ASX mining stock Lynas Rare Earths Ltd (ASX: LYC) has been heavily sold this month after reaching six-month highs of $8.09 on November 8.
Shares are now swapping hands at $6.905 apiece, down almost 4% this year to date.
The company also hosted its annual general meeting (AGM) today, covering a wide range of topics – including talks of a prospective dividend.
Could this ASX mining stock be gearing up to reward investors with its first-ever dividend payout? Let's dive in.
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ASX mining stock talking dividends
At today's AGM, Lynas chair John Humphrey hinted that the board was actively considering a dividend policy while maintaining a focus on growth.
Humphrey had this to say in his address:
From a capital management perspective, the Board continues to consider capital management plans, including the potential for a dividend.
To date, given the capital investment required for growth initiatives, the Board has decided that capital is best used for reinvestment in growth projects.
The Board is working to develop a dividend policy appropriate for a growth company like Lynas.
Reinvestment in growth projects has been the company's priority up to this point. Such projects include Lynas' new $800 million rare earths cracking and leaching facility in Kalgoorlie and expansions at the Mt Weld mine in WA.
But rare earth prices remain a wildcard for Lynas. Prices for neodymium-praseodymium (NdPr), a key ingredient in electric vehicles (EVs) and high-tech magnets, have been unstable.
Humphrey advised that NdPr prices hit US$60.4/kg in mid-2023 and were down sharply to US$44/kg by June this year. This trend could continue.
There have been some positive movements in the NdPr market price in recent months, however, it is Lynas' view that prices are likely to remain volatile until there is a strengthening in the Chinese economy.
Meanwhile, the Mt Weld mine reported a 92% increase in mineral resources after the ASX mining stock completed an update of its ore reserves.
Analysts still divided
Brokers have not discussed Lynas' potential dividend today, but opinions remain split on the ASX mining stock's investment potential.
Sequoia Wealth Management issued a sell recommendation on Lynas, citing cash burn and declining revenue.
Lynas reported cash reserves of $413 million at the end of September 2024, down 54% year on year, with first-quarter revenue slipping to $120.5 million.
Despite this, production volumes were up sequentially in Q1 FY25, as the business focuses on a "margin over volume strategy" with weaker rare earths prices.
But will this be enough cash to fund future dividends and maintain growth? Time will tell. Sequoia values the ASX mining stock at $5.50 apiece.
Consensus, meanwhile, rates it a hold, according to CommSec.
Foolish takeout
Despite this ASX mining stock being sold down in November, its board just hinted at the possibility of paying a first-ever dividend.
Weaker rare earths prices have hit Lynas' operations in 2024, but management remains constructive on the long-term outlook.
Time will tell how this view progresses. Lynas shares are trading 4.6% higher than they were 12 months ago.
