Lynas shares sink 7% to 8-month low after $672 million Meteoric deal

Lynas Rare Earths (ASX:LYC) shares witnessed a significant drop of 7.1%, reaching A$12.85, marking their lowest point since January 5, following the announcement of a $672 million all-share deal to acquire Brazilian rare-earth developer Meteoric Resources. The S&P/ASX 200 also declined by 1.7% on the same day. The all-share deal stipulates that Lynas will acquire 100% of Meteoric through a fixed exchange ratio of 0.0207 Lynas shares for each Meteoric share, with an estimated equity value of A$968 million.

Lynas' latest closing price of A$13.83 suggests a transaction value of approximately A$876 million ($608 million). Following the merger, Meteoric shareholders will possess around 5.9% of Lynas on a fully diluted basis. The deal's focal point is Meteoric's Caldeira Rare Earth Project in Minas Gerais, Brazil, a site recognized as the largest ionic-clay rare-earth oxide mineral resource outside China, containing both light and heavy rare earths.

Post-merger, Lynas anticipates its Measured and Indicated total rare-earth oxide resources to rise by about 79%, and reported Ore Reserves by around 26%. The Caldeira project's output will be integrated into Lynas' existing downstream processing operations in Malaysia, with potential exploration for downstream processing in Brazil.

The capital expenditure required for Caldeira's development is estimated to exceed $500 million, with an initial $498 million based on Lynas' feasibility study. To facilitate the transaction, Lynas will offer Meteoric an interim funding facility of up to A$110 million, consisting of an initial A$35 million tranche to cover Caldeira's development costs, transaction expenses, and working capital during the scheme process.

A scheme meeting is scheduled for January 2027, with implementation slated for March 2027, contingent upon necessary approvals.