Oct. 15 (Bloomberg) -- Molycorp Inc., owner of the largest rare-earth deposit outside of China, fell the most in nine months after saying it may sell $230 million of shares to help fill a potential funding gap after output fell behind schedule.
Molycorp dropped 21 percent to $5.58 at the close in New York, the biggest decline since January.
Sales and cash flow were lower than expected for the first nine months of 2013, the Greenwood Village, Colorado-based company said today in a filing. Rare-earth oxide output from its Mountain Pass plant in California achieved an annualized rate of 15,000 metric tons for just “brief” periods this year, compared with a projected capacity of 19,050 tons.
The announcement of the stock sale comes eight months after Molycorp raised $375 million selling shares and convertible debt to fund work at the Mountain Pass plant, which processes the rare earths from the adjacent mine of the same name. The company has also been hampered by a decline in prices for the commodities -- 17 chemically similar metallic elements used in rechargeable batteries, wind turbines and electric vehicles.
The size of the latest stock offering “indicates that either there is a significant overabundance of caution, or that there is more going on than we are being told,” Jonathan Hykawy, an analyst for Byron Capital Markets Ltd. in Toronto, said today in an e-mail.
Molycorp said it expects negative cash flow in the fourth quarter after servicing its debts. The company has had “limited” success in obtaining equipment financing and that while it is trying to secure a revolving credit facility, it doesn’t yet have any commitments from lenders.
Morgan Stanley, Goldman Sachs Group Inc. and JPMorgan Chase & Co. will underwrite the stock sale, Molycorp said today in a separate statement.
Molibdenos & Metales SA, the Chilean company that’s Molycorp’s largest shareholder, and incoming Chief Executive Officer Geoff Bedford indicated an interest in buying $75 million of the shares in aggregate, Molycorp said in its sale prospectus. Bedford, currently chief operating officer, will start in his new job on Dec. 2, Molycorp said Oct. 8.
--Editors: Simon Casey, Steven Frank