The Lynas Corporation Ltd share price is now up 65% in 2017

Shares in rare earths miner Lynas Corporation Ltd (ASX: LYC) are now up 65% in 2017 as rare earth prices recover thanks to cut backs in production across its main Chinese producers.

The stock traded above $2 per share in 2011, yet hit just 5 cents per share this year as the former market darling nearly collapsed as its Malaysian operations struggled with environmental protests, regulatory concerns, operational delays and the falling rare earths price.

The shares may now be attracting some bargain hunters after the company posted record sales and positive cash flow of $69.3 million and $11.6 million for the quarter ending March 31 2017.

Its key product is neodymium that is used industrially as a component in magnetic metals that can end up in microphones, loudspeakers and computer hard disks among other common products.

Lynas stated that for the most recent quarter neodymium prices increased around 10% from US$31 to US$34 per kilo and much of the company’s success will depend on the direction of neodymium prices.

The company has $24.3 million in cash on hand and if it is able to deliver growing cash flows over several years it may offer strong returns. However, this company is only for investors who are prepared to take on a high degree of risk given its reliance on the mysteries of rare earth prices and mixed track record.

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Motley Fool contributor Motley Fool Staff has no position in any stocks mentioned. 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.

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