Rare earths miner Lynas Corporation Limited (ASX: LYC) is the top performing stock from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) on Monday with its shares having jumped 18% to 5.9 cents per unit.
It's possible that Lynas stock has jumped as a result of news from last week regarding rival rare earths explorer, Northern Minerals Ltd (ASX: NTU). Northern Minerals managed to raise $49.5 million from the Shanghai-listed Jilen Jien, a large-scale multi-national group, in return for 33% of the explorer. The money will be used to continue the progression of its Browns Range Project which it believes could become a "globally significant source of high value dysprosium."
The news bodes well for the rare earths industry which has remained depressed due to uncertainty regarding Chinese government policy weighing on rare earths prices.
Although its shares are jumping today; investors should still be extremely cautious with Lynas Corporation. In its most recent cash-flow and activities report, management warned that it was not expecting cash flow strength to be sustained in the March quarter. This could seriously stunt its ability to repay its debts and continue as a going concern.
Given the enormous risks still facing the business, investors would be far better off looking at some of the market's safer and more attractive opportunities.
