-tonne capacity NdFeB permanent magnet manufacturing facility near Lynas Malaysia’s plant. This collaboration underscores Lynas’ ambition to deepen its footprint in the rare earths value chain beyond mining and separation.

Financial Position and Capital Management

At 30 June 2025, Lynas held A$166.5 million in cash and short-term deposits, reflecting the winding down of major capital expenditures. The company maintains its Japan Australia Rare Earths (JARE) loan facility, with a principal balance of approximately US$110 million due by 2030. Lynas also announced a fully underwritten institutional placement to raise approximately A$750 million, alongside a share purchase plan, signaling plans to bolster its balance sheet for future growth.

Sustainability and Risk Management

Lynas continues to prioritize sustainability, with ongoing investments in renewable energy infrastructure such as the Mt Weld Hybrid Power Station and a solar array at its Malaysian facility. The company reported enhanced climate-related governance and risk management practices, including comprehensive greenhouse gas emissions tracking and scenario analysis. Safety remains a focus, with mixed results in injury frequency rates prompting targeted safety campaigns.

Market Dynamics and Challenges Ahead

The rare earths market remains volatile, with NdPr prices improving late in the fiscal year but overall pricing pressures persisting. Lynas has strategically focused on high-value customers and diversified supply agreements to mitigate market risks. However, uncertainties linger around the construction of the planned US Heavy Rare Earth processing facility in Texas, with permitting challenges and offtake agreements still unresolved.

Bottom Line?

Lynas’ FY25 results reflect the growing pains of expansion amid a dynamic rare earths market, setting the stage for a pivotal execution phase in its Towards 2030 growth strategy.

Questions in the middle?

• How will Lynas navigate the permitting and financing uncertainties of its US processing facility?
• What impact will the equity raising have on Lynas’ capital structure and growth investments?
• Can Lynas sustain profitability as it ramps up new facilities and expands downstream operations?