UPDATE 3-Molycorp warns of dwindling cash; to raise money

Tue Oct 15, 2013 11:39am EDT
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* Could sell up to $230 million worth of common stock

* Estimates negative cash flow for third quarter

* Expects to write down finished goods, inventory (Adds context on rare earths, analyst comment.)

Oct 15 (Reuters) - Rare earths producer Molycorp Inc said on Tuesday its cash cushion has dwindled to insufficient levels and announced its second major financing in less than a year, sending shares of the one-time market darling down more than 15 percent.

Rare earths prices skyrocketed in 2010 and early 2011 as China clamped down on exports of the metals and oxides used in high-tech products like smartphones and hybrid vehicles, sending Molycorp stock racing.

As customers found alternatives to some rare earths and China relaxed export controls, mining and processing the materials became a very tough business.

Molycorp's shares, which rose as high as $79.12 in May 2011, fell 17 percent early Tuesday to $5.88 after the company said it could sell up to $200 million of common stock, or $230 million if its underwriters exercise options.

It raised $414 million earlier this year, in part to finish expansion and modernization at its main mine, Mountain Pass in California.

Mountain Pass could make Molycorp much more competitive, but ramp up is taking longer than expected, and sluggish demand has cut cash flow.   Continued...