The Lynas share price received a boost today following the release of a pre-budget speech by the Prime Minister. We take a closer look.
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The Lynas Corporation Ltd (ASX: LYC) share price was up by 4.74% at the time of writing to $2.43. The rise in the Lynas share price came following media reports that Australia’s Prime Minister, Mr Scott Morrison, has promised to include stimulus for critical minerals processing in the coming budget.
What has been reported?
According to media reports, the Prime Minister will give an address at the Press Club in Canberra today that will outline a plan to boost the economy through stimulus for the manufacturing industry. Of the six key areas identified to receive government help, critical mineral processing was included.
The stimulus will be up to $1.6 billion in the form of grants. Additionally, the Prime Minister hinted toward more favourable industrial relations for manufacturers, coordination between different levels of government and assistance from the scientific and research community.
All of these policies will be good news for the Lynas share price, with the company planning to build a rare earth processing centre in Western Australia.
In his pre-released speech, the Prime Minister outlined that his strategy has three main elements, all of which are relevant to Lynas. The elements include making manufacturers more competitive through a more favourable business environment, building scale in areas of competitive strength and securing sovereign capability in areas that are of national interest. Lynas could benefit from more favourable regulation. Additionally, rare earth production by Lynas is of importance to Australia’s national interest and it will be likely to benefit from the government’s ambition to create sovereign capability in critical mineral production.
Although the Prime Minister did not name any companies specifically, his speech seemed to target rare earth processing among a few other vital industries, which could explain the boost to the Lynas share price today.
About the Lynas share price
Lynas is a rare earths miner and processor with assets in Australia and Malaysia. It also has plans to build a processing plant in the United States. The company has been listed on the ASX since 1986.
Recently, Lynas raised capital through an institutional placement, an institutional rights issue and an underwritten retail entitlement offer, raising $425 million at $2.30 per share.
Lynas had earnings before interest, tax, depreciation and amortisation (EBITDA) of $59.8 million in the 2020 financial year. This figure was affected by production halts due to COVID-19.
The Lynas share price is up 318.97% since its 52-week low of 58 cents, it has risen by 6.11% since the beginning of the year.
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Motley Fool contributor Chris Chitty has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.