One of the biggest movers in morning trade has been Lynas Corporation Limited (ASX: LYC) with its 9% gain to 8.8 cents.
The shares of the rare earth miner have rocketed higher following the release of its second quarter update.
That update revealed record quarterly neodymium-praseodymium (NdPr) production of 1,331 tonnes at design rates. This was an impressive 13.2% quarter-on-quarter increase.
Total rare earth oxides (REO) production was 3,913 tonnes, up from 3,665 tonnes in the prior quarter. The increase in production was largely the result of improvements in its operational performance.
These improvements led to a drop in operating costs of approximately $1 per kilo on a per unit basis to a total of $53.3 million. Pleasingly management expects these production improvements to be sustainable moving forward.
Another positive was its sales figures. Despite continued weakness in NdPr prices, the increased production led to record quarterly sales of $65 million during the quarter.
Considering the difficult environment that Lynas and Iluka Resources Limited (ASX: ILU) are operating in, I think this has been a great quarter from the rare earth miner.
As a result I'm not at all surprised to see its shares bolt higher. If rare earth prices recover in the next 12 months then Lynas will be in a great position to profit thanks to its cost cutting.
But whether or not rare earth prices will recover is the million dollar question. Illegal mining in China has been a real issue, but the government has begun to crack down on these activities.
Whilst this has led to an increase in demand from the China market for NdPr, only time will tell whether it will be sustained. For now, I would sit this one out.
