Lynas Rare Earths (ASX:LYC) hit a setback in production after apatite ore was discovered at Mt Weld, which the miner has now framed a temporary rather than structural issue, Jefferies said in a note on Wednesday.

The investment firm said that while the impact was unforeseen, it remains confident in Lynas Rare Earths as a geopolitically significant, non-China supplier with increasing earnings security through pricing agreements and growing production capacity.

The firm forecasts capital expenditure to increase to AU$707 million from AU$496 million over the next five years, driven by a sharp 63% jump in the cost of the Heavy Rare Earth separation facility expansion, higher equipment costs, and thorium extraction and waste management projects.

Jefferies maintained its buy rating but lowered price target to AU$20.50 from AU$22.