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Lynas Rare Earths (ASX:LYC) has jumped as much as +14% in Wednesday’s lunchtime trades after it inked a deal with a Japanese entity on Wednesday, the market is currently perceiving as transformational for the stock – one week after it inked a new long-term agreement for its Malaysian operations, too.
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In a deal with JARE – Japan Australia Rare Earths BV, a vehicle established between the Japanese-government-backed ‘Japan Organisation for Metals and Energy Security’ (JOGMEC) and Sojitz Corporation, 75% of Heavy Rare Earth (HRE) oxides Lynas produces will be made available to Japanese industry.
In return, Lynas will be incentivised with a floor price of US$110/kg for Neodymium (and praseodymium, NdPr) – which was the same promise made to MP Materials by Washington last year that triggered the CY25 rare earths rally.
And similarly, on Wednesday down under, news of this price floor has lifted all boats. Even the long-awaited FID with billions of shares on issue, Rinehart-backed Arafura Rare Earths (ASX:ARU) is now eyeing 30cps.
Key to that thinking: JARE is bound to purchase at least 5K tonnes of NdPr per annum from Lynas. The maths there are fairly obvious.
“Where Lynas’ achieved price is above US$150/kg NdPr, an amount equal to 30% of the upside above US$150/kg NdPr, capped at a maximum of US$10 million each calendar year, will be paid to JARE,” LYC elaborated on Wednesday.
Lynas and JARE were already partnered (the two are bound by a long-term loan facility), but this new agreement, Lynas described as a result of “rapid evolution of the rare earths market.” It extends into CY38.
LYC last traded at $20.14/sh today.
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