Rare earths miner Lynas Corporation Limited (ASX: LYC) saw its shares rise 2 cents or 15.4% to 15 cents today. That absolutely crushed the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XKO) return of 0.4%.
With the company's $30 million recent share purchase plan closing last Friday, it appears investors may have some confidence that the company has managed to secure enough funds to continue operations.
Lynas is attempting to ramp up production at its LAMP (Lynas Advanced Materials Plant) facility in Malaysia that processes ore from its Mount Weld mine into rare earth oxides.
The company is in a precarious position, needing to massively increase production to bring down its processing costs, while at the same time struggling with low commodity prices for rare earth oxides, a heavy debt burden and opposition to the processing facility in Malaysia.
The company says it will reach its sustainable operating target of 11,000 tonnes per year during the June quarter, but some media reports suggest Lynas won't have a profitable operation until it doubles capacity to 22,000 tonnes per year, and driving down production costs.
Lynas is a high risk, potentially high-return stock, if the stars align. Rare earths oxides are used in many new technologies such as smartphones, and demand is expected to rise. But despite their name, rare earths are actually very common – just not in many commercially-viable deposits.
It's not a stock for widows and orphans as they say, with a high risk of your investment heading to zero. There are better options out there for investors looking for ideas.
