New Trade for May 19th, 2021

Stocks were under pressure this morning, tracking for their third straight day of losses, as the rotation out of the tech sector continues.  Investors nervously anticipated the release of minutes from the latest Federal Reserve policy setting meeting.  Cryptos also plunged, sending Bitcoin below $35,000, to levels not seen since February.    

The world is in desperate need for rare earths supply outside of China.  The situation has become so dire President Biden signed an executive order on supply chain security, noting,  “From rare earths in our electric motors and generators to the carbon fibre used for aeroplanes – the United States needs to ensure we are not dependent upon foreign sources or single points of failure in times of national emergency.”

Most of the companies looking to break China’s stranglehold on the industry are still in the planning or exploration stages, and many of them are still private.  But there are ways for savvy investors to get involved.  Today we’ll highlight the rare earths company that stands out among its peers for a few reasons,  read on to find out more.

The world is in desperate need for rare earth supply outside of China.  Headquartered in Malaysia, Lynas Rare Earths (OTC: LYSCF) is only one of two companies in the world who have rare earth processing capacity that is not located in China. Other companies are looking at significant investments to build more global processing capacity, but this will take time and hundreds of millions (if not billions) of dollars, never mind that ore supplies that are currently under contract to be processed in China. Lynas also recognizes this and has announced construction of an additional rare earths processing centre in western Australia.

The company has a partnership with private Blue Line Corp. to develop rare-earths processing plants in Texas because we can’t be independent if we’ve got to send our rare earths to China for processing.  The joint venture has been chosen to receive funding by the Pentagon from the DPA to the tune of $30.4 million  to “build a Texas facility to process specialized minerals used to make weapons, electronics, and other goods,” as reported by Reuters.  

As you can see, LYSCF has shares that trade on the U.S. OTC markets.  Of six analysts offering recommendations for the stock, three rate it a Buy, 1 calls it a Hold and 2 have a Sell rating for the stock.  An average analyst price target of $6.19 implies an upside of more than 40%.

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