This is why the Lynas Corporation Limited share price rocketed today

Shares of rare earths miner Lynas Corporation Limited (ASX:LYC) soared as much as 20% early in the session

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of Lynas Corporation Limited (ASX: LYC) surged as much as 20% after the rare earths miner announced a restructure of its long-term debts. The stock has since retreated although it is still trading 11.4% higher than last week's closing price.

So What: The company said that its debt providers, Japan Australia Rare Earths B.V. (JARE) and the Mt Kellett led bondholder group, had agreed to extend the maturity dates for their respective debt facilities from 2016 to 2018.

What that means is that Lynas now has more time to fully repay the loans as well as lowering upcoming payments. For instance, under the old JARE facility, Lynas was to repay US$205 million this financial year, with that number now reduced to just US$2 million.

Lynas also says that demand for Rare Earths products is expected to grow significantly over the next few years so will take the opportunity to invest in market development with its partners.

It said: "This announcement marks the end of speculation and uncertainty for all stakeholders… Lynas now has a strong, sustainable financial platform which complements its significantly improved and continuously improving business performance."

Now What: Despite today's rally, a quick glance at the company's historic share price chart shows that it has been a woeful investment for shareholders in recent years. Indeed, its shares traded at $2.70 in April 2011 but have since fallen 98.6% to trade at just 3.9 cents today.

Lynas has certainly shown signs of improvement in recent quarters with the group strengthening its cash flows and production rates. Although today's news is certainly a positive for the company; Lynas remains a high-risk prospect and one that long-term 'Foolish' investors would be best to avoid for now at least.

Motley Fool contributor Ryan Newman has no position in any stocks mentioned. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »