Lynas Corp [ASX:LYC] traded up 14.6% this morning to a high of 10.2 cents per share.
What happened to the Lynas share price?
This morning, the rare earth miner released their cash flow and quarterly activity report. Sales remained high during the March quarter. In fact, revenues reached a quarter high of $69.3 million.
The revenue high was thanks in combinations to a hike in sales volume and rare earth prices.
Lynas CEO, Amanda Margaret Lacaze wrote:
‘The record results on all key performance measures for this quarter reflect the strong foundations on which Lynas operates. Lynas is now the second largest NdPr [Neodymium and Praseodymium] producer in the world. With no in-house downstream production, Lynas is the largest supplier of NdPr to the free market.’
Lower production, staff and corporate costs saw Lynas increase cash by 36.66% to $52.58 million.
What now for LYC shares?
There are many investors with a bullish view on rare earths. They are the minerals vital for modern tech like your smartphone and high tech magnets. Moving forward in our tech age will only increase the demand for these useful minerals. So, surely having exposure to rare earths is a good thing, right?
It depends on which company. Right now Lynas is a major rare earths producer. If you wanted to speculate on rare earths, Lynas would be a strong option.
But taking a look at their half yearly accounts, an investment in Lynas doesn’t come without its risks. The company currently makes an operation loss of $18.9 million. They have huge borrowings of $477.7 million. Total assets are just enough to cover total liabilities. And their accumulated losses have increase to $1 billion.
It’s probably not the company Buffett would invest in. But you’re not Buffett. So if you are bullish on rare earths, make sure to only invest what you’re willing to lose, because there’s a possibility it might actually happen.
Junior Analyst, Money Morning
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