Why the Lynas (ASX:LYC) share price is up 86% in 2021

Why shares in the rare earths miner are on fire in 2021

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The Lynas Rare Earths Ltd (ASX: LYC) share price has been on fire this year. Shares in the Aussie rare earths producer are up 86.4% year-to-date after closing at $7.79 per share on Wednesday.

So, what's driving this Aussie resources share higher in 2021?

Why the Lynas share price is up 86% in 2021

Let's start with what Lynas actually does. The Aussie company is the second largest producer of rare earths globally and the only significant producer outside of China.

Lynas focuses on the entire rare earths life cycle from mining through to customer delivery.

The Lynas share price has been on fire this year bar a one-week period in August where the group's value slumped 18% in a week. That came as part of a broader resources sector correction after Lynas was trading near a 52-week high.

Lynas' full-year results drew a muted reaction from the market. The Lynas share price fell lower on August 27 despite the rare earths miner's record profit announcement.

Lynas posted a 60% increase in revenue to $489 million with net profit after tax of $157.1 million. The group's earnings before interest taxes, depreciation and amortisation (EBITDA) jumped 294% to $235.3 million.

The strong profitability and Lynas share price growth have largely gone hand in hand. Rare earths and lithium shares have performed well in 2021 driven by supply-side disruptions, soaring demand and subsequently soaring prices.

That's been good news for shareholders who have watched Lynas shares continue to climb higher in recent months. In fact, recent gains mean the Lynas share price is now up more than 200% in the past 12 months with a market capitalisation in excess of $7 billion.

Foolish takeaway

Lynas shares are sitting at $7.79 per share as at Wednesday's close, threatening the group's $7.82 52-week high.

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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