Lynas Gains Blue-Chip Status Amid Operational Headwinds

Shares of Australian rare earths producer Lynas Rare Earths advanced 2.46 percent to AUD 12.49 on Monday. The move coincided with the company’s formal entry into the S&P/ASX 50 index, a milestone that triggered mandatory buying from institutional funds and ETFs that track the benchmark. This technical support provided a timely boost for the equity, even as the firm contends with significant production challenges at its Western Australian operations.

Beneath the positive index-driven momentum, Lynas is grappling with persistent issues at its Kalgoorlie processing facility. The plant, which produces critical Mixed Rare Earth Carbonate (MREC), has been hampered by recurring power outages. Company management has confirmed these disruptions caused a one-month production shortfall during the December quarter. The affected crack-and-leach processes are particularly consequential, as they are essential for downstream operations at the company’s Malaysian separation plant.

In response to these setbacks, analysts at Canaccord Genuity have revised their near-term forecasts downward, trimming projections for Neodymium-Praseodymium (NdPr) output and revenue expectations. The lost production volume is considered unrecoverable within the current quarter.

Should investors sell immediately? Or is it worth buying Lynas?

A Silver Lining in Pricing and Strategy

On a more positive note, rare earths prices have shown signs of stabilization. Dysprosium oxide, a crucial heavy rare earth element, is currently trading around USD 171 per kilogram—a level substantially below its historical peaks. While this price normalization allows for more predictable revenue modeling, it also limits potential upside from sudden price surges.

Strategically, Lynas continues to make headway on key projects. Its new heavy rare earths separation facility in Malaysia, representing a capital investment of approximately AUD 180 million, is taking shape. The company targets the commencement of samarium production at this site by April 2026.

The Path Forward: Execution is Key

The index inclusion has delivered a one-time supportive effect for the share price. Market attention will now pivot to the company’s operational performance, with the January 2026 quarterly report expected to fully quantify the financial impact of the recent production losses. The critical questions for investors are whether the power reliability issues at Kalgoorlie have been permanently resolved and if the March quarter can demonstrate a return to clean operational execution. Sustained operational stability will be necessary to justify the company’s new blue-chip valuation.