MP Materials and Lynas explore merger amid rare earth market woes: report

MP Materials (NYSE: MP) and Lynas Rare Earths (ASX: LYC), two leading producers of rare earth elements, could be considering a merger, the Australian Financial Review reported Friday.

The Sydney-based publication suggests that the companies may be in talks to merge, potentially forming the world’s largest producer of rare earths outside China.

Both Lynas, with a mine in Western Australia and a plant in Malaysia, and MP, with operations at Mountain Pass in California, have faced challenges due to plummeting rare earth prices.

Over the past year, MP shares have plummeted by over 50%, while Lynas shares declined by about 40%.

China’s recent ban on the export of rare earth extraction and separation technologies aims to safeguard its market dominance amid speculation about the East Asian country cutting off supply amid deteriorating relations with the United States. The production of rare earths, used in permanent magnets and other technologies needed for the green energy transition is dominated by China, which currently supplies almost 90% of processed rare earths.

Last year, Lynas managing director Amanda Lacaze told the AFR the company consistently receives merger and acquisition proposals. She reportedly emphasized the need for a source of heavy rare earths to complement its Australian operations and fulfill commitments to the US Department of Defense. The latter is funding a Lynas downstream processing plant in Texas.

Las Vegas-based MP Materials also has backing from the Pentagon, including a contract to boost heavy rare earths supply.

MP is one of only two producing rare earths mines in the Americas, after Brazil’s Serra Verde announced the start of commercial production last month at its Pela Ema project in the central state of Goiás. 

MP’s shares were down 12.5% to US$17.19 apiece on Friday, giving it a market capitalization of US$3 billion. They traded in a 52-week range of US$14.47 and US$36.67. Lynas shares were up 2.6% to A$5.83, near the floor of its 52-week window of A$5.68 and A$9.80. It has a market capitalization of A$5.4 billion.