In the quiet competition for capital flowing toward the energy transition, Goldman Sachs has drawn a careful distinction between two Australian rare earth contenders. In April 2022, the bank placed a conviction buy on Iluka Resources while offering only a neutral nod to Lynas Rare Earths — not because one story is false, but because one is priced more honestly than the other. As the world's appetite for electric motors and wind turbines pulls rare earth demand into structural deficit, the question of where to stand in that current becomes less about the tide and more about the vessel.
Goldman Sachs favors Iluka over Lynas for rare earths exposure
Iluka trades at 5x EBITDA while peers command 15x
Mark
So Goldman is saying Iluka is cheaper than it should be. But cheaper on what basis exactly?
Mimi
They're looking at EBITDA multiples. Iluka trades at 5x, while other rare earth companies trade at 15x. That's a significant gap.
Luke
But hold on—is that gap because Iluka is undervalued, or because it's riskier? We should be careful about assuming a valuation gap means opportunity.
Mimi
Fair point. Goldman's argument is that the gap exists because the market hasn't yet priced in Iluka's growth pipeline—the 40% production increase, the rare earth ramp-up.
Mark
And they're confident that will happen?
Mimi
They're forecasting it based on their project pipeline analysis. But forecasts aren't guarantees.
Luke
Exactly. And their long-run neodymium-praseodymium price assumption is $80 per kilogram, but spot was $135 at the time. That's a big gap. If prices fall, the whole thesis weakens.
Mark
So the rare earth market staying in deficit is crucial to both companies.
Mimi
Absolutely. That's the structural tailwind. If demand from EVs and renewables stays strong, both benefit. Iluka just looks like better value if it executes.
Luke
And if it doesn't execute, or if rare earth prices collapse, Iluka's valuation discount might not be a discount at all—it might be justified.
Mark
So this is really a bet on execution and market structure holding up.
Mimi
Yes. Goldman thinks both are there. But Iluka offers better odds at a better price.
The Pulse
- Rare earth demand is accelerating faster than supply can answer, with the neodymium-praseodymium market projected to remain in deficit well past 2025 as EV and renewable energy adoption intensifies.
- Goldman Sachs entered the debate with a decisive split verdict — conviction buy on Iluka, neutral on Lynas — signaling that not all exposure to a hot sector is created equal.
- The tension lives in the numbers: Iluka trades at just 5x EBITDA while rare earth peers command 15x, a gap that suggests the market has not yet caught up to what Goldman believes the company is capable of delivering.
- Iluka's growth pipeline is the engine of the bull case — over 40% mineral sands expansion and 18,000 tonnes of annual rare earth output projected by 2026, with EBITDA potentially more than doubling.
- Lynas is not dismissed, but its neutral rating and a price target implying barely 2% downside leave little room for surprise, making it the less compelling bet at current valuations.
- The story is landing on a simple axis: both companies ride the same structural tailwind, but only one appears undervalued enough to reward investors who arrive now.
In the quiet competition for capital flowing toward the energy transition, Goldman Sachs has drawn a careful distinction between two Australian rare earth contenders. In April 2022, the bank placed a conviction buy on Iluka Resources while offering only a neutral nod to Lynas Rare Earths — not because one story is false, but because one is priced more honestly than the other. As the world's appetite for electric motors and wind turbines pulls rare earth demand into structural deficit, the question of where to stand in that current becomes less about the tide and more about the vessel.
When two companies compete for the same investor dollar in the same sector, the real question is rarely who is right — it's who is priced right. In April 2022, Goldman Sachs answered that question for Australian rare earth investors by initiating coverage of Lynas Rare Earths with a neutral rating and a $9.50 price target, while maintaining a conviction buy on Iluka Resources at $14.00 — against a share price of $12.43 at the time.
The reasoning was rooted in valuation. Iluka trades at roughly 5 times EBITDA, a striking discount to rare earth peers at 15 times and even to mineral sands comparables at around 6 times. Goldman's analysts interpreted that gap as an opportunity the market had not yet fully recognized. Their forecasts gave it substance: Iluka is projected to grow mineral sands production by more than 40% and reach 18,000 tonnes of annual rare earth output by 2026, including 3,500 to 4,000 tonnes of high-value neodymium-praseodymium. If the company executes, EBITDA could more than double.
The backdrop matters. Rare earths are not a speculative story — they are embedded in the physical infrastructure of the energy transition, essential to electric vehicle motors and wind turbines. Goldman's models show the neodymium-praseodymium market remaining in supply deficit for years, even as their long-run price assumption of $80 per kilogram sits well below the $135 spot price prevailing at the time of the note.
Lynas is a legitimate business in a legitimate market, and the neutral rating reflects that. But with Goldman's target implying only about 2% downside from where the stock was trading, there is little margin of safety and little room for upside surprise. Iluka, by contrast, carries the kind of valuation that leaves space for the story to unfold. Both companies are riding the same structural wave. Goldman's call was simply about which one offers a better seat for the journey.
If you're hunting for a way to bet on rare earths through the Australian stock exchange, you have two main contenders: Iluka Resources and Lynas Rare Earths. Both are legitimate players in a sector that's drawing serious institutional attention. But Goldman Sachs has just made a clear choice between them, and it's worth understanding why.
In April 2022, Goldman Sachs initiated coverage of Lynas with a neutral rating and a $9.50 price target—slightly below where the stock was trading at $9.69. For Iluka, the bank went further: a conviction buy rating with a $14.00 target, compared to a share price of $12.43 at the time. The difference in tone is deliberate. Goldman's analysts looked at both companies and decided Iluka offered better value and better prospects. Their reasoning hinged on one word: valuation.
Iluka trades at roughly 5 times EBITDA, a multiple that looks cheap when you stack it against comparable rare earth producers, which typically command 15 times EBITDA, or mineral sands and pigment peers at around 6 times. That gap matters because it suggests the market hasn't fully priced in what Goldman sees coming. The bank forecasts that over the next five years to 2026, Iluka will grow mineral sands production by more than 40 percent and ramp up rare earth output to about 18,000 tonnes per year—with roughly 3,500 to 4,000 tonnes of the high-value neodymium-praseodymium mix. If those numbers materialize, EBITDA could more than double. That's the bull case in a nutshell.
But why does rare earth supply matter at all? The answer sits in the energy transition. Rare earths are essential to wind turbines and electric vehicle motors. Demand is climbing, and Goldman's analysis suggests it will keep climbing past 2025. Their models show the neodymium-praseodymium market staying in deficit—more demand than supply—for years to come. At the time of their note, spot prices for neodymium-praseodymium in China were hovering around $135 per kilogram. Goldman's long-run assumption is $80 per kilogram, which still leaves room for healthy margins.
Lynas isn't being dismissed outright. The neutral rating acknowledges it's a real business in a real market. But at $9.50, Goldman's price target implies only about 2 percent downside from where it was trading, which doesn't offer much of a margin of safety or upside surprise. Iluka, by contrast, sits at a valuation that leaves room to run if the company executes on its growth pipeline.
For investors considering exposure to rare earths or the resources sector more broadly, Iluka emerges from this analysis as the more compelling opportunity—not because Lynas is broken, but because Iluka looks undervalued relative to what it's capable of delivering. The rare earth market itself appears structurally tight for years ahead, which is the tailwind both companies are riding. The question Goldman answered was simply which one offers better value at that moment.
Notable Quotes
We prefer ILU over LYC for Rare Earth/NdPr exposure based on valuation— Goldman Sachs
ILU is undervalued at 5x EBITDA versus key rare earth peers at 15x and mineral sands peers at 6x— Goldman Sachs
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