Investors in Lynas Corporation Limited (ASX: LYC) must have the strongest stomachs. Holding shares over the last 12 months has been like the inevitable high-speed descent that follows the slow ascent to a roller-coaster peak.
Massive Shareholder Losses
That's not to say that investors should have foreseen the plunge from $2.50 in 2011 to 30 cents at the beginning of the year, to 13 cents currently, but rather that investors must have nerves of steel to hang onto the company through the recent disappointments.
The shares have already fallen 55% this year as investors debate participating in a big equity raising to shore up the company's balance sheet for the medium term. As we have mentioned previously, Lynas was perilously close to running out of money in the last quarter and until the company's rare earths processing plant in Malaysia gets up to reasonable capacity, investors can expect Lynas to continue to burn through cash.
A 13% Surge
It may be unfair to suggest that the surge over the last five days is actually a surge, after the huge decline over the past 12 months. Indeed, the same magnitude rise would have been a 5% jump at the start of the year or 0.6% in 2011.
Still No Clear Signs of Recovery
Despite the 13% jump last week there is no indication that the company is turning things around or improving free cashflow. The biggest problem for Lynas heading forward is overcoming operational problems at its Lynas Advanced Materials Processing (LAMP) plant in Malaysia.
When to buy
I can't see myself ever buying shares in Lynas. The company has had so many problems and let down investors so many times over the years that trust in the company is at an all time low, not just for me but for other investors and analysts too. I would need the company to demonstrate consistent positive cashflow and strong operational performance over 9 to 12 months before I would consider it.
