Lynas Rare Earths' (ASX:LYC) revised agreement with Japan Australia Rare Earths (JARE) for the availability and supply of rare earths to the Japanese industry supports "healthy" profit margins, with upside value sharing largely retained by the company, Jefferies said in a Wednesday note.

The company will provide up to 7,200 tonnes per year of neodymium-praseodymium to the Japanese industry to 2038, with the updated deal locking in 5,000 tonnes per year at a minimum price of $110 per kilogram.

The company will largely retain upside with JARE capped at $10 million per $2 per kilogram revenue share above $150 per kilogram.

An additional 2,200 tonnes per year can be mutually agreed upon at no opportunity cost to the company.

The deal also sees 75% of all heavy rare earth oxides produced by the company made available to the Japanese industry, with a firm commitment from JARE to purchase the equivalent of 50% of all the oxides. While beneficial for the company, this reduces spot availability in other regions and perpetuates existing issues, Jefferies said.

Jefferies lifted its rating on Lynas Rare Earths to buy from hold and raised its price target to AU$24 from AU$15.50.

Lynas Rare Earths shares rose nearly 1% in midday trade Thursday.