Rare Earths

Hi Derek,

For context Lynas (LYC), Iluka (ILU) and Arafura (ARU) all surged in late 2025 as China’s rare-earth export controls triggered a scramble for alternative supply, but much of the initial enthusiasm has since unwound. Over the past 12 months, LYC has returned just +4.3%, ILU +17.5% and ARU +11.4%, despite each being dramatically higher at their respective peaks and the broader ASX Materials sector gaining ~53%.

The initial bullish re-rating simply ran too far, too quickly, leaving the sector vulnerable as attention shifted back to earnings, execution and funding. The launch of the VanEck Rare Earths ETF (ASX: RESM) this year arguably provided another sign that enthusiasm had become excessive — as we’ve noted previously, when a hot investment thematic becomes popular enough to spawn new ETFs, it can often prove a short-term contrarian sell signal rather than a reason to chase the rally.

The recent weakness has also reflected stock-specific disappointments despite the commodity backdrop being broadly supportive, e.g. NdPr is up ~25% YTD:

• LYC has endured production disruptions at Mount Weld, dragging the share price lower on results days despite record revenue and profit.
• ILU has been hit by weak mineral-sands demand, production suspensions, impairments and sharply lower earnings.
• ARU has faced substantial dilution from two pre-production large capital raisings and continued funding/execution risk at Nolans.

The rare-earths structural story remains intact, but the last year has demonstrated that geopolitical tailwinds alone aren’t enough — ultimately, earnings, project delivery and shareholder returns still matter.

We like the risk/reward towards the space into fresh 2026 lows, or ~10% below Thursdays levels.

chart

Lynas (LYC) vs Arafura (ARU) vs Iluka (ILU)

LAST UPDATED 10/09/2026 11:02

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chart

Lynas (LYC) vs Arafura (ARU) vs Iluka (ILU)

LAST UPDATED 10/09/2026 11:02