NEW YORK (TheStreet) -- Shares of mining corporation Molycorp  (MCP) surged 12.01% to $1.09 in afternoon trading Tuesday as Chinese rare earth element prices climbed.

The rare earth price index rose to 144 points on Monday, up 8.43% from the record low of 132.8 points in 2014, according to data from the Association of China Rare Earth Industry (ACREI).

The Chinese are tightening their supplies of rare earths as prices of the materials, such as terbium and dysprosium, are soaring.

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Molycorp owns the Mountain Pass rare earth mine in California, which once supplied the majority of rare earth elements to the rest of the world.

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More than 7.3 million shares had changed hands as of 1:28 p.m., compared to the daily average volume of 5,681,230.

Separately, TheStreet Ratings team rates MOLYCORP INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate MOLYCORP INC (MCP) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow, poor profit margins, generally disappointing historical performance in the stock itself and generally high debt management risk."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Metals & Mining industry. The net income has significantly decreased by 50.4% when compared to the same quarter one year ago, falling from -$69.93 million to -$105.18 million.
  • Net operating cash flow has significantly decreased to -$28.16 million or 76.29% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • The gross profit margin for MOLYCORP INC is currently extremely low, coming in at 3.47%. Regardless of MCP's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, MCP's net profit margin of -84.86% significantly underperformed when compared to the industry average.
  • The debt-to-equity ratio of 1.45 is relatively high when compared with the industry average, suggesting a need for better debt level management. Despite the company's weak debt-to-equity ratio, the company has managed to keep a very strong quick ratio of 2.53, which shows the ability to cover short-term cash needs.
  • Looking at the price performance of MCP's shares over the past 12 months, there is not much good news to report: the stock is down 82.32%, and it has underformed the S&P 500 Index. In addition, the company's earnings per share are lower today than the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • You can view the full analysis from the report here: MCP Ratings Report