Lynas Corporation Limited reports: Here's what you need to know

The rare earths industry is facing strong headwinds. How is Lynas Corporation Limited (ASX:LYC) holding up?

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Lynas Corporation Limited (ASX: LYC) delivered its first-half earnings report today, revealing a wider loss to the amount reported in the prior corresponding period.

The rare earths miner blamed a slower-than-anticipated ramp up of its Malaysian processing facilities while also struggling with the prolonged downturn in rare earths prices. It reported a net loss of $142.2 million for the half-year ended 31 December 2014, which compares to the $81.5 million loss recorded a year earlier. Meanwhile, losses before one-off charges hit $103.5 million, higher than the $59.3 million loss in 2013.

Indeed, conditions have been tough in the rare earths market due to uncertainty regarding Chinese government policy which has weighed heavily on rare earths prices. To combat this, Lynas has been lifting output slowly so as to not flood the market, while it has also focused on reducing overall operating costs. As an example, it has laid off workers and even shifted its headquarters to Malaysia to ease expenses.

Unfortunately, the company's efforts have not been enough to save the falling share price. The shares are currently trading at 5 cents, down 2% for the day and a massive 98% since April 2011. As highlighted by The Australian, the company has also diluted its shares on issue from 92 million to 3.5 billion in that time in order to survive. Considering the enormous risks facing the business, investors should continue to avoid the stock altogether.

Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest. The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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