Shares of Lynas Corporation Limited (ASX: LYC) surged as much as 20% after the rare earths miner announced a restructure of its long-term debts. The stock has since retreated although it is still trading 11.4% higher than last week's closing price.
So What: The company said that its debt providers, Japan Australia Rare Earths B.V. (JARE) and the Mt Kellett led bondholder group, had agreed to extend the maturity dates for their respective debt facilities from 2016 to 2018.
What that means is that Lynas now has more time to fully repay the loans as well as lowering upcoming payments. For instance, under the old JARE facility, Lynas was to repay US$205 million this financial year, with that number now reduced to just US$2 million.
Lynas also says that demand for Rare Earths products is expected to grow significantly over the next few years so will take the opportunity to invest in market development with its partners.
It said: "This announcement marks the end of speculation and uncertainty for all stakeholders… Lynas now has a strong, sustainable financial platform which complements its significantly improved and continuously improving business performance."
Now What: Despite today's rally, a quick glance at the company's historic share price chart shows that it has been a woeful investment for shareholders in recent years. Indeed, its shares traded at $2.70 in April 2011 but have since fallen 98.6% to trade at just 3.9 cents today.
Lynas has certainly shown signs of improvement in recent quarters with the group strengthening its cash flows and production rates. Although today's news is certainly a positive for the company; Lynas remains a high-risk prospect and one that long-term 'Foolish' investors would be best to avoid for now at least.
