Lynas shares sink on A$968M Meteoric deal

Lynas Rare Earths (ASX: LYC; US-OTC: LYSDY, LYSCF) has agreed to buy Meteoric Resources (ASX: MEI; US-OTC: METOF) in an all-share deal valued at A$968 million (C$954.3 million), gaining control of the Caldeira rare earths project in Brazil.

At Thursday’s A$12.64 close, the 0.0207-for-one exchange ratio valued the offer at about A$801 million on the same basis. Lynas fell 8.6%, while Meteoric jumped 47% to A25¢. The companies calculated the A$968-million value on a fully diluted basis using Lynas’s 60-day average price.

“We view the transaction as a lower-risk pathway to develop Caldeira and expand Lynas’ resource base,” the broker said in a note Thursday, Canaccord Genuity said in a note, citing Caldeira’s advanced stage, Meteoric’s partnership with Posco International and Lynas’s balance sheet and cash flow outlook.

Caldeira lies near Poços de Caldas in southwestern Minas Gerais, about 450 km by road southwest of state capital Belo Horizonte. Meteoric reports it as the largest known ionic-clay rare earths resource outside China under Australia’s JORC code.

The deal would give Lynas, the largest producer of separated rare earths outside China, a second major ore source and its first outside Australia as manufacturers seek alternatives to China. The country accounted for 91% of refined magnet rare earth output in 2024, according to the International Energy Agency. Lynas’s financial strength lowers Caldeira’s funding risk, but the project still needs an installation licence and an estimated US$498 million (C$708.4 million) to build, leaving permitting and execution as the deal’s main tests.

Australian broker Ord Minnett called the transaction “a decent deal” that adds a “massive resource offering strategic options,” but warned it would dilute existing Lynas shareholders and add permitting risk.

Brazil scale

Caldeira holds probable reserves of 151 million tonnes grading 3,524 ppm for about 532,000 tonnes of total rare earths oxides, according to Meteoric.

The shallow clay-hosted mineralization can be mined without drilling or blasting and processed without crushing hard rock. Meteoric’s July feasibility study outlined a 23-year operation producing an average of 12,500 tonnes of total rare earth oxides annually.

Using spot prices, the study estimated an after-tax net present value of US$847 million and a 24% internal rate of return. Caldeira has a preliminary environmental licence and Meteoric is targeting the installation licence required for construction this year.

Supply strategy

The feasibility study forecasts annual output of about 3,862 tonnes of light rare earths neodymium-praseodymium oxide and 127 tonnes of the heavy rare earths dysprosium-terbium oxide. Heavy rare earths are used for strengthening permanent magnets used in electric vehicles, wind turbines and defence systems.

Lynas estimates Caldeira’s dysprosium-terbium output could supply almost one-third of current demand outside China. The project would increase Lynas’s total measured and indicated rare earths resource by about 79% and its reserve by 26%, based on the companies’ combined estimates.

Lynas’ main project is its Mt Weld hard rock mine in Western Australia. The ore is processed at Kalgoorlie in the state before it is shipped to a separation plant in Malaysia. Its initial plan is to produce mixed rare earth carbonate at Caldeira and send the intermediate product to Malaysia. The company will also study downstream processing in Brazil.

Deal terms

Meteoric shareholders would receive 0.0207 Lynas share for each share held and own about 5.9% of the enlarged company. At Lynas’s pre-announcement price, the offer valued each Meteoric share at A$0.286, a 68.4% premium to Wednesday’s close.

Meteoric’s board unanimously supports the proposal, provided an independent expert finds it in shareholders’ interests and no superior offer emerges. Its directors, who hold 2.6% of the company, intend to vote in favour, as does largest shareholder Tolga Kumova for his 6.7% stake, subject to the same conditions.

Lynas will provide Meteoric with an interim loan of as much as A$110 million to keep Caldeira advancing during the approval process, starting with an A$35-million tranche.

The acquisition requires Meteoric shareholder and Australian court approval, as well as clearance from Brazil’s National Council for the Industrialization of Critical and Strategic Minerals. The companies expect shareholders to vote in January and the deal to close by March.